Understanding money isn’t just for adults! Teaching children about finances early on helps them manage their money effectively as they grow. It also equips them with important life skills that go beyond dollars and cents. Practicing financial literacy skills such as saving for something special, budgeting, or understanding the value of hard work helps kids develop tools that will help them in school and prepare them for success in the real world.
Why Financial Literacy Matters for Kids
Financial literacy is more than just knowing how to count money—it’s about understanding the concept of earning, spending, saving, and planning for the future. These critical life skills impact kids in a big way as they grow.
In fact, in KITS’ follow-up studies of recent high school graduates, we asked young adults what would have helped them feel more prepared to meet their long-term goals after graduation. Time after time they told us that what they most needed was more real-life skills such as how to get a good job and save and manage money.
Encouraging and modeling financial literacy from an early age helps kids build a strong foundation for managing their finances wisely as adults, avoiding debt, spending within their means, and planning for the future.
Financial Literacy and School Readiness
Learning and practicing healthy financial strategies also strengthens school readiness skills including basic math, critical thinking, problem solving, self-regulation, self-confidence, and independence.
- Financial literacy teaches basic math skills. Children can practice math skills as they track their spending or even set up a simple budget with their allowance, monetary gifts, or money they have earned in other ways. For example, they may want to find out how much money they have after buying a toy or saving for something special.
- Financial literacy promotes critical thinking and problem-solving. Deciding how to spend their allowance or birthday money, budget for a project, or set up their own small business ideas encourages logical thinking and decision-making skills. These problem-solving abilities carry over into academic tasks, such as working on math problems, completing group projects, or even getting along with others.
- Financial literacy fosters responsibility and impulse control. Being financially responsible means learning to balance earning, spending, and saving. And, experiencing the consequences of their financial decisions teaches children accountability. These skills translate to the classroom, where students must manage their time, complete assignments, control their impulses, and take responsibility for their actions.
- Financial literacy provides opportunities to practice regulating emotions and frustration. What do we do when we feel frustrated because we don’t have enough money to buy an item we want, or when we’ve spent all of our money on something that didn’t last? Or maybe we’ve even lost some money? These types of situations allow children to practice handling those not-so-good feelings, an important skill for school success.
- Financial literacy builds confidence and independence. Money management skills give kids confidence in their ability to make decisions and take control of their financial future. This independence builds self-esteem and prepares them to handle challenges on their own, whether in school, work, or personal life.
Teaching kids about money from an early age is an invaluable gift that helps develop a sense of independence and self-discipline. Children learn that money doesn’t appear magically—it’s earned through hard work and proper management, planning, and saving. These lessons foster important school readiness skills and teach children to make informed financial decisions throughout their lives, preparing them for adulthood.
Financial responsibility is a BIG concept, even for many adults. Start small! Consider talking about your own financial decisions (how you decide which items to buy and when, how you handle saving money-or would like to) or involving your child in the grocery shopping. You may want to give them an allowance to practice managing money on their own.
For more ideas about getting started, watch out for our upcoming infographic with tips for raising financially responsible children!
