Back to Basics: What Every Child Under 10 Should Know About Personal Finance

kids personal finance

Financial literacy is an essential life skill that should be taught to children from a young age. It is never too early to start teaching children about basic financial concepts that will set them on a path toward financial success. Here are the basics of finance that every child under 13 should know:

Pre-Schoolers and Kindergartners

Some Basic Concepts

When your children are preschool or kindergarten age, you can start introducing them to some basic concepts. Consider showing your child a dollar bill and having a discussion with them about what it could be used for. Try and lead them to the idea that dollars have value and can be used for things that they need or want.

You can also start introducing the different types of money, such as bills vs. coins. Emphasize to your child that both coins and bills have value and can be used to purchase things you want.

You can also talk to your children about who has money, and why people need money. One idea might be to introduce the idea of trading and then talk about how money has replaced the need to trade for things.

Saving

Saving is an essential part of financial management. Teach your child to save money for a specific goal such as buying a toy or saving for a rainy day. A good way to do this is by giving them a clear piggy bank. The advantage of a clear piggy bank is that it allows your child to see their progress. Talk through savings with them and make a big deal about the savings growing.

Set An Example

Even at a young age, your children are watching you to see how you manage money. According to a study by researchers at the University of Cambridge, money habits are formed by the age of 7. So, if you’re not budget or making good decision yourself, your kids will pick up the same behavior.

This will help them develop a habit of saving and managing their money better.

Elementary Students and Middle Schoolers

Basic Math

Basic math skills are critical to managing finances. Teach your child simple arithmetic like addition, subtraction, multiplication, and division. This will help them understand the concepts of budgeting and saving and make them comfortable with financial calculations.

The first and most important concept to teach children is money management. Children need to understand the basics of budgeting, saving, and spending. Teach your child the importance of setting aside money for saving and spending wisely.

Earning Money

Teach your child that money is earned by working hard. Explain that you earn money by doing your job, and that’s how you can afford to buy things that you need. Introduce them to the concept of entrepreneurship and help them start a small business like selling lemonade or homemade crafts.

You can also teach them to earn money by paying them for doing chores around the house.

Delayed Gratification

Children need to learn the concept of delayed gratification, which means putting off something they want now for something better in the future. Explain to your child that it is essential to save money for bigger goals rather than spending it all on small things they want now. This will help them develop patience and avoid impulsive buying.

Needs vs. Wants

Children need to learn the difference between needs and wants. Explain to them that needs are things that they require to survive, such as food, clothing, and shelter. Wants, on the other hand, are things that they desire but can live without, such as toys or candy. This would also be a good time to introduce the idea of opportunity costs. Explain to your kids that if they spend money on one thing, they may not have it for other things. Help them weigh decision and their possible outcomes.

So basically, teaching your child basic finance concepts is an essential part of parenting. By teaching them about money management, needs vs. wants, saving, earning money, delayed gratification, and basic math skills, you can help your child develop healthy financial habits that will last a lifetime. Start early and make learning about finance a fun and interactive experience for your child.

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Tamila McDonald

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.