Kids and money—how to teach your kids financial literacy

Many of us look back fondly on our childhood as a carefree time when we didn’t have to worry about mortgage payments, bills, and savings goals. Yet, we also know that what we learn throughout our childhood shapes the adults we become. That’s why it’s a good idea to make time to teach your kids about money early. The more you educate your kids about financial literacy, the more likely it is that they’ll be good at managing their own money when they’re grown. 

And the truth is that it’s never too early to start teaching kids about money. To help you get started, we’ve created a handy guide with tips for when and how to start the conversation.

With a global crisis and the financial world becoming ever more digital, it’s more important than ever to build your children’s money skills.

We all have different priorities when it comes to money. While some people prefer to spend money on travel and experiences, others would rather save up for early retirement or a down payment on a house. No matter what you prioritize, it’s a good idea to define your money values for yourself so you know what you want to impart to your children. 

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Kids are always learning from our behavior, so make sure to practice what you preach when it comes to money. After all, kids learn by seeing as much as by doing. Take overspending—avoiding it can reduce your own financial stress and lead to a healthier relationship with money down the line. For example, by not caving in to your children’s requests for new toys all the time, you’re modeling discipline when it comes to money and showing your kids that exercising moderation is an important life skill. Perhaps you can show them instead how you're putting money away for their college fund, or—if you have the means—ask them to help you choose an organization to donate to. This can be a great catalyst for opening up conversations about the value of money, and the many ways money is used throughout our lives.

From the day they were born, your kids have been a part of your financial life. They’ve gone to the store with you and watched you pay, requested candy at checkout, and seen you withdraw money at the ATM. Take opportunities to educate them when you’re shopping or dining out. Try games at playtime that involve the exchange of money to help them practice. When they’re older, you can let them pay for ice cream, or offer them an allowance in exchange for doing chores. Money permeates every aspect of life—use these as a learning opportunity!

Digital tools have made managing your finances easier than ever. From banking apps and mobile payments to online budgeting tools, your finances can now be managed right from your phone. Not only is this a great way to improve your children’s digital literacy, mobile banks are interactive and visually engaging, making it fun for kids to engage with. Keen to see for yourself? Open an N26 bank account here to discover how easy 100% digital banking can be . 

While every kid is different, it’s important that your conversations are age-appropriate. You’ll probably be able to have frank conversations with older kids or teenagers, while younger kids might have trouble understanding that an ATM isn’t just a machine that gives you free money. Keep the conversations engaging by speaking about concepts that aren't too advanced, and encourage their curiosity around money. Remember, while it's a good idea to teach money management skills early, childhood is sacred—try to not burden them with your own financial stress.

Finances are complex, even for adults. But through play, conversation, and lifestyle adjustments, you can empower your kids to get excited about financial literacy. Of course, how you talk about it will depend on your children’s age. Here’s a breakdown of how to start the conversation  with kids of different ages:

• Toddlers and small children: When someone’s still throwing tantrums about having to take a bath, it’s probably too early to teach them to balance a checkbook. But toddlers are curious creatures who learn fast, so try explaining simple concepts and see what sticks. Play “grocery store” and have them shop for items and pay with stones or rocks, or let them treat you to a meal in their imaginary restaurant and decide what it should cost. Above all, model for them how empowering healthy money-management can be, whether at the store, the bank, or at home. 
• Elementary school kids: Give your kids a piggy bank and offer them a small amount of money to put in it. Explain that saving up means that they’ll have more money later on, either for buying something special or to use when they’re older. Play board games such as Monopoly to build a general understanding of spending and saving. Take a trip to an ATM and show them how to withdraw cash, or let them pay for a loaf of bread at the bakery now and then. Because they might start receiving cash from relatives, open a bank account for them and encourage them to start saving some money for when they’re older.
• Teenagers and young adults: Suggest after-school or summer jobs such as babysitting or lifeguarding. This will give them an appreciation for the work involved in earning money. Explain how to  deposit their hard-earned money into their own bank account, and show them how to create a budget using banking app tools. Now is the ideal time to start saving for college, a holiday with friends, or their own car. Remind them not to compare themselves to others who might have more, and model good behavior by donating to causes that you care about when you have the means. 

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Teaching kids about money matters doesn’t have to be difficult, especially with your finances and smart savings features at your fingertips. Open an N26 Smart account today and get ten N26 Spaces sub-accounts, designed to help you easily set money aside and reach your saving goals. This way, you can show your kids the most interactive, effortless ways to streamline your expenses and stick to a budget, all with just a few taps on your smartphone. Create Rules to set up recurring transfers, and let your kids watch the balance grow. Plus, with N26 Shared Spaces sub-accounts, you can even share savings with loved ones, create budgets together, and model good financial behavior for your little ones.