4 Life Stages of Financial Literacy for Kids

Managing money is a foundational part of being a successful adult, but how we learn financial literacy can be a hit-or-miss process. Financial literacy isn't a standard part of the educational curriculum, although several schools are making an effort to include it.

Throughout school, financial literacy may be taught in a variety of formats (elective versus compulsory), timeframes (a single course versus over many years) and age ranges (elementary versus high school). With such variability, the topics a child learns may not line up to the time when they're necessary, like learning about credit in middle school when a credit card isn't needed. Even parents are varied in whether and how consistently they teach their kids financial literacy.

Setting kids up for financial success

To achieve many of the milestones we want for our children—completing college, getting married, buying a home, having children, starting a business or traveling—it's important to include financial lessons into their skill set. The ability to have a healthy relationship with money and understand how to both achieve your own goals and protect yourself from risks can help level out the bumps in life and prevent adult children from boomeranging home in a financial crisis.

When teaching your kids financial literacy, include them in your money conversations at different ages to help bring consistency to their own money journey. Overall, you want to teach them that money is an important consideration when making a decision, but you don't want to pass along money anxiety if you've experienced it.

Here are some age-appropriate activities and conversations to help give your children a solid financial base.

1 Elementary school-aged children

Children should start to learn the basics of money and saving in elementary school. Here are some ways to teach these topics in a way they can easily understand.

• Books and games: There are several books written for schoolchildren explaining how money works, including the Moneybunny series by Cinders McLeod. If you'd rather learn through play, Monopoly is an evergreen board game about capitalism with real staying power. Both activities allow you to teach your children subconsciously while focusing directly on something else.
• Allowances: This teaches your kids to adjust to having money themselves. Whether learning to physically manage it or count it and save it to buy things they want, they start to learn the value of money and build ideas about what's theirs. This lesson can be learned repeatedly, especially when they make a bad purchase.
• The one-third rule: The one-third rule—putting 1/3 of your funds toward savings, 1/3 toward charity and 1/3 toward wants—somewhat mirrors the budgeting structure many adults follow. Add some rules around an allowance so you can give your kids structure and teach them to allocate funds thoughtfully.
• Gifting money instead of things: When your kids get cash instead of a physical gift, it helps them understand the value of what they want. This is especially true if the cash isn't quite enough and they'll have to make up the difference for a purchase.
• Starting a small business: Encourage an entrepreneurial spirit in your children to help them earn money for things they want. Tried-and-true methods include a lemonade stand, cookie sale, car wash and lawn mowing service. This can help them understand the value of a product or service—and what it feels like to earn money.

2 Middle school-aged children

Start introducing budgetary practices and investing once your kids enter middle school. This can include opening a bank account they can manage or getting them involved with charitable donations.

• Bank accounts: Pre-teen kids should have a bank account to manage their savings. An account helps them monitor the growth of their savings and understand the time value of interest and appreciation. It also introduces them to how financial institutions work.
• Budgeting apps: Most bank accounts come with free tools that help manage your spending, get insights into your spending habits, and create a budget or savings plan. These tools can be very visual, making them easy to use and understand. Use them with your kids to help them create and manage a budget for their savings or set a purchase goal and work toward it.
• Family charitable donations: If you make charitable donations on a regular basis, get your kids involved in the process when they're 11 to 13 years old. This can not only instill your philanthropic values but also encourage excitement in the process into adulthood. To start, have them research and select a charity using GuideStar or Charity Navigator.
• Investments: With many low-cost self-directed investing platforms available, it's easy to set up a brokerage account and have your kids make small contributions each month. Sites like TreasuryDirect Kids also provide educational insights, so your children can learn about types of assets, risk and volatility as you help them decide the best place to grow their money.

3 High school-aged children

As your kids begin to earn more money for work—whether it be a part-time job, summer position or full-time social media hustle—now's the time to start increasing the complexity of their financial education.

• More cash: Because they can potentially earn more than some working adults, now's a good time to teach your kids how to manage this money. Teach them how to use credit and debit cards, manage a business, and file tax returns while they're still at home.
• More independence: Most or all of your teens' wants should be handled by their own earnings as a way to build on their budgeting and money management skills. The complexity and accompanying issues that arise with higher earnings will also crop up, making this additional education essential.

4 College-aged and young adults

This is the time when your kids begin to integrate their financial life with others and lean on you for help with adult financial choices.

• Sharing expenses: Whether with roommates, romantic partners or friends, as your kids enter college and young adulthood they'll need to learn how to navigate splitting and managing expenses with others. This includes understanding how to adjust based on differing levels of debt and income, how others relate to money and how to work out what they can afford.
• Big-ticket purchases: Young adults will also be buying big-ticket items like cars and down payments. A lot goes into these purchases, including insurance, financing, setting a budget, negotiating and fees that require help from someone with experience.
• Emergency funds: If the recent pandemic taught us anything, it's that having an emergency fund is vital for all of us. Teach your income-earning young adult child to keep 3 to 6 months of funds accessible to cover necessities if they're out of work.
• Qualified plans: A first job often requires selecting a retirement plan, investment options for the plan and a contribution percentage. Help guide your kids toward an appropriate plan so they can better understand the benefits of long-term planning while taking advantage of employer-matching contributions.
• Fraud and identity theft: Empower your kids to safeguard their financial and personal information to protect them from these real threats, and teach them how to be carefully skeptical of requests for loans, co-signing debt and passwords.

The bottom line

While no two journeys are the same, instilling foundational knowledge and financial confidence in your kids early and frequently revisiting the topic can help you lay a solid foundation. Your First Citizens financial partner can also offer resources to help you and your children solidify a plan for success.