Dollars and Sense: A Guide to Building Financial Literacy in Kids

Editor's note: This article was sponsored by BECU.

American parents are talking to their kids about money, but kids may not be getting the message. While 68 percent of parents report talking to their young children about financial concepts, such as budgeting and debt, many adults report feeling uncomfortable and uninformed when having those conversations. Postponing the money talk puts U.S. teens behind the curve, financially speaking. The National Center for Education Statistics reports that nearly one-quarter of American 15-year-olds score below proficiency level on a financial literacy test, behind 15-year-olds in China, Australia and Belgium.

Talking with kids about money can’t start too early, according to Stacey Black, lead financial educator at BECU, Washington state’s largest credit union. She counsels families to introduce kids to the four “pillars” of financial health — saving, spending, borrowing and planning — before they are even old enough to join the conversation.

“It’s never too early to start,” says Black. “I like to tell people to think about ways to weave financial concepts into everyday conversations and start activities as early as possible.” These early conversations are as important for parents as they are for kids — consider them practice sessions that pave the way for richer, more meaningful money talks later on.

Ready to get started? Here’s how to foster financial literacy, from toddlerhood through the teen years.

Early years (0–5)

Of course, preverbal tots can’t converse about saving, investing or charitable giving. However, talking openly about these concepts creates an important family norm and sends the message that talking about money is not just okay, but encouraged, notes Black. “You can open a savings account or college fund for your baby, and when they get old enough, you can start talking about why you’re saving and update them on savings progress.”

By age 5, kids are often ready to set a savings target or contribute to a family savings goal. “When kids have a toy that they want, or if there’s a family vacation coming up, you can make that a savings goal,” says Black. Allowing kids to handle, sort, and stash coins and bills in a piggy bank or jar helps them begin to understand the value of money.

As kids learn about savings, they also might show interest in spending. “Playing ‘store’ at home is a great way to introduce the topic of spending,” says Black.

Tots can start learning about giving to charity at a young age, according to Jump$tart’s National Standards for Personal Finance Education, a guide that sets benchmarks for financial literacy by age. Before kids reach kindergarten, parents can talk to them about their own charitable giving and explain how giving to a cause is different from sharing toys with a sibling or friend.

Elementary-school years (6–12)

School-age kids have watched adults around them earn, spend and save for years, so they’re ready to tackle bigger topics. “Families might be surprised by the financial savvy of a fourth-grader,” says Black. “You can definitely start talking to a fourth-grader about concepts like borrowing, debt and interest. It’s not going to be the same conversation you’d have with a teenager, but you can introduce them in a simple way.” When your child or preteen wants to buy something but doesn’t have enough money to cover the cost, you can offer to buy it as long as the child agrees to repay the “loan” — with interest. “Set a deadline for when the money is due, and if it’s not made on time, add interest each week that it is late. This is a great lesson to learn before your child takes out a loan in the future,” says Black.

Aim to spark conversation and reflection about financial choices, wants versus needs and the long-term implications of purchases. Build a habit of thinking before spending by establishing a waiting period of 24 hours before making a purchase over a certain amount, and talk to kids about the difference between shopping — or evaluating and comparing potential options — and buying.

To internalize these lessons, kids need to have some money to spend, says Black. “Whether or not parents believe in giving out allowance, it’s important that kids have money to make mistakes and learn,” she notes. If families don’t want to dole out allowance or pay kids for chores, they can allow kids to buy some of their own school supplies, help shop for family holiday gifts or choose souvenirs from a gift shop while on vacation — all within a certain budget or amount.

As kids grow, conversations about saving for the future can grow, too. “Some families introduce investing around this age,” says Black. “I’ve even seen families have a family 401(k) and make decisions about how to invest together, so it becomes a family activity in addition to a learning tool.”

Teens and young adults (13 and older)

For teens, the conversation about borrowing takes on greater importance. Managing debt is a strong theme in “Your Guide to the Next Big Talk: The Money Talk,” BECU’s guide to meaningful money conversations with kids. “For me, credit is the most important topic for teens,” says Black. When teens begin eyeing bigger purchases, from gaming systems to cars, parents should highlight the cost of using credit by using online calculators to show how long — and how much — their teens will spend on interest and fees.

The key to keeping teens engaged in money talks is staying out of lecture mode. Instead, make financial literacy topical and fun — think TikTok meets teachable moment. “I’ve found some great videos on social media that I use in my classes with high school students, and BECU has Instagram Reels that break down money topics. Teens are going to pay attention to those over anything an adult tells them,” says Black.

Financial lessons can be found everywhere, from streaming channels to family game night. Watching young couples on television as they grapple with the decision about whether to invest in a home or spend thousands on a wedding, or playing the classic board game The Game of Life, can get teens thinking and talking about financial choices.

Giving teens more control over their spending on clothes, gifts and entertainment provides more opportunities to practice budgeting, prioritizing and making mistakes while the stakes are relatively low. Many financial institutions allow parents to open a youth spending account linked to a debit card for kids ages 13 and older, allowing teens more freedom while parents can transfer funds and keep an eye on spending.

Don’t worry if you’re still learning about financial literacy yourself, notes Black. “I tell parents that it’s okay not to know everything. Don’t think you need to be a money expert to talk to your kids about this, because that’s what holds a lot of parents back.”

Financial literacy involves lifelong learning, and showing teens how to find information is one of the most valuable lessons parents can teach them, says Black. “It’s okay to say, ‘I don’t know — let’s look it up!’”