Today’s blog post is brought to you by Deb Avara. Deb has a passion for teaching basic financial literacy to people of all ages. She teaches college and sees financial illiteracy all the time. She feels this is a subject that definitely needs to be worked on in most families.

Deb holds two Masters Degrees and is an Associate Professor at Amarillo College where she teaches Sociology. She runs where she has developed books, games, and seminars that teach financial literary in creative ways.


As parents, we need to talk to our kids about money. All ages. The earlier the better. Don’t wait until high school when they start working.

Most parents don’t know where to start when it comes to talking about money. I’m committed to helping you know where to start and providing creative ways to do teach your kids!

Even preschoolers aren’t too young to learn about money. If you are paying bills and your 3-year-old wants to know what you are doing, tell them. You can explain that it takes money to pay for electricity, water, and food and you are just paying the people that you buy that from. Don’t shoo them away thinking they are too young to understand. They will probably say “Oh, ok,” and walk away, but the door is open for them to start understanding that you have to pay for what you need or want.

What about other ages? Here are some practical suggestions for teaching kids about money at any age:

Elementary school:

Teach them to spend, save, and give. Whether you give your child an allowance for doing chores, or if you have a chore chart for them to earn extra money, start teaching them how to spend some, save some, give some. You can use 3 different containers (square tissue boxes, coffee cans with slots) decorate them and write on them. If they earn 50 cents, give them 1 quarter (to save) 2 dimes (to spend) and a nickel (to give).

Teach them the value of time and money. If they don’t do their chores, they don’t get paid. They have to exchange their time for work and earn their allowance. You can explain that mommy and daddy have to do the same thing. They go to work in exchange for a paycheck.

Wants vs needs is an important concept to start very young. They want a new toy, they probably don’t really need one. Older elementary may want a cell phone. Some may actually need a cell phone for whatever reason – and that’s ok. But just because all their friends have a cell phone, this does not automatically turn their ‘want’ into a need. We did not get cell phones for our family until my son turned 16 and started driving! People just didn’t know how we were surviving without one!

Middle school:

Introduce bank accounts. Continue the concept of save some, spend some, give some, but now you can use a bank for a savings account. This concept may become more difficult at this age because now they ‘want’ many more things. Download music, games, books, designer jeans, a fancier cell phone case – whatever it is. They are going to be inclined to just ‘spend’. Now you must instill the ‘wait until you’ve saved enough’ concept. This is tough because we are living in a world where everyone wants what they want NOW, not later. It’s a gift to teach our children delayed gratification.

Teach them how to make a budget. If they are earning $10.00 a month allowance, and they want something that cost $50.00, how long will it take them to save for it? Maybe they want to use their ‘save’ and ‘spend’ portions so they earn it faster. Show them that money in has to equal money out. Write it down! Even if it’s two lines: ie: “Income …$8.00.     Expense… Saving…$8.00”.  This is a budget. Perhaps they can do extra chores to earn their money faster? Resist the urge to lend them money because that introduces the concept of “debt” and it’s important for them to learn to manage their money. (Of course, there are rare occasions like a school dance where a little loan isn’t the end of the world…but don’t let them off the hook. Make sure they pay it back!)

Explain to them how debit and credit cards work. Use an online credit card calculator, plug in $3,000, and show how much extra money they would be paying if they only made the minimum payment. Lesson here: You MUST make more than the minimum payment every month. Also explain that the money on the debit card is not magic. Someone is putting the money in the account for them to have access to it.


High School:

Encourage getting a part-time job. It’s now time for them to start paying for a portion of the cell phone bill, and maybe even their portion of the car insurance.This will not kill them – as much as they protest it might! They need to understand these are privileges that come with expenses. Oh and don’t forget to explain all the deductions on their paycheck.

Start talking to them about 401ks and Roth IRA’s. Yes, retirement. This is when ‘time’ is absolutely your friend. I’m talking about compound interest. If they start young they can have that retirement they’d like to have when they reach that age. I did not learn about compounding interest until I reached my mid 40s! This is actually how I started my career in teaching basic financial literacy. If I had only known when I was 20 how compounding worked – I would have done so many things differently! And by the way – age is not a factor when it comes to having a Roth IRA. Your child just needs earned income. So technically, if they are mowing yards at age 12, they can start their Roth IRA.

Start exploring financial aid and scholarships for college. The average student loan debt right now is over $38,000. This loan must be repaid. You cannot declare bankruptcy and have it forgiven. Have them start the research on different loans and talk to financial aid at your local college for ideas.

Discuss buying and paying for a car. Their ‘want’ may be very different from their ‘need’. Explain that gas, insurance and repairs all add on to what they pay for their car. This goes back to their budget. If someone has $400.00 a month for a car, all of these expenses must be considered, not just the monthly payment.

Teach them about credit. Make sure they understand that bouncing checks, not paying their car payment, and not paying their credit cards on time will cause bad credit. This will affect their interest rates for future credit cards, cars, houses, renting an apartment, their car insurance, getting loans for college, and certainly their interest rate for a house.


College age and young adult:

Help them to prepare to move out on their own. Teach them about the process for securing an apartment. They’ll need the first month’s rent PLUS a security deposit. They’ll also need to figure in the monthly costs of utilities and renter’s insurance.

Encourage them to save for a house down-payment. Even high school age students can begin saving for a house down-payment. It’s never too early and even little amounts every paycheck can add up over the years.

When he or she is ready to buy their first home, teach them to buy what they can afford NOW. Do NOT let the agent convince you that once you graduate college and get that fabulous job that you can afford a bigger house than what you can comfortably pay for now.

Play with an amortization calculator. The banks are not going to tell you that you can save thousands of dollars in interest alone if you take a 25 year note vs a 30 year note. The difference in monthly payment is usually minimal, so play with a calculator – comparing 30 year to 25 year to even 20 year. DON’T forget you need to add to your PI (principle/interest) the TI (taxes/insurance) and PMI (Private Mortgage Insurance you can avoid if you have 20% to put down) to your monthly payment!

Teach them about saving for insurance deductibles and home repairs. The home owner now has to make and PAY for all the repairs to the house. They need to have a Home Repair savings account. Encourage them to also keep their home and auto insurance deductibles in its own savings account. Then if an auto or home insurance claim is filed, they have the deductible.

Teach them about emergency funds. (This is a good reminder for us as adults!) When we don’t have emergency funds, this is when we depend upon credit cards to “save us.” That’s also when we start the sinkhole called “debt.” A first goal for an emergency fun is $1000. Then three months of household expenses should be a second goal. If it takes $3000 a month for household expenses, then $9000 in an emergency fund savings account is what you’re shooting for. After that 6 to 9 months of emergency funds are wise. That would be between $18,000 and $24,000 saved. Should you lose your job in a re-org or downsizing, this could be very important for staying afloat while you’re finding another job. Start early saving that money!

Want to take some next steps? Here are some resources for each age group:

K-2nd grade—Bella Buys A Big Blue Bike

3rd and 4th grade—Money Quest

5th-8th grade—The Money Maze

High School–Personal Financial Literacy for High School Students

High School—Jill Savage’s Parent and Teen Financial Notebook

College—Just the Basics Please

Family Games

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