Teaching Kids About Money: Age-Appropriate Lessons
A parent's guide to teaching children about money at every stage, from savings jars for toddlers to investment basics for teenagers. Covers allowance systems, bank accounts, earning opportunities, and budgeting skills.
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Allowance Structure
Decide whether allowance is tied to chores, given freely, or a combination
Research is split on this. Some experts recommend a base allowance (to teach money management) plus bonus pay for extra tasks (to teach earning). A common starting amount is $0.50-1.00 per year of age per week.
Set a consistent pay schedule: weekly for younger kids, biweekly for teens
Weekly payments work best for children under 10 since they struggle with longer time horizons. Biweekly for teens mirrors a real paycheck cycle. Pay on the same day each time to build the habit of expecting and planning for income.
Establish clear rules about what the child is responsible for buying
For ages 6-9, they might buy toys and candy. For ages 10-13, add entertainment and gifts for friends. Teens can cover clothing beyond basics, phone accessories, and outings. Gradually expanding financial responsibility builds real budgeting skills.
Savings Jars System (Ages 3-8)
Set up 3 clear jars labeled Spend, Save, and Give
Clear containers let young children see money growing. Start with a simple 50% spend, 40% save, 10% give split. Use real coins and bills rather than digital money, since physical currency is more concrete for children under 8.
Help your child set a savings goal with a picture of the item on the jar
A visual target makes saving tangible. Choose something achievable in 3-6 weeks at their saving rate. When they reach the goal and buy the item with their own money, the pride and sense of ownership reinforces the saving habit.
Let your child choose where the Give jar money goes
Giving builds empathy and perspective. Let children pick causes they care about, whether that is an animal shelter, a school fundraiser, or a food bank. Even $2-5 teaches that money can help others.
Count the jars together each week and talk about progress
This 5-minute weekly ritual builds number skills and financial awareness. Ask questions like 'How many more weeks until you reach your goal?' and 'What would happen if you saved an extra dollar this week?'
First Bank Account (Ages 8-12)
Open a custodial savings account at a bank or credit union
Most banks offer youth savings accounts with no minimum balance and no monthly fees. Credit unions often pay higher interest rates (0.5-2% vs. 0.01-0.05% at large banks). Bring your ID, the child's Social Security number, and a small opening deposit.
Teach your child to read a bank statement and track their balance
Review the monthly statement together. Point out deposits, any interest earned, and the running balance. This is the first step toward understanding that money can grow over time without doing any additional work.
Introduce the concept of interest with a simple calculation
If your child has $100 saved at 2% annual interest, that is $2 per year the bank pays them for keeping money there. Show them the math and compare it to their savings jar, which earns nothing. This plants the seed for investing later.
Earning Opportunities (Ages 8-15)
Brainstorm age-appropriate ways to earn money beyond household chores
Ages 8-11: lemonade stand, yard sale of old toys, helping neighbors with yard work. Ages 12-15: pet sitting ($10-15 per visit), lawn mowing ($15-30 per yard), tutoring younger kids ($10-20 per hour). Earning their own money is the most powerful financial lesson.
Help your child calculate their hourly earnings from different activities
If they spend 2 hours mowing a lawn for $25, that is $12.50 per hour. Compare different earning activities side by side. This teaches the concept of opportunity cost and helps them value their time as they get older.
Teach basic record keeping: income, expenses, and profit
A simple notebook tracking money in and money out builds accounting fundamentals. For a lemonade stand, help them track the cost of supplies ($8), total sales ($30), and profit ($22). This is the foundation of business thinking.
Budgeting Basics (Ages 10-15)
Give your teen a fixed monthly amount and let them manage it independently
Start with a clothing or entertainment budget. If you normally spend $50-75 per month on their entertainment, give them that amount and let them make choices. Running out of money before month's end is a powerful and safe lesson.
Teach the difference between needs and wants with real examples
Use grocery shopping as a teaching moment: food is a need, but a specific brand of chips is a want. This distinction helps children understand that budgeting is about making choices, not about deprivation.
Practice delayed gratification: wait 48 hours before any purchase over $20
The 48-hour rule reduces impulse buying by 60-70% for most people. When your child wants something, write it on a wish list and wait. If they still want it after 2 days, it may be worth buying. Many times, the urge passes.
Investment Concepts for Teens (Ages 14-18)
Explain compound interest using a real example with their savings
Show that $1,000 saved at age 15, growing at 7% annually, becomes roughly $21,000 by age 65 without adding another dollar. Compare that to starting at age 35, which only yields about $5,400. The 20-year head start nearly quadruples the result.
Open a custodial investment account and buy a first index fund together
A custodial brokerage account (UGMA/UTMA) lets minors own investments with a parent as custodian. Start with a broad market index fund that requires as little as $1-25 to begin. The goal is hands-on experience, not large amounts.
If your teen has earned income, open a custodial Roth IRA
Teens with W-2 or self-employment income can contribute up to $7,000 per year (2024 limit) to a Roth IRA. Money grows tax-free for life. A teen who contributes $3,000 per year from ages 16-18 could have over $150,000 by age 65.
Discuss debt, credit scores, and how interest works against borrowers
Before they leave home, teens should understand that a $1,000 credit card balance at 22% interest costs $220 per year in interest alone. Explain that a credit score above 740 saves thousands in lower interest rates on future car loans and mortgages.
Frequently Asked Questions
At what age should you start teaching kids about money?
Research from the University of Cambridge found that money habits are set by age 7, so starting early matters. Ages 3-4: introduce coins and bills, play store. Ages 5-6: explain that things cost money and money is earned through work. Ages 7-9: introduce saving goals and basic budgeting. Ages 10-12: open a savings account and discuss earning, spending, and giving. Ages 13+: introduce budgeting apps, debit cards with parental controls, and the concept of compound interest.
Should you tie allowance to chores or give it unconditionally?
Financial experts are split. Dave Ramsey advocates commission-based pay (no work, no money) to teach the work-money connection. Ron Lieber (author of The Opposite of Spoiled) recommends a small unconditional allowance to practice money decisions, with extra earning opportunities for larger chores. A middle-ground approach: give a base allowance for practicing money skills, plus bonus earnings for above-and-beyond tasks. Most families start allowance between ages 5-7 at $0.50-$1.00 per year of age per week.
How much allowance should a child get by age?
A widely used guideline is $0.50 to $1.00 per year of age per week. A 7-year-old would receive $3.50-$7.00 weekly. For teens, consider what expenses the allowance should cover: if they pay for their own entertainment and snacks, $15-$25 per week for ages 13-15 and $25-$50 per week for ages 16-18 is common. Adjust based on your family's budget and local cost of living. The amount matters less than the consistency and the financial conversations it creates.
When should a child open their first bank account?
Most banks offer custodial savings accounts for children of any age, though the practical benefit starts around age 8-10 when kids can understand the concept of interest. By age 13, consider a teen checking account with a debit card — Capital One, Chase, and Greenlight all offer teen accounts with parental controls and real-time spending notifications. The FDIC reports that children who have a savings account in their name are 7 times more likely to attend college.
How do you teach teenagers about investing and compound interest?
Start with a simple demonstration: if you invest $100/month starting at age 15 earning 8% annually, you would have $1.2 million by age 65 — but waiting until age 25 cuts that to about $590,000. Use real examples they can relate to: "If you bought $1,000 of Apple stock in 2010, it would be worth over $20,000 today." Custodial Roth IRAs let teens invest earned income (from babysitting, part-time jobs) tax-free. Apps like Fidelity Youth or Stockpile let teens buy fractional shares with parental oversight.