Teaching our children the value of money is one of the most important lessons we can share to ensure their success. Lessons about personal finance have the ability to impact our lives forever. However, very often we neglect to share basic money lessons with our children. 

We encourage our children to strive for excellence academically without teaching them how to avoid a life of money mismanagement. Click To Tweet

If you’re here, you’re ready to change this pattern and I want to help you get started.

Let’s discuss some of the basic money lessons to prepare your child for financial success.


Start as early as preschool.  Children are very perceptive at this age and curious about money. They observe the spending patterns of adults and they begin to understand that money is exchanged for goods and services.  

Around ages 2 or 3,  they begin practicing money identification. Gather a few coins and identify each one with your child.  After they can easily identify coins, move on to paper currency.

This age group should also learn how to distinguish wants from necessities. All kids want something when they go to the store, but it’s important to help them understand that everything they want isn’t a necessity, nor should it always be purchased.

Once they begin to show an interest in purchasing items, teach them how money is earned through work. Remind them that in order to make special purchases, they must save the money they earn. Find tasks they can do in addition to their normal household chores. Explain how these extra tasks can help them save up for whatever item they may want to purchase.

Grade School 

After they’ve graduated from the preschool and kindergarten stages of childhood, start focusing on budgeting, comparison shopping, and interest. You may think these topics are too complex for a 7 or 8-year-old child, but they are not.

If your child has begun purchasing items on their wishlist, they understand the concept of buying. Don’t neglect to teach them how to compare prices on those purchases. They need to understand value.

To teach them the basics of budgeting, help them create a budget for back to school items or holiday and birthday gifts by providing them with a certain amount of money and helping them determine how much to spend.

Last, don’t forget to introduce interest. They may have already begun to save money in their piggy banks; but now it’s time to show them how a dollar can work for them. Pay them interest on portions of their allowances that they save. Take them to the bank to open their own savings account and show them the interest earned each month when the statement arrives. Some financial institutions even offer incentives for young savers.

High School

After navigating each stage above, a high school student has a good working knowledge of the basics of money. However, this doesn’t mean that they aren’t prone to making future mistakes. It’s up to you to prepare them as best as your can for upcoming temptations as they enter their teenage years.

Discuss with them how credit cards are essentially loans.  They are borrowing money they’ve agreed to pay back. Instead of earning interest like they did in their savings, explain they will be paying interest on credit cards. Make them understand that:

A credit card is not free money — it’s debt against future earnings! Click To Tweet

Other lessons should include taxes and investments. Many teenagers secure jobs of their own and it’s a good idea to make sure they understand a W-2 and 1099. They also should learn that paying Uncle Sam is not optional.

For investments, pick one of their favorite companies and share the cost of stock for that company. Show them how much their money would grow if they took a portion of their savings and invested in a Roth IRA or 401(k), if their employer allows participation.

The points provided should give you a great foundation to prepare your child to handle money in their future. As you can see, this process won’t be quick, but it will be worth it. Don’t prepare them for excellence in every facet of life except for finances. Break the generational cycle of financial illiteracy by preparing your kids throughout their childhood. Your efforts will pay off.

Do you have additional questions about teaching children about money? Download the Teaching Children About Financial Literacy guide.

Latoya is a writer for hire who loves talking about budgets and money.  Her mission includes paying off $79,000 in student loans and living to tell about it.  She’s a full-time, work-at-home mama who shares her journey over at Life and A Budget.  You can connect with her on Twitter and Facebook.

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Created by nationally recognized millennial money expert Tonya Rapley, My Fab Finance is a leading financial education and lifestyle blog for millennials who want to become financially free and do more of what they love.