According to FINRA’s study Financial Capability in the United States 2016, 59% of the study’s respondents were not offered financial education by a school or college they attended. On the five-question financial literacy test they administered as part of the study, only 14% were able to answer all five questions correctly. Yet, “respondents whose parents or guardians taught them how to manage finances [did] slightly better on the financial literacy quiz.” While financial literacy, in general, may be rather abysmal in the United States, there are very concrete data that show parents can, and do, make an impact in a child’s ability to manage money in adulthood. In order to make money concepts stick, however, it needs to be a fun and enjoyable experience, not feel like a lecture or homework. In this article, I’ll cover five fun ways you can teach your kids about money.
Take them to the Store
Kids can start grasping money concepts around age 2 or 3 and a great way to introduce them to money and how it’s used is setting up a play storefront and exchanging play money for goods. Be creative with what you stock in their store. You can use kitchen utensils such as spatulas and spoons, empty cereal boxes, or even toys. Invite your kids to use their imaginations and pick their own items to stock as well.
Then, make play money and engage in various different transactions together. Combine this with trips to the grocery store where they get to see it in action. You can have them pick out items on your grocery list so they feel they are helping, but also so they understand how commerce occurs in the real world. Nothing beats hands-on experience.
If your kids are older, board games can be an excellent way to teach more complex money concepts. Games like Monopoly and Cash Flow are both great examples. They teach the prioritization of spending, how to create cash flow, and how to invest for the future. Their use of stories and different pieces of information all presented in a format new to your kids challenges them to think critically.
They’re required to weigh the options in front of them, make decisive decisions, and realize the consequences when they go wrong. This translates exceptionally well to the real world and teaching them lessons on the consequences of poor financial decisions.
The huge advantage is you can teach real-world money examples without real-world repercussions. Board games can also be incredibly fun, they naturally encourage your kids to play and therefore learn more about money.
Provide an Allowance
Once your kids are old enough, you can start to introduce real money. An allowance is a great way to do this, but it must be done carefully. You don’t want your kids to believe money just grows on trees or that you have an infinite amount of it. With an allowance, it’s important to also teach that money is a finite resource and the only way we can keep the coffers full is if we provide goods and services in exchange for it. You can have your kids be required to do certain chores around the house in order to receive their allowance.
Encourage saving a portion each time they receive their allowance by getting them clear piggy banks and paying them cash. Having a clear piggy bank allows them to visually see the accumulative effects of saving. Once they’ve filled their piggy banks, open a savings account for them and have them deposit it into their accounts.
Give them some free reign (within reason, of course) over how they spend it so you can teach them how to prioritize. If you go to the mall and they find a new toy or video game they want to purchase but they spent all their savings or allowance on something else, then they can’t buy it and have to live with their prior spending decisions.
Take Advantage of the Internet
The internet offers a plethora of games and tools designed to teach kids about money. One of my personal favorites is The Stock Market Game. It’s designed mainly as a curriculum for students to be taught in the classroom, but it’s available for free to the general public and does a great job of teaching the basics of investing.
Unlike board games, online games can be collaborative on a massive scale and capable of very accurately simulating situations you’re more likely to encounter in the real world. This means a wider variety of formats and challenges you can offer your kids to get their gears turning and learning.
Encourage your kids to donate to a charity of their choosing and make it fun by attending fun volunteering events together. This is a great way to teach your kids first-hand the impact giving your time and money can have on improving a cause your kids carry about.
It’s a lesson that extends far beyond money as well, as it teaches social responsibility and being a good steward of our society. Experiences like this help provide different perspectives to your kids that give them a deeper understanding of how the world works. This is in turn can form the foundation for building healthy financial habits as well.
With so many different ways you can teach your kids about money, these five fun ways are just a small sample of your options. I encourage you to be creative and see what ideas you can come up with. As long as you can make it fun, chances are your kids will engage in it and learn something applicable along the way. The sooner you start, the better off they’ll be.
Chad Rixse grew up in Anchorage, Alaska, but has lived in the Seattle area since 2007. He majored in Spanish at the University of Washington where he honed his fluency in the language and discovered his passion for travel and connecting with other cultures. He’s a self-professed golf addict who can never seem to get his fill despite still struggling to break 100.