Teaching kids about money: 9 ways to start

Teaching kids about money management is one of the most important lessons parents can impart — and it’s never too early to start. Many experts agree that kids as young as three can start their journey toward financial literacy. And by the age of seven, they can form lifelong money habits, according to a study by the University of Cambridge.

But children develop at different rates, so it’s up to you to decide when your little one is ready. To help you get started, we rounded up eight tips you can use to teach your kids about money — whether they’re three-nagers or on their way to adulthood.

1. Introduce bartering or play pretend store — Ages 3 to 4

Even before your tot enters kindergarten, you can familiarize them with the concept of bartering: exchanging goods or services for something of comparable value.

Try this with toys first, then consider getting a grocery store playset that lets you and your little one roleplay as a cashier and customer. These playsets typically include a shopping basket, plastic produce and a child-sized cash register you can use to teach how financial transactions work.

As your kid gets a bit older, they may even hone their bartering skills with friends by trading baseball cards, Pokémon cards or other children’s collectibles. (Remember Pogs?!)

As an added bonus, this can also sharpen their social skills. (I’ve never been more popular than when I snagged Ken Griffey Jr.’s rookie card in third grade!)

2. Teach them about bills and coins — Ages 3 to 7

Once your little one is old enough to understand numbers and their value — and to know not to put money in their mouth! — it’s time to teach them about cold hard cash.

“Children should be taught to recognize currency and specific denominations as soon as they’re able to understand basic counting,” says Mark Daoust, CEO of the business marketplace Quiet Light.

“If you teach a child what a quarter is and that there are four of them in a dollar, by the time they start school, they’ll have a basic knowledge not only of money but of addition, subtraction, multiplication and division.”

On your next trip to Walmart, give your child $5 and tell them they can pick out a toy to buy. This is the perfect opportunity to drive home the true value of money — and why they can’t afford that Batmobile Lego set they claim they can’t live without.

3. Start using savings jars — Ages 3 to 7

After your kid finally understands the value of money, get them in the habit of saving any cash they get through an allowance, as a gift or when they earn.

Opt for three separate savings jars or piggy banks for:

• Spending
• Savings
• Giving

This will let your child watch their money grow and teach them to keep their savings and spending money separate.

Although some financial experts recommend kids put more money in their spending jar than their savings jar, we suggest maintaining more in the savings jar or a balance between the two to underscore the importance of saving for the future.

Ashley Patrick from The Money Mindset Podcast agrees. “I recommend kids 3 to 5 years old put 10% in the give jar, 45% in the save jar and 45% in the spend jar. As they get older, you can adjust percentages based on your child,” Patrick tells Finder.

Once your kid has grasped the concept of glass jars, you can open a kids’ savings account to teach them about interest. (My dad did this for me, and I’m forever grateful!)

4. Debit cards for kids — Ages 5 and up

Once you’re sure your kid has a firm grasp on the fundamentals of money management, consider signing them up for a kids’ debit card. These cards generally fall into one of two categories:

1. Prepaid debit cards for kids
2. Debit cards linked to a chequing account for kids

Some kids’ chequing accounts also include financial literacy features and features for parental controls or involvement in money management.

One solid kid’s spending card option for Canadians is the Mydoh prepaid card, offered through a partnership with RBC and Visa. The Mydoh app links the parent and child accounts. Kids can make their own decisions about spending once they have a balance, wherever Visa is accepted. Parents can transfer money into the account and view balances, transactions and other financial information. You can add up to five children to your account to help you conveniently teach all of your kids about money management.

5. Involve them in purchasing processes — Ages 5 to 8

One of the most effective ways to boost your kid’s financial literacy is to involve them in the purchasing process. Take your kid to the grocery store and give them a budget to buy a snack. Encourage them to compare products based on price, rather than brand names or the artwork on boxes. (I’m looking at you, GoGurt!)

Another way to teach them is by vocalizing your own spending decisions. For example, if you’re buying a bag of salad, you may opt for one brand over another because it’s on sale or has a BOGO discount. Explaining this aloud can help your kid understand the rationale behind your purchasing decisions.

6. Gift-buying and budgeting — Ages 5 and up

If you pay your kid to do chores or give them a weekly allowance, the holidays are a PERFECT time to teach them about budgeting. Buying gifts on a budget requires your kid to think critically about how much they can spend on each person on their list. Help them calculate the total amount they want to put toward all gifts and how much they can afford to spend on each person.

Money-saving expert Andrea Woroch recommends speaking to your kids about budgeting on an ongoing basis. “Involve your children in household budgeting talks, especially when it comes to things or experiences that involve them, such as saving for college, taking a vacation or back-to-school shopping.”

7. Financial literacy workshop — Ages 5 to 17

Many organizations across Canada host free financial literacy workshops, either in-person or online, for kids in grade school and high school. These programs often include instructions, worksheets, videos and other resources to help children wrap their young minds around basic banking concepts such as fees, loans, interest or even investments.

8. Games — Ages 5 to 13

Popular board games like Monopoly Jr. and Payday involve play money and require careful financial planning to be the winner.

“The Game of Life is great for first and second graders,” says Todd Christensen, an accredited financial educator and the author of Everyday Money for Everyday People. “However, I recommend the ‘Extreme Reality’ edition of Life since other versions promote gambling and ridiculous income opportunities.”

In addition to classic board games, many modern video games also include a financial dimension. For example, the wildly popular Nintendo Switch game Animal Crossing incorporates a savings account and a mortgage account that accrues interest when players don’t pay back their loan. Playing this game can teach your kid how interest works and the consequences of late payments.

Is it too late to teach my teen about money?

It’s not too late to teach your teen about money. If your teen plans to attend college, it’s the perfect time to teach them how student loans, interest and repayments work.

“Teaching financial literacy in college is simply too late,” says Robert R. Johnson, professor of finance at Creighton University and co-author of Investment Banking for Dummies. “By that time, many students have sealed their long-term fate by incurring burdensome student loans.”

6 ways kids’ debit cards teach financial literacy

Compared to chequing accounts, a prepaid debit card can put your kid’s financial literacy on the fast track by teaching them lifelong financial management lessons, such as:

1. Budgeting. When your child only has a fixed amount of funds on their debit card, they’ll need to be more mindful about what they buy and when.
2. Savings. Prepaid debit cards teach your child the value of saving for things they truly want, rather than hastily buying impulse items. And if the card offers parent-paid interest, they’ll develop an understanding of how interest can help their money grow over time.
3. Spending. Using a debit card to pay for purchases teaches your young one how to navigate financial transactions online or in person.
4. Investing. When your kid uses a prepaid card to buy something that will gain value over time, they’ll become aware of their financial future.
5. Giving. Your child can use their card to donate to charitable causes, teaching them the value of helping those in need.
6. Chores and allowances. By adding a set amount of money to your kid’s debit card each week or month, they’ll be more prepared to use their paycheques wisely when they enter the workforce.

Financial literacy programs for kids in Canada

There are a host of financial literacy programs available for children in Canada. These programs are designed to educate and engage your child in money-related topics such as saving and budgeting.

Bottom line

Helping your kid develop healthy money habits is an incredibly important aspect of parenthood. If you think your little one might be ready to start managing their own money or simply taking the first steps to financial literacy, explore the best debit cards for kids now to compare accounts.