Teaching Children About Money

Spending Activities

Spending Simulation: For younger kids, you can simulate the experience of spending to teach them about tradeoffs. Give your child some money (maybe $5) and set up a small, at-home store. The store could include one item that will cost the whole $5, a few between $2 and $3, and multiple small things for $1 or less. These items can be small toys, treats, or even “coupons” for extra time playing games or a movie night. The point isn’t what they’re buying, but that the child recognizes that they can’t get everything—they’ll have to prioritize what they want most. Repeat the store every so often, perhaps with money they earn instead, to see how their understanding grows.

Expense Tracking: For older kids, help them track all of their spending for a week or month. They can do it on a piece of paper, a spreadsheet, or even an app. At the end of the tracking period, have them evaluate all of their choices. Did they spend more than they expected? Less? What would they like to change? Help them create a target for the next period and suggest ways they can improve. Repeat the process to see what changes. You may even offer a reward if your child is able to meet a goal you agree on.

Saving Activities

Create a Savings Goal: Help your child set a saving goal. Children’s goals vary a ton based on their age, but might include toys, sports equipment, electronic devices, special clothes, or other big-ticket items. Let them discover for themselves that not all goals are worth the time and effort it takes to reach them. Once they’ve set a goal, create a clear way for them to track their progress. The more visible, the better. For example, a jar in the living room or a paper chain that you cut pieces off of for each milestone. This will remind them of their goal and give you both the chance to celebrate progress.

Open a Savings Account: Take a trip to your bank or credit union and help your child open their first savings account. You can even ask an expert at the financial institution to explain how interest works and why it’s wise to store your money in an account. Encourage your child to ask other questions about how financial institutions work. You may even choose to contribute a little to help get their fund started. But remember, the child needs to learn how important it is to regularly add money to the account. Interest won’t be enough on its own to reach their goals.

Illustration: Cristi Cash

Investing

Investing is a powerful financial tool that everyone should understand. The sooner you start teaching your kids the basics, the better! Help your children understand that the goal is to buy when things are inexpensive and sell when they’re worth more. Investing is often done by buying stocks (very small parts of a company). The stocks are worth more when the company is doing well and less when the company is struggling. Since you own part of the company, you may also get payments when that company earns a lot of money. As the child gets older, you can touch on more complex aspects of investing.

Keep Teaching

These topics and activities are meant to help your child form a foundation of financial literacy. Once your child begins to master these topics, expand to others. You could teach about the 3 jar method, the 50/30/20 rule, and more! What’s most important is that you keep an open conversation with your child about money and the importance of managing it carefully.

Opening Accounts for Children

Most financial institutions offer a few accounts built specifically for minors. The most common options are:

• Joint Bank Account: An account that you and your child own together. If you opt for a checking account, your child can get access to a debit card. This is a great way to get your child used to using a bank account for everyday purchases. If you decide on a savings account, your child can gain experience with saving and earning interest. Be aware that the child may be able to overdraft the account or incur fees.
• Custodial Account: An account owned by the child but run by a parent or guardian. The guardian may withdraw money as needed for the child, but the child cannot access the account without them until they are 18 or 21, depending on the state. This account is a bit more complicated and comes with some strict rules. It’s usually best for long-term savings.
• IRA: An IRA is a great way to teach your teens about saving for retirement while building a solid foundation for their future. The only requirement is that your child has earned income. Because that income will likely be relatively small, the best option will probably be a Roth IRA (the child pays taxes on their income now and doesn’t have to pay taxes when they withdraw at retirement). The contribution limit in 2025 is 100% of their earnings up to the max of $7,000.

If you’d like to help get these accounts started, you can give each child up to $19,000 in 2025 without incurring gift taxes. If your spouse, partner, friends, or other relatives want to contribute, they do the same. Learn more about what will be required to open your child’s first account.