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Teaching kids about banking from a young age lays the foundation for financial independence later in life. But what is the right age to start teaching kids about money? How do you make sure they understand what points you’re trying to make? We put together this blog to answer these questions and provide everything you need to know about helping children understand banking basics.

How to Teach Young Children About Money

Even at a young age, children can understand the concept of money. Here are some techniques for teaching young kids about banking.

Show Them That Stuff Costs Money

Explain that the things they want, like toys or treats, cost money. Start simple conversations about exchanging money for goods to help them understand the value of money and the process of purchasing items.

Discuss Budget Limits

Children should understand that individuals and families have budgets. Teach kids that you need to make choices about spending to ensure you don’t go over budget. For example, when deciding between going to a movie or buying a new toy, explain that there is a set amount of money available, and they have to choose which purchase is more important.

Teach Them How to Divide Allowances

Giving an allowance for completed tasks, such as cleaning their room or helping with chores, is a great way to teach kids about money. Encourage them to split their allowances between savings and spending.

Talk About Saving and Spending

Discuss the difference between saving money for something special in the future and spending money on immediate purchases. For instance, if they want a new game, explain how they can save a portion of their allowance over time to afford it.

Use a Clear Piggy Bank

Using a clear piggy bank helps kids see their money grow over time. The visual reinforcement of watching their savings grow can motivate them to save more.

Mother teaching her children about money

How to Teach Elementary Students About Money

As kids get older, they can learn to count and handle money more effectively. Here are some ways to teach kids banking basics.

Start Counting Bills and Coins

Let kids take part in real-life purchases, such as paying for groceries, and have them practice counting bills and coins. This can build their confidence in managing money.

Show Opportunity Cost

Opportunity cost is an important concept when teaching kids about banking. Explain to children that every purchase involves giving up something else. For example, if they spend their money on a new book, they won’t have that money for the video game they’ve been saving for.

Give Commissions, Not Allowances

You can begin giving children commissions for completing tasks at this age instead of a fixed allowance. Commissions show the correlation between effort and reward, which mimics the real world. Using this approach, you teach children that earning money is tied to work and productivity.

Avoid Impulse Purchases

Teach kids to think before they spend money. Discuss strategies like making a wishlist and waiting a few days before buying something instead of making an impulsive decision.

Stress the Importance of Giving

When teaching kids about money, it’s a great idea to include the value of helping others. Encourage them to donate some of their money to a cause they care about, such as a local charity.

Teach the Difference Between Needs and Wants

Help kids understand the difference between essential items (needs) and non-essential items (wants). Knowing this difference can foster responsible spending. Discuss with them why it’s important to prioritize needs over wants.

Talk About Budgeting

Introduce kids to banking basics like budgeting. Give them a hypothetical income and discuss how they can allocate it for different purposes like saving, spending, and giving.

How to Teach Teenagers About Money

Teenagers can grasp more in-depth financial concepts. Here’s how to teach older kids about money.

Discuss How Savings and Checking Accounts Work

Explain the basics of savings and checking accounts to teenagers. Include information such as how interest works and how to monitor their account balance. Discuss the benefits of saving money in a bank account vs. at home.

Open a Bank Account For Them

The best way to teach kids about banks is to open a bank account in their name. Once you open an account for your teenager, you can make them responsible for managing it. This hands-on experience can teach them about money management, banking basics, and the importance of keeping track of their transactions.

Teach Them About Saving for College

If your kids plan to go to college, discuss college expenses and the importance of saving for the future. Encourage them to take an active role in planning for their education by setting up a college fund.

Discuss the Difference Between Debit and Credit Cards

Teach children that debit cards let them spend money from their checking account, while credit cards involve borrowing money they’ll have to pay back.

Teach Them the Positives and Dangers of Credit Cards

Teach kids that credit cards can be a helpful tool for building credit when used responsibly. However, make sure to warn them about the dangers of accumulating high-interest debt. Explain that when not used responsibly, credit card balances can lead to stress and negatively affect their credit score.

Help Them Create a Budget

Encourage teens to create and follow a budget. Discuss their financial goals and help them create a budget that will help them achieve those goals.

Introduce Them to Basic Investments

Explain investing strategies to teenagers, including savings accounts, stocks, bonds, and mutual funds. Advanced investment strategies may be too complex, but helping them understand the basics can prepare them for the future.

Cover the Time-Value of Money

Teach kids about money’s ability to grow over time through saving and investing. Discuss the concept of compound interest and how saving and investing now can impact their financial future.

Drive the Concept of “Living Within Your Means”

Emphasize the importance of living within your means. Help your teenagers understand that spending less than they earn is essential for financial stability.

Help Them Find Ways to Make Money

Jobs can be an excellent way for teenagers to learn about money, whether that’s from starting a small business, freelancing, or working a traditional part-time job. Working can teach teens the value of hard work and the reward of earning money.


Teaching kids about banking from an early age helps them learn financial responsibility. Starting with age-appropriate lessons and gradually increasing their financial knowledge as they age empowers them to make informed decisions about money management as they progress through each stage of their life.

Financial institutions can be valuable resources for educating young people about managing their finances. If you’re a financial institution wanting to provide better education for your young customers, BMA is here to help. Contact us today to learn more about how we can assist you in empowering your customers with knowledge about banking basics.

Financial Literacy for Kids | Learn the basics of finance and budgeting