Money doesn’t grow on trees—but with online shopping and digital payment methods, it can be harder than ever for kids to know that, unless we teach them. If you’re wondering how to teach your kids about money, you’re not alone. More parents and teachers are looking for meaningful ways to boost financial literacy for kids—and the good news is, it’s never too early to start. Don’t feel ready to teach your kids about money? As respected author Robin Taub likes to say, “If you’re not teaching your kids about money, who is?”
Below, you’ll find easy, practical strategies and fun financial literacy activities for kids that help build smart money habits from a young age. The timing is key because our money habits and beliefs are established as early as age seven and remain incredibly stable throughout our lives. Perhaps nowhere is the adage “an ounce of prevention is worth a pound of cure” more applicable than in personal finances! Here we go:
1. Talk About Money Early and Often 💬
Kids are naturally curious. Use that curiosity to introduce simple financial concepts:
- 💰What is money? (It’s what people earn when they do a job. More complex or physically challenging jobs usually pay workers more money.)
- 🧑⚕️Why do people work? (To pay for themselves and their families. Food, a place to live, and clothes to wear all cost money.)
- 🏦What does it mean to save? (Saving means you spend less money than you make. Savings = After-Tax Earnings minus Monthly Spending.)
Paying for gas, ice cream, groceries, or online orders offers real-life examples that make teaching kids about money both relevant and practical. How many workers are at this gas station? How many people work at this ice cream stand? How many people does it take to fulfill an online order? Wow - a small container of raspberries costs as much as a whole bag of apples. 🍏
Don’t let your kids think that your debit card pays for everything - you do! Similarly, don’t let them believe all those Amazon packages magically show up at the front door. Your hard work earned the wages to buy them, and people at Amazon and their suppliers worked hard to make and deliver what you just bought.
2. Make Allowance Intentional
Getting good with money is like getting good at anything else - you need to practice earning, spending, sharing, and (eventually) investing. Allowance is the only way most kids can get that practice. Whether tied to chores or given on a weekly basis, allowance helps children learn how to manage limited resources.
Guide them in planning how much to spend, save, and share. Once they know how to save (and thus create an investable surplus), you can describe how investing is another habit that builds personal financial peace of mind. But starting with the importance of investing (a common mishap) puts the cart before the horse.
Mistakes are mere teaching moments when the dollar amounts are still small. It is so much better to succumb to impulse shopping when the only consequence is that you can’t buy the T-shirt you want at the end of a visit to a theme park. The adult consequences of impulse shopping (a lower credit score and possible inability to rent an apartment, qualify for a mortgage, or a car loan) are much more painful.
3. Teach kids about opportunity cost: involve them in back-to-school shopping. 🛍️
There’s no best age to teach kids about money, but there is "a best time": when they want some! This is why back-to-school shopping lends itself so nicely to developing some terrific money habits. In four simple steps, kids can create an intentional back-to-school shopping list that allows families to allocate precious dollars to the purchases that matter most. Here’s how:
- Reflect on the prior school year’s hits and misses. What makes sense to replace? What makes sense to skip?
- List the supplies, clothing, sports equipment, or devices you think you’ll need for the upcoming school year.
- Own your list; how much can/ are you willing to contribute towards any of the purchases you’ve just identified? Don't have a job? Can you babysit? Fold laundry? Garden? Grocery shop?
- Consider the trade-offs. How much does your favorite out-of-the-house snack cost? How many times would you have to forgo that snack to help pay for some of the items on your back-to-school list? Being willing to give something up to save money for something else shows how much a purchase means to you.
What is Opportunity Cost?
The four-step approach described above teaches kids the basics of budgeting and naturally introduces the concept of opportunity cost (what you give up when you choose one thing over another). Every time you decide to do or buy something, you're also deciding not to do or buy something else because once you spend money, you have to earn more before you can spend more.
The value of the next best thing you didn’t choose is the opportunity cost. For example, let's say you had $20. You could have either used it to buy a new T-shirt or go to the movies with your friends. You chose the T-shirt and, therefore, could no longer go to the movies. The opportunity cost of the T-shirt is the fun and laughs you missed with your friends at the cinema. That’s the next best thing you could have done with that $20!
Pro Tip: This approach also works for birthday and holiday gifts. 🎁 When regularly occurring gift-giving events are on the horizon, ask your kids to consider what they’ve enjoyed in the past and what they didn’t. Reflective moments are essential when teaching kids about money. They demonstrate the power of comparing alternatives before making a selection.
4. Use Visual Goal Trackers 🌡️
Let your child pick a savings goal, then build a tracker together. (We built one you can use: Worth the Wait Goal Tracker.) Whether it’s a toy, a concert ticket, new shoes, or a new device, seeing their progress motivates smart saving. Think of how much easier it would be to forgo an iced latte with your friends if you knew you were only $10.00 away from being able to buy the jean jacket you’ve been saving for.
5. Try our Free, Award-Winning Mindful Spending Tool, the DIMS-DOES IT MAKE SENSE?® SCORE Calculator. 💡
One of the most effective and accessible tools for teaching kids about money is the DIMS-DOES IT MAKE SENSE?® SCORE Calculator. This mindful spending tool was purpose-built to help kids understand the full cost of an item or experience, as well as how much they’re likely to use or appreciate a potential purchase before they spend their own money or that of others. In other words, it helps kids think before they buy.
It's won three Money Awareness and Inclusion Awards 🏅 and is a free public good:
- There’s no registration required to use the DIMS SCORE® Calculator.
- There’s no paywall.
- The calculator was designed to encourage young consumers to ask simple questions about typical purchases before they spend their own money or that of others, nothing more, nothing less.
- It encourages reflection before spending or requesting a holiday or birthday gift.
Calculating the DIMS SCORE® for possible purchases is one of the most engaging financial literacy activities for kids available today because it allows young people to work on a problem that matters to them in real-time: “Should I buy this item or experience?” But don’t take our word for it, see what personal finance experts, parents, teachers, and most importantly, kids, have to say here.
The DIMS SCORE® Calculator helps kids assess the real value of potential purchases before making a decision. See how it works here. Parents can use it as a response to a spending request at home (“Did you calculate the DIMS SCORE?”). Teachers can use it in a class project at school. (Learn about free lesson plans that demonstrate how easily the tool fits into classroom schedules on the Teacher Tab.) Either way, it makes learning about money immediately helpful, which is what makes it so engaging and effective.
Mindful Money Habits Start Early 🧠
The bottom line is you don’t need to be a finance expert to raise money-smart kids. By utilizing everyday experiences and proven tools, such as the DIMS SCORE® Calculator, you can raise thoughtful, confident decision-makers. Whether you’re a parent setting up chore charts or a teacher creating a classroom economy, remember: financial literacy for kids is built moment by moment, conversation by conversation. And, like mastering every other life skill, the best place to begin is at the beginning.
We don't start any other subject "in the middle"!
We don’t start any other subject “in the middle.” We learn the alphabet and then how to read. We learn our numbers and then how to add, subtract, multiply, and divide. Thinking before buying is the ABCs or 123s of being good with money. And as these five financial literacy activities for kids reveal, it’s really not that hard to teach your kids to think before they buy. In fact, that habit just might be the best gift they ever get!
To learn more about our tool and approach, click on the pink or blue buttons below.
Allowance Child Development Financial Literacy For Parents For Teachers
