Teaching kids about money, saving, and investing is a crucial skill that will help them build a stable financial foundation for the future. Teaching shouldn't be boring — it can be fun and genuinely engaging. We've put together the 7 best tips to help kids understand what money is, where it comes from, and what to do with it. We'll also share the best books we recommend reading, since they'll help kids build financial literacy.
1. Help kids understand money and its value
You can start teaching kids about money as early as preschool age. Explain to them that money doesn't grow on trees. It has to be earned, and it's important to spend it wisely too. That goes for our living expenses, savings, investments, and even charity. Use everyday situations, like grocery shopping, to involve them in deciding what to buy based on price and quality. Show them that money is a tool we use to get what we need and want. This hands-on approach will help kids better understand the concept of money and handle it wisely.
2. Teach the saving habit
Encourage kids to save money. Buy a piggy bank, or make one together from a jar the child can draw or write on to show what they're saving for — a new toy, say, or a special trip. You can use a plastic lid with a hole cut into it for dropping coins in. Encourage them not to spend all the money they get as gifts or for doing chores, and to put part of it toward savings.
3. Investing
Investing isn't just for adults. Explain investing to your kids. Start with simple concepts, like buying company shares, profit, or investment funds. Use real examples of companies they know, like Disney or Apple. Discuss the possible risks and rewards that come with investing, and encourage them to think long-term.
4. Lead by example
Kids are like sponges — they soak up everything they see and hear. They learn by watching, so model responsible money management and spending habits in your everyday life. Let them see how you build a budget, save toward your goals, and make thoughtful spending decisions.
5. Encourage kids to work over summer
Summer jobs aren't just a great way for kids to earn extra money — they're also an invaluable learning experience. Whether it's babysitting, mowing lawns, or selling lemonade, encourage your kids to find different ways to earn money. They'll gain valuable experience, learn how important it is to work responsibly, and build a strong work ethic.
6. Introduce the concept of credit
Once kids reach an age where they can understand it, introduce them to the concept of credit and using it responsibly. Explain that credit can be useful, but it can also lead to debt and financial trouble if used carelessly. Explain the concepts of loans and interest rates. Teach them that credit should be used wisely. ESTO is a good example — it provides innovative payment solutions and various types of loans, including a credit line and a small loan.
7. Make learning fun with games and activities
Turn financial literacy into games or activities that spark kids' creativity. Create your own currency at home and open a toy shop where they can "buy" and "sell" things. Use board games like Monopoly, or apps that simulate real money management scenarios, to make learning fun and interactive.
By putting these tips into practice while raising your kids, you can be confident you've made a positive contribution to their financial success and stability. And now it's time to dive into three fantastic books that will spark their curiosity and enthusiasm for financial literacy.
"My Money, Your Money: Your First Financial Literacy Book"
A book for preschoolers and young school kids about where money comes from. Money and finance are usually not just a hard topic for kids, but a boring one too. But author Mike Schäfer and illustrator Meike Tēpervina tackle many questions in a clear, interesting, and even fun way. Kids often don't stop to think about where the adults in their lives get the money they use to keep the family comfortable. That's why it's so important to understand how to save money and how to start earning it. It gives a brief overview of financial relationships in society — how to handle shares and credit, how health insurance works, why part of a paycheck goes to taxes, and what happens if a person or a company becomes insolvent. The more kids understand money, the sooner they'll manage it properly.
"Penny Learns About Money"
Two brothers — Penny and Sunny — go on a journey and get to know the complicated world of finance in simple terms: pocket money, ATMs, cards, banknotes and coins, budgets, essential spending, saving ideas for reaching goals, choices, balance, responsibility, charity, and much more. The book is designed as a workbook, so the child can get involved, try out new knowledge, take a break from reading, and spend time reflecting on their own goals and dreams.
"The Road to Financial Freedom"
The book's author, Bodo Schäfer, has published several financial literacy bestsellers: "Money Is Good for Women," "Money, or The ABC of Getting Rich," "The Winner's Rules: A 30-Day Programme for Achieving Success," "A Dog Named Money," and others. This book will become your personal financial advisor for life. Take on board the millennia-old wisdom in this book, and money will become your ally and one of life's pillars.
By teaching your kids the art of saving and building useful financial habits into their upbringing, we lay the foundation for their future wellbeing and a life where they won't have to constantly struggle for money. If you can become an inspiring role model and a guide to financial literacy for your kids, you can be confident that in the future they'll live in abundance and comfort, act responsibly toward others, the environment, and themselves, all while feeling less financial stress.
Didn't find what you were looking for? You might find this article useful: Building a Family Budget: How to Start Managing Your Finances.