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$400 emergency, and a third have saved nothing for retirement. Meanwhile, more than 60 percent of young adults under 34 say that thinking about their personal finances makes them anxious.

In many cases, these young adults feel anxious about their finances because they never learned about money growing up. Fewer than 20 states require high school students to take personal finance classes, even as studies show that young Americans want to learn about money and wish they had learned to be more financially savvy in school.

That’s where you come in. Giving your kids real-world lessons at home on how to manage their finances will go a long way toward helping them stockpile plenty of savings, stay out of debt and maintain healthy credit scores.

Read on to learn the critical money lessons you should teach your kids at every age, from their toddler years to their teen years.

Table of Contents

Start With Yourself: Be a Good Example 

Smoking. Drugs. Bullying. All of these are topics that parents say they would rather discuss with their kids than the family’s finances.

Maybe you have struggled with using money responsibly in the past. Maybe you don’t want to tell your kids how much you make or reveal that you’re in debt. But it’s important that you become comfortable with talking to your kids about money so that they become comfortable using it.

Brush Up on Basic Financial Concepts 

Pop quiz! If you take out a loan for $1,000 with a 20 percent interest rate, how much will you owe per year in interest?

The answer is $200. Did you know that? If not, you’re like almost two-thirds of Americans who have trouble calculating interest rates.

Take some time to brush up on basic financial concepts. Make sure you understand these topics inside and out so that you can answer your kids’ questions and provide the most well-rounded lessons possible.

Get Out of Debt

Every good lesson in using money responsibly starts with reducing or eliminating debt. More than family’s finances and get on the same page. This way, you can better understand your family’s financial goals and communicate them with your kids.

It’s also helpful to write down your family’s financial goals and display them in a prominent place in the home. For example, if your family wants to go on vacation later in the year, you could post that goal on the refrigerator to remind everyone why the family is saving.

Protect Your Kids 

Another important component of putting your kids on the best financial track possible is thinking about what would happen if you could no longer take care of them.

Even though most Americans have life insurance, a good chunk do not have enough coverage. About half of Americans have $100,000 or less in coverage. It’s recommended that you have coverage equal to at least 10 times your salary. With kids, that multiplier should typically be even higher.

Also, make sure you have a will to ensure that your assets are properly divided and that your kids are cared for should something happen to you.

Younger Than 3

At this age, your kids likely just learned how to throw a ball overhand or to scribble freely on paper. They have no idea what money is or how it works — but that doesn’t mean you can’t introduce them to some basic money concepts.

Allow them to play with coins. Play store to introduce them to the concept of a marketplace. Even allow them to watch you pay bills. This helps them understand that money has a value and that items vary in cost.

Coin Identification Game 

Show your toddlers different types of coins. Allow them to trace the outlines of the coins onto a piece of paper. As you color in the shapes that you traced, help them to match the coins to the drawings and repeat the coins’ names.

Coins are more fun for toddlers to play with than paper money, but you can also draw dollar bills and color those in to include in your toddlers’ homemade “wallets.”

The Play Store 

Using the pretend money that you created from the coin identification game, gather a bunch of household items and allow your toddler to exchange the money for the items.

Kids already love playing store for the fun of it, but take this opportunity to show them that different items require different types of pretend money. For a twist on the traditional game, decorate price tags and attach them to the items.

Toy Calculator and Checkbook 

Toddlers are always watching you, so why not use that to help them learn about money? When you’re paying bills with your checkbook and calculator, let them know that you’re buying things just like they do when they play store.

For even more fun for your toddlers, give them their own “checkbook” and calculator to play with while they watch you.

Ages 3 to 5 

By kindergarten and pre-kindergarten, your kids have already seen you give something green to the pizza delivery driver or put down a piece of plastic on the table at the end of your dinner at a restaurant.

It’s your job to answer their questions and explain to them that they need money to buy things. As they reach school age, you can even allow them to manage a little bit of money on their own by way of allowances.

It’s up to you whether the allowance should be earned or given, but the important thing here is to teach your kids to save and to help them understand that they may need to wait before they can buy something.

Saving, Spending, and Sharing Jars  

Gather three clear jars and ask your kids to decorate labels with “saving,” “spending,” and “sharing” for the jars. Piggy banks are great, but you can’t see what you’re putting in them, and you want your kids to be able to see the progress they’re making!

Explain that everything costs money. The money in the “spending” jar can be used today to buy anything your kids want within reason. If they want something that is more expensive, they will have to wait until their “saving” jar has enough money in it.

You can also encourage your children to put a couple of coins or a dollar bill or two in the “sharing” jar, and help them think of charities for the money.

Needs vs. Wants Shopping   

Let’s say your kids want a $10 stuffed animal. Help them count out $10 from their jars. Have them take the $10 to the store and hand the coins and bills to the cashier. Allow them to see how much money is left in the jars, and explain to them that if they spend money this time, they’ll have to wait a little bit before they can buy something again.

If they don’t have enough money in the jars, help them understand how much they have and how long it will take to save enough for the stuffed animal given their current savings rate.

Imaginary Restaurant 

What kids don’t like to play restaurant? At the end of the game, remind them that they can’t leave the table without “paying” the bill.

This is also a good opportunity to introduce your kids to the relative value of coins and bills. Show them that one-dollar bill equals ten dimes or four quarters.

Ages 6 to 10 

While teaching kids about money is critical at every age, this age group is especially important. Researchers believe that kids’ money habits are formed by the time they turn seven.

Give them a firm foundation in protecting their money in savings accounts (and earning interest), shopping around for the best deals and understanding the different ways that money can be spent or shared.

Opening a Savings Account 

Take your kids with you to the bank. Explain to them that putting your money in a bank is better than stockpiling money at home because a bank protects your money and pays you interest.

Explain that the bank pays you interest as a reward for keeping your money in that bank, instead of at another bank. Also, explain that interest is a cool concept because it keeps growing the longer you keep your money in the bank.

You can illustrate this concept by asking your kids to set aside $1 from their allowance. Tell them you’ll act like the bank and pay them 10 percent, or a dime, in interest for this $1. They’ll now have $1.10. Explain to your kids that you’ll pay interest on this $1.10 in a month and that they’ll receive 11 cents instead of just a dime. Allow them to see how interest keeps adding up!

Coupons and Comparing Prices 

It’s surprising how much your kids can learn about money at the grocery store! If you use coupons, ask your children to help you clip them and identify the corresponding products at the store. Make sure they watch as the cashier scans the coupons and shaves dollars off your bill.

Additionally, look closely at the unit prices of products. Ask your kids to help you determine which products offer a better deal (a lower price per ounce, for example). This is also a good opportunity for your kids to practice their basic math skills.

Career Exploration 

It’s important for kids to know that money is not just spent on physical goods, like food and toys. Explain to them that money is also spent on services, like labor. This is a good time for you to tell them what you do to make money and encourage them to start thinking about what they might want to do when they grow up.

Charitable Giving 

Since many of your kids’ money habits will be formed during this time, make sure to explain the importance of giving back to their communities and to those in need. You’ll want to tell your kids that they are part of a larger community and that everyone in the community is responsible for those around them. This includes a responsibility to give your time and some of your money to community causes.

Help them connect with a cause they might care about, like a local animal shelter that rescues stray cats or an environmental group that plants trees in the local park and explain that they can give some of their money to help others. Helping them to understand that not everyone has the money they need will help them appreciate their money and grow to be more giving adults.

Ages 11 to 13 

Your kids have already opened savings accounts and have seen how money seems to show up out of nowhere. It’s time to explain how compound interest works and explore other places to store your money. They also can begin to learn more about the worth of objects around them.

Exploring Compound Interest 

Finally! You get to share the wonders of compound interest with your kids. Play around with a couple of classic examples that show that savings can really add up, but only if you start saving early.

For example, if they save $100 every year starting at 14, they’ll have $23,000 when they’re 65, but only $7,000 if they start saving when they’re 35.

Encourage them to play with an online compound interest calculator that allows them to input the specifics of their bank accounts and play around with different time periods and interest rates.

Investment Games 

Show your kids that you can store your money in other ways that could make you more money than a traditional savings account. However, be careful to warn about the risks of losing more as well.

Have your kids pick out a couple stocks that relate to their favorite hobbies. Track how the stocks perform every week for a given amount of time and award a prize (maybe a pizza dinner or a movie night) to the winner.

Yard Sales

Your kids should have a pretty good grasp on how to value different objects already, but allow them to develop these skills even further with a yard sale (and clean out your basement in the meantime).

Put them in charge of planning the yard sale, finding things to sell, setting the prices, and interacting with customers.

Ages 14 to 18 

By this point, you’ve helped your kids learn about money for more than a decade. Now it’s time for them to start working and thinking about college before they eventually go off on their own.

Be prepared to answer many questions during this time, as there are many essential financial  You’ll need to cover everything from paychecks to checking accounts, credit cards, and social security.

Breaking Down the Paycheck 

As your kids earn their first paychecks, they might not like what they see. The total might not match the amount they had banked on earning. Now’s a good time to explain taxes.

Explain the different types of taxes to them and show them where the taxes go, whether it’s to Social Security or Medicare or elsewhere. Also emphasize the importance of saving and encourage them to open an individual retirement account.

Perhaps your daughter or son will want to make some extra cash. Encourage them to be resourceful and help them look for opportunities like babysitting or selling old clothes.

Debit Cards 

Before your kids head off to college and eventually open their own checking accounts, they might want some practice at home. Consider opening a joint account with your kids to give them access to a bit of money. You can monitor their spending using online apps and ensure that they’re making healthy financial decisions.

Their names can also be on the checks associated with the account. Take this opportunity to teach them about writing checks and balancing checkbooks.

Credit Cards 

Kids can’t enter into legally binding contracts, such as credit card agreements until they are 18. One way around this is to add your kids as authorized cardholders under certain circumstances.

Whether or not you give your kids access to your credit cards at this point, you must teach them to use credit cards responsibly. Explain that they should use a credit card only if they can pay off the monthly payment in full. Talk about the dangers of debt and how missed payments decrease credit scores and make it harder to secure loans.

Finally, stress the importance of exercising caution and avoiding suspicious websites when entering your credit card number online.

Social Security Numbers

It’s likely your kids will be asked repeatedly for the last four digits of their social security numbers. Make sure they memorize all of the digits before they go off to college so that they’re not caught off guard.

Every parent wants their kids to be financially healthy — to have plenty of savings, know how to budget, and avoid the troubles that come with bad credit. But your kids won’t know how to be savvy with money on their own. Take the time to teach them good tips at every age and set them up for success.

Additional Resources

• Find games, activities, and information about money for kids at MyMoney.gov.
• Follow the FDIC’s Money Smart for Young People lesson plans.
• Explore the U.S. Securities and Exchange Commission’s Compound Interest Calculator.
• Learn how to explain taxes to kids at USA.gov.
• Investigate different types of coins and learn more about the U.S. Mint.