Parents and caregivers are in a unique position to prepare children for money management by teaching financial literacy at home. Children as young as three can begin to grasp the four functions of money: spending, saving, investing, and giving. Most children are only aware of the spending stage because they observe purchases made for the household and family. They witness consumption only. By sharing other experiences with children—putting money into a savings account, investing in bonds, or donating to a cause—parents and caregivers expand a child’s knowledge of all the ways money is used. Financial concepts introduced in the early years build the foundation needed to understand more complex notions like credit and compound interest.

How to Develop Financial Literacy

Before embarking on a financial literacy journey with children, parents and caregivers should reflect on their own attitude toward money. Sometimes, this can involve remembering how grandparents and great-grandparents interacted with money. Financial expert, Jen Hemphill, grew up with an ultra-frugal mindset, which she later realized was limiting her family’s ability to “financially grow and thrive.” Now, she works to help families adopt a “healthy money mindset,” where finances are openly discussed with children. Notice how you answer children when they ask questions about money. Are you attaching a negative emotion passed on from previous experiences? Parents and caregivers are their child’s first role models. An openly negative relationship with money could impact your child’s future approach to working with their finances.

Preschool (Ages 3 – 5 years old)

Introduce the four functions of money.

1. Save Money: Use a clear jar to collect loose change so children can witness the accumulation of savings. With your children, pick a charity to make a donation or purchase a household item to illustrate how the saved money is used.
2. Take Your Child to the Bank: Show your child that banks serve many functions from saving money to paying bills.
3. Read Books Together: Bunny Money by Rosemary Wells and A Chair for My Mother by Vera B. Williams are both classic stories about the concept of money.
4. Play Board Games: Try simple games like The Allowance Game.

Elementary and Tweens (Ages 6 – 13 years old)

Introduce your child to financial tools and give them opportunities to practice their skills.

1. Create Opportunities to Earn: Establish weekly chores so children can understand earning.
2. Open a Savings Account for Tweens: Encourage children to save for their next big purchase or to donate year-end gifts to their favorite cause.
3. Talk Openly About Credit Cards: If children do not see the work behind earning money and the payment of credit card bills, they will not understand that credit must be paid off for financial health. Talk them through the process.
4. Explore Age-Appropriate Finance Apps: Review current finance apps, which can help tweens budget and track savings.
5. Read Books: If You Made a Million by David M. Schwartz and Finance 101 for Kids: Money Lessons Children Cannot Afford to Miss by Walter Andal are informative books to share and discuss with children.
6. Play Board Games: Make practicing financial skills fun by playing games like Money Bags or classics, such as Pay Day and Life.

Teens (Ages 14 years and up)

Allow your teen to practice more independence in financial decisions. Discuss financial risk taking and potential consequences.

1. Create a Savings Account: Is your teen excited to go to college? To buy a car? To travel? Encourage them to save for it.
2. Encourage Children to Find a Seasonal Job: Make sure the job does not interfere with schoolwork or compromise safety, and make sure that it follows labor laws.
3. Sponsor Your Teen’s First Credit Card: If you’re comfortable with setting your teen up with their first credit card, be sure to outline what your expectations are for its use. Review the consequences for overspending and review bills together each month.
4. Monitor Online Investing: If your teen is investing in crypto, stocks, or other funds, be involved and ask questions. Offer guidance to help them make sound choices.
5. Review the Household Budget with Your Teen: In order for teens to successfully live on their own, they need to understand cost of living: housing, utilities, internet service, computers, food, insurance, transportation, clothing, entertainment, etc.
6. Read Books: I Want More Pizza by Steve Burkholder and How to Turn $100 Into $1,000,000: Earn, Invest, Save by James McKenna, Matt Fontaine, Jeannine Glista, are engaging, informational books to help start conversations between parents/caregivers and teens.

Working with children to internalize ways of handling money fosters a healthy attitude toward financial matters. By remaining involved in teens’ financial literacy education, parents and caregivers continue to expand their children’s skills so they are prepared for the future.

About the Author

V. Kulikow is a former Montessori teacher and youth services librarian. She currently works as a UX designer and enjoys content creation both with words and images. On weekends you can find her gardening, taking nature photos, and working on her garden design certification through the Native Plant Trust.

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The opinions expressed in Montessori Life are those of the authors and do not necessarily represent the position of AMS.