Teaching Kids About Money: Age by Age

Let children hold, sort, and count real coins. Play store with price tags and play money. Children at this age learn that coins and bills have different values. Use clear jars (not piggy banks) so they can see money accumulate. The visual of a growing pile is more powerful than an abstract concept at this age.

When your child wants a toy (10-20 USD), help them save for it over 2-3 weeks. Give them a clear jar and a picture of the item taped to it. Each time they add money, count the total together. The waiting period teaches delayed gratification, which research from Stanford's marshmallow experiment links to better financial outcomes in adulthood.

At the grocery store, compare prices between two similar items. At a restaurant, explain that food costs money and someone has to pay. When you use a card, explain it is connected to money in your bank account, not free. These micro-lessons build financial awareness naturally without formal instruction.

Most financial experts recommend starting allowance between ages 5-7. Common amounts are 0.50-1.00 USD per year of age per week (a 7-year-old gets 3.50-7.00 USD per week). Tie part of the allowance to chores (commission-based) and provide a small base amount unconditionally. This teaches both earning and basic income concepts. Pay on a consistent schedule.

Divide allowance into three clear jars. A common split is 40% save, 50% spend, 10% give. The save jar is for bigger goals (a 50 USD toy). The spend jar is for immediate small purchases. The give jar goes to a charity or cause the child chooses. This simple framework teaches budgeting, goal-setting, and generosity simultaneously.

Most banks offer fee-free savings accounts for minors (custodial accounts). Bring your child to the bank to open it together. Let them make deposits and watch the balance grow online. Current savings account interest rates are 4-5% APY at online banks, meaning 100 USD earns about 4-5 USD per year. Explain how the bank pays them for keeping money there.

Give your child a budget for back-to-school supplies or a birthday gift for a friend. Let them compare options and make trade-off decisions. If they want a 30 USD item but have 20 USD, they must either save more or choose something different. Do not rescue them from every financial mistake. Small losses now prevent large ones later.

Babysitting, lawn mowing, dog walking, and car washing teach the connection between work and income. Help your child set fair prices by researching local rates. A 12-year-old babysitter typically earns 10-15 USD per hour. Encourage them to save receipts and track earnings. This is also a good time to explain that adults pay taxes on their earnings.

Give a monthly lump sum (30-50 USD) for a specific category like entertainment or clothing. They manage it for the entire month. If they spend it all in the first week, they wait until next month. This teaches planning and prioritization over a realistic timeframe. Review their spending together at month-end without judgment.

Show your child a credit card statement (with sensitive info covered). Explain the minimum payment, interest charges, and how a 1,000 USD purchase at 20% interest costs 1,200 USD if paid over 2 years. Use online calculators to show the true cost of minimum payments. Make the math real and specific. This is one of the most valuable lessons you can teach before they turn 18.

Use the rule of 72: divide 72 by the interest rate to see how many years it takes money to double. At 10% return (historical stock market average), money doubles every 7.2 years. Show them that 1,000 USD invested at age 13 could become 32,000 USD by age 65 without adding another dollar. Use visual charts to make compound growth tangible.

Most banks offer teen checking accounts (ages 13-17) as joint accounts with a parent. Features include mobile banking, debit card, and spending alerts. Set up text notifications for every transaction so both you and your teen can monitor spending. Monthly fees are typically waived for minors. This is their first experience managing real money digitally.

If your teen earns more than 400 USD from self-employment or has a regular job, they may need to file taxes. Sit together and walk through Form 1040 or use free tax software (IRS Free File). Even if they do not owe taxes, the exercise teaches them how income, deductions, and withholding work. Standard deduction for 2026 is approximately 15,000 USD, so most teen earnings are tax-free.

If your teen has earned income from a job, they can contribute to a Roth IRA (up to 7,000 USD or their total earnings, whichever is less). You can fund the IRA on their behalf using your money, as long as they earned at least that amount. A 16-year-old who contributes 2,000 USD per year for 3 years and then stops will have approximately 175,000 USD at age 65 from just those contributions.

Before college decisions, review the full cost of attendance (tuition, room, board, fees, books) for each school. Compare financial aid packages side by side. Explain that 30,000 USD in student loans at 5% interest with standard repayment costs approximately 38,000 USD total over 10 years. Use the Federal Student Aid loan simulator to show monthly payments after graduation. This conversation should happen before applications, not after acceptance.

Children who grow up in homes where money is discussed openly make better financial decisions as adults. Share your budgeting process, explain why you choose one brand over another, discuss saving goals as a family. You do not need to share your exact salary, but explaining concepts like mortgage payments, utility bills, and saving for vacation demystifies money.

If your 8-year-old spends their entire savings on a toy they lose interest in within a week, that is a 15 USD lesson in impulse buying. Resist the urge to prevent every bad purchase. Discuss what happened afterward without lecturing. Ask questions like 'What would you do differently next time?' Small, low-stakes mistakes build financial judgment that prevents large, high-stakes mistakes later.