How to Teach Your Kids About Money and Investing

How to start teaching your kids about money and investing

Why teaching your kids about money is important

Kids begin forming money habits earlier than many parents realize, with PBS reporting that money habits are set by age seven and children as young as age three can begin grasping basic money concepts. Everyday activities, like shopping at the grocery store or saving birthday money, can help children understand how money works. Teaching kids about money helps show them how to think through decisions, understand trade-offs and build the discipline needed to save for things that matter.

Kids who learn to manage small amounts of money often have an easier time managing larger financial responsibilities through their teenage years and adulthood. The goal of teaching your kids about money is not perfection. It is helping your child feel capable and comfortable talking about money and building strong financial habits early on.

When to start talking to your kids about money

You can start introducing money concepts as soon as your child begins asking questions, usually around three years old. Younger children benefit more from simple, hands-on examples, while older kids are ready for more structure. As kids grow, they become increasingly aware of how money works in the world around them, making it the perfect time to build on their understanding. Short conversations tied to everyday tasks help make money lessons feel more positive and approachable.

If you’re looking for practical lessons and resources to start teaching your kids about money, check out Jump$tart Clearinghouse—a non-profit, non-governmental organization that provides a national database of free and paid curated financial education resources targeted toward children. Additionally, the Federal Deposit Insurance Corporation has a resource center focused on financial literacy for young people, with resources focused on pre-K aged students all the way up to grade 12.

Building smart habits: teaching kids the basics of money

Younger kids typically learn the quickest through real-life examples. Helping kids understand that money is earned and used to buy things can give them an early sense of responsibility. You can also involve them in small financial choices, such as selecting a snack within a budget or explaining why some purchases must wait. These small interactions help kids understand the difference between needs and wants and make more thoughtful decisions.

Saving teaches children patience and planning. Something like a simple jar, envelope or visual tracker is often a strong tool to help them see visually how money adds up. As savings build, you can introduce the idea that money kept in a bank can grow over time through interest. As of 2025, Statista reported that only 39% of U.S. children have a savings account signifying the current gap that most children face when it comes to jumpstarting savings and financial literacy. These early saving lessons help kids learn the value of setting goals and working toward them.

Why should kids receive an allowance

An allowance gives kids hands-on experience managing their own money. It creates opportunities to practice budgeting, saving and even giving. Allowances help kids learn how to plan for larger purchases, make financial decisions independently and understand the consequences of those decisions. What matters isn’t how much they receive, but the real-world money experience an allowance provides.

For more parent focused resources on how to help teach your kid financial literacy, review the U.S. Securities and Exchange Commission’s page for parents.

The purpose of an allowance

Some families tie allowances to the completion of chores, while others provide a small weekly or monthly amount to help children practice making choices. Both approaches can be effective, and some parents will even combine approaches providing a regular baseline allowance with the potential to earn more through extra chores, good grades or other performance incentives. Regardless of how you decide to handle allowance, the primary focus should be using the allowance as a tool to talk about goals, spending and saving in a way that feels consistent and supportive.

Age-appropriate allowance strategies for kids

Allowance systems evolve as kids grow, changing with their spending patterns and adjusting to meet the demands of a more independent lifestyle. Younger children may only need a small amount for simple spending decisions, like toys and candy, while older kids may manage larger budgets for school activities or personal goals.

Clear expectations help children build confidence while still giving them the flexibility to make their own choices. As your child gets older and more financially responsible, another smart strategy can be providing a budget for things like school clothes, sporting equipment and other relevant items that were previously bought by parents. This provides opportunities for children to do their own research, work within the constraints of a budget and ultimately make financial decisions based on their own needs and wants.

Jump$tart.org also provides a free reality check tool, allowing kids to complete a survey and see whether they will be able to afford the adult life they imagine.

Teaching kids how to save with real accounts

As children get older, opening a kids savings account can bring financial concepts to life. Since kids savings accounts are operated by parents or guardians until your child is able to legally manage it, there is no minimum age requirement. A real savings account helps kids better understand how deposits work, how to track a balance and how interest can help their money grow over time.

Setting savings goals together, such as working toward a larger purchase or planning for a future activity, can further help reinforce the importance of long-term thinking. Parents can review statements with their child to show progress and celebrate milestones.

How to explain investing to kids

Investing can be introduced in simple, kid-friendly language, but may be a bit more difficult of a concept to fully grasp at a young age. You can try explaining investing as owning a small piece of a company or putting money into something that can grow over time, and children will typically understand the general idea of planting a seed and watching it grow. Examples like this can make investing feel relatable and easier to understand at a young age. You can also explain compound interest by showing how small amounts of interest can continually increase when left alone.

Any practical examples can further drive this concept home, for example, giving your kid an extra $1 in allowance for every $100 they have in their savings or another similar practice that helps connect increased savings with tangible rewards. The focus should be on helping kids understand long-term growth rather than short-term gains. If your child is ready, you can explore general, high-level tools or educational programs that introduce the concepts of saving and investing:

• Jump$tart Clearinghouse curated financial education resources
• Jump$tart Clearinghouse reality check
• U.S. Securities and Exchange Commission for Parents
• U.S. Securities and Exchange Commission for Students
• Federal Deposit Insurance Corporation Money Smart for Young People

Age-based money lessons and practical strategies

Money lessons look different at every age. Younger children learn best through simple activities, practical examples and short-term goals, while preteens are ready to track spending and start budgeting. Teens benefit from managing earnings from part-time work, planning for school expenses and learning the basics of digital banking and safe online spending. Everyday family activities, like allowance or back to school shopping, offer opportunities to reinforce these lessons. Planning meals, reviewing sales or comparing prices can help kids think more critically about money and the decisions behind each purchase, better preparing them to be financially successful adults.

If you’re ready to take the next step in opening a saving account for your children, review Associated Bank’s options for saving and investing.