Teaching Kids About Money: Where to Start and Why It Matters

Managing your own finances can be challenging, but explaining money to kids brings a whole new set of hurdles. Even before they receive their first allowance or earn a paycheck, kids are aware of money—but it’s usually up to us to help them truly understand how it works.

Many parents and educators aren’t sure where to begin. Since schools often don’t prioritize or have the means to teach financial literacy, the task tends to fall to conversations at home. But how do you explain investing to an elementary schooler? Or the concept of a paycheck to someone who doesn’t yet have a job? The truth is, teaching kids about money starts with us.

Research shows that kids begin forming financial habits by the age of 7. Financial literacy isn’t just a subject—it’s a behavior, a habit built over time. That’s why at FitMoney, we’re committed to helping kids as young as kindergarten learn the value of money. And just as importantly, we support parents with the tools to talk about money confidently and raise financially capable kids.

Not sure how to start? That’s totally okay. These simple steps can help you create a home environment where open conversations about money are encouraged and financial confidence can grow.

Start with the Basics:

Needs vs. Wants, Goods vs. Services

One of the most fundamental lessons in money management is knowing the difference between what we need and what we want. When budgeting, needs always come first—things like housing, food, medical care, and electricity.

Kids can learn this too. Pose simple questions: Is it more important to buy vitamins or a new toy? A warm blanket or candy at the movies? Help them understand prioritizing.

Make it fun—have them walk around the house and sort things into “needs” and “wants.” Or when shopping, ask whether something in the cart is a necessity or a treat. You can even share your own thought process—like explaining that paying rent or a mortgage comes before buying movie tickets.

You can also introduce the concept of goods vs. services. A loaf of bread is a good; a haircut is a service. This teaches kids how people earn money and how it circulates in the economy. You can even connect these ideas to discuss what services are needs and which could be wants.

Talk About Saving and Set Goals Together

Once kids grasp how we make spending choices, it’s time to introduce the why behind saving. Life throws curveballs—a broken appliance, an unexpected doctor’s visit—and savings help us handle them.

Share real-life examples of when having money set aside helped you out. Encourage your child to recall similar moments. This helps them understand that saving isn’t just smart—it’s necessary.

You can even help them set their own savings goal. Maybe they want a new toy or to fund a lemonade stand. Grab a piggy bank or a clear jar and start adding to it together. Having a goal gives purpose to their saving and helps them build patience and discipline.

Call Out Advertising and Its Influence

Kids are surrounded by ads every day, often without realizing it. Marketing influences what we want—and how we spend.

Next time they ask for a product, ask where they saw it. It might’ve been from an ad on YouTube or a billboard. Help them spot different kinds of advertisements and talk about what each ad is trying to convince them to do.

This awareness helps kids understand that while ads are designed to tempt us, our budget and savings goals are what really matter.

The Right Time to Teach? Right Now.

Explore a variety of self-directed and classroom programs from FitMoney, free for K-12 students.

There’s no perfect method or moment to start teaching kids about money—what matters most is that you start. The earlier we begin building smart money habits, the better prepared our kids will be for a financially secure future.

FitMoney is a non-profit organization dedicated to empowering families and schools with free, unbiased financial literacy tools starting in kindergarten. We believe everyone deserves the skills to live financially fit lives.

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