Basics of Personal Finance for a kid

Teaching children about personal finance is one of the best things you can do for them. Just like you might teach them any other skill, personal finance is a skill that can serve them throughout their entire life. I thought I’d come up with a simplified explanation of the basics of personal finance for a child, you would probably want to modify this for your child but this can give you an idea of how simple the conversation can be. You don’t need to get deep right off the bat.

• Earning money: People work to earn money. When you grow up, you’ll have a job or do tasks to make money. This money is called your income.
• Saving money: It’s important to save some of the money you earn. Saving means keeping your money aside for later. You can save money in a piggy bank or a special savings account at a bank. Saving money helps you reach your goals and have money for things you need or want in the future.
• Spending wisely: When you want to buy something, think about whether it’s something you really need or just something you want. It’s a good idea to spend your money wisely and not waste it on things you don’t really need.
• Making a budget: A budget is a plan for how you will use your money. You can make a list of things you want to spend your money on, like toys, clothes, or treats. Make sure you have enough money for the important things first, like saving and basic needs.
• Avoiding debt: Debt is when you borrow money and have to pay it back later. It’s best to avoid borrowing money when you’re young because it can be hard to pay back. Try to only spend the money you have, so you don’t owe anyone.
• Sharing and giving: It’s also important to learn about sharing and giving. When you have extra money, you can help others who may not have as much. You can donate to charity or do nice things for others. Sharing and giving make us feel good and help those in need.

Its that simple, these are the basics to get the conversation started. As they grow take opportunities to talk about finance in day to day activities. For example when you go grocery shopping explain how you are spending the money, how items cost different amounts, how the store is a business, etc… There are many opportunities you can take to share about how finances work. Encourage them to be curious and ask questions so you can continue to have more conversations in the future.

I hope you find talking to children about personal finance enjoyable. I know it has been a subject over which I’ve been able to have many good and meaningful conversations with my own children. Have you had any good conversations with kids about finances, how have they gone? Share your tips below.

If you need to review the basics at an adult level here is a post I created on that subject.