How to Teach Your Kids About Money and Investing

Money is a part of our everyday lives, whether we like it or not. We use it to buy things, to save for the future, to invest in our dreams, and to deal with unexpected situations. Money can also be a source of stress, confusion, and frustration, especially if we don’t have enough of it or don’t know how to manage it well. 

That’s why it’s important to teach our kids about money and investing from an early age. By doing so, we can help them develop the skills and habits that will enable them to make smart and responsible financial decisions throughout their lives. We can also help them avoid some of the common pitfalls and mistakes that many adults face when it comes to money matters. 

But how do we teach our kids about money and investing? What are the best ways to make it fun, interesting, and relevant for them? And what are the appropriate topics and activities for different age levels? 

In this blog post, we will answer these questions and provide some practical tips and examples for parents who want to raise financially literate and savvy kids. We will also share some of the benefits and challenges of teaching kids about money and investing, and some of the resources and tools that you can use to support your efforts. 

Why Teach Your Kids About Money and Investing? 

Before we dive into the how, let’s talk about the why. Why should we teach our kids about money and investing? What are the benefits of doing so? 

Here are some of the reasons why financial education is important for children and youth: 

1. It helps them develop a positive and healthy relationship with money. Money is not something to be feared, hoarded, or wasted. It is a tool that can be used to achieve goals, to help others, and to enjoy life. By teaching our kids about money and investing, we can help them appreciate the value of money, the importance of saving and spending wisely, and the joy of giving and sharing. 
2. It helps them acquire essential life skills. Financial literacy is not just about knowing how to count, budget, or invest. It is also about learning how to plan, set goals, make choices, solve problems, and deal with risks and uncertainties. These are skills that are useful not only for managing money but also for navigating other aspects of life, such as education, career, and relationships. 
3. It helps them prepare for the future. The world is changing rapidly, and so are the financial opportunities and challenges that our kids will face. They will need to deal with more complex and diverse financial products and services, more global and digital transactions, and more personal and social responsibilities. By teaching our kids about money and investing, we can help them adapt to these changes and take advantage of the opportunities that they offer. 
4. It helps them build wealth and achieve financial independence. Money is not an end in itself, but a means to an end. By teaching our kids about money and investing, we can help them understand how money can help them pursue their passions, fulfill their potential, and create their own destiny. We can also help them avoid some of the common financial pitfalls that can derail their dreams, such as debt, fraud, and inflation. 

How to Teach Your Kids About Money and Investing? 

Now that we know why we should teach our kids about money and investing, let’s talk about how. How do we make financial education fun, interesting, and relevant for our kids? How do we tailor it to their age, interests, and needs? 

Here are some general tips and principles that can guide us in teaching our kids about money and investing: 

1. Start early and be consistent. Financial education is a long-term process that should start as early as possible and continue throughout the school years and beyond. Research shows that financial habits and attitudes are formed by the age of seven, so it’s important to expose our kids to money concepts and experiences from a young age. It’s also important to be consistent and reinforce the lessons and skills that we teach them over time. 
2. Use everyday situations and examples. One of the best ways to teach our kids about money and investing is to use the opportunities that arise in our daily lives, such as shopping, paying bills, saving for a trip, or donating to a cause. These situations can help us illustrate and explain the financial concepts and principles that we want our kids to learn, such as income, expenses, budgeting, saving, investing, and giving. They can also help us show our kids how money affects and is affected by other aspects of life, such as values, goals, and emotions. 
3. Involve your kids in financial decisions and activities. Another effective way to teach our kids about money and investing is to involve them in the financial decisions and activities that we make and do as a family, such as planning a budget, opening a bank account, choosing a financial product, or investing in shares. This can help our kids develop a sense of ownership and responsibility for their money, as well as a sense of curiosity and confidence in their financial abilities. It can also help us model and share our financial knowledge, skills, and habits with our kids. 
4. Make it fun and playful. Financial education doesn’t have to be boring or intimidating. We can make it fun and playful by using games, stories, songs, videos, and other creative tools and methods that can capture our kids’ attention and imagination. We can also use humor, praise, and rewards to motivate and encourage our kids to learn and practice their financial skills. The key is to make financial education enjoyable and engaging for our kids, so that they will want to learn more and do better. 
5. Make it relevant and realistic. Financial education should not be abstract or hypothetical. It should be relevant and realistic to our kids’ lives, interests, and needs. We can do this by using examples and scenarios that are familiar and meaningful to our kids, such as saving for a toy, buying a gift, or starting a business. We can also do this by setting realistic and achievable goals and expectations for our kids, such as saving a certain amount, earning a certain return, or donating a certain percentage. The goal is to make financial education practical and applicable for our kids, so that they will see the value and impact of their financial decisions and actions. 

What to Teach Your Kids About Money and Investing? 

Now that we’ve discussed how to teach our kids about money and investing, let’s delve into what specific topics and activities we should cover at different age levels. 

Ages 3-5: Introduce Money and Its Basic Functions 

At this age, our kids are curious and eager to learn about the world around them, including money. They can recognise and name different coins and notes, and they can start to understand the basic functions of money, such as exchanging, saving, and spending. 

Here are some of the topics and activities that we can use to introduce money and its basic functions to our kids: 

• Money recognition: We can help our kids learn to identify and name different coins and notes, and to sort and count them by their value. We can use real or play money, or we can make our own money using paper, cardboard, or stickers. We can also use books, songs, or videos that feature money and its symbols. 
• Money exchange: We can help our kids learn to use money to buy and sell things, and to understand the concept of price and value. We can play store or market with our kids, using real or play money and items, or we can take them to a real store or market and let them observe and participate in the transactions. We can also use books, games, or apps that simulate money exchange. 
• Money saving: We can help our kids learn to save money for something they want or need, and to understand the concept of delayed gratification and goal setting. We can give our kids a piggy bank or a jar and encourage them to save some of their money, such as their allowance, birthday money, or coins they find. We can also help them set a savings goal, such as a toy, a book, or a trip, and track their progress. 
• Money spending: We can help our kids learn to spend money wisely and responsibly, and to understand the concept of needs and wants and trade-offs. We can let our kids make some of their own spending decisions, such as choosing a snack, a toy, or a gift, and guide them to compare the prices, quality, and value of the items. We can also help them learn to prioritise their spending, such as buying the essentials first, and to avoid impulse buying. 
• Money giving: We can help our kids learn to give money to others who are in need, and to understand the concept of generosity and gratitude. We can encourage our kids to donate some of their money to a charity, a cause, or a person that they care about, and to learn about the impact and benefits of their donation. We can also involve our kids in fundraising activities, such as selling lemonade, cookies, or crafts, and donating the proceeds to a chosen organisation. 

Ages 6-10: Explore Money and Its Various Aspects 

At this age, our kids are more aware and interested in the world around them, including money. They can understand and perform basic arithmetic operations with money, and they can start to explore the various aspects of money, such as earning, saving, spending, and investing. 

Here are some of the topics and activities that we can use to explore money and its various aspects with our kids: 

• Money earning: We can help our kids learn to earn money by doing chores, selling goods or services, or finding ways to increase their savings. We can also introduce them to the concept of income and its sources, such as allowances, gifts, and potential small business ideas. 
• Money saving: We can help our kids learn to save money for short-term and long-term goals, and to understand the concept of compound interest and its power. We can also introduce them to the idea of opening a bank account and how it works, such as checking the balance, making deposits and withdrawals, and reading the statements. 
• Money spending: We can help our kids learn to spend money wisely and responsibly, and to understand the concept of budgeting. We can involve them in planning family budgets and tracking income and expenses. Additionally, we can introduce them to concepts like income tax, goods and services tax, and how these affect their spending. 
• Money investing: We can introduce our kids to the concept of investing for long-term growth and security. While this age group may not be ready to invest in complex financial products, they can learn about the basic types of investments, such as savings accounts. 

Ages 11-16: Expand Money and Its Various Aspects 

During these years, our kids are more independent and responsible, with more opportunities and choices to earn, save, spend, and invest money. They can also understand more complex aspects of money, such as interest, inflation, diversification, and taxation. 

Here are some topics and activities for this age group: 

• Money earning: Continue to expand their understanding of income sources and introduce them to the broader financial system, including the role of the Reserve Bank of Australia, currency exchange rates, and financial markets. 
• Money saving: Teach them about saving for both short-term and long-term goals and delve deeper into concepts like interest rates, fees, and financial product features. Encourage them to explore different savings products. 
• Money spending: Help them develop more advanced budgeting skills and introduce them to concepts like income tax brackets, deductions, and credits. Teach them about managing credit and debit cards responsibly. 
• Money investing: Introduce them to the concept of investing in assets like shares and property. Discuss risk and return, diversification, and different investment strategies. 

Ages 16-18: Apply Money and Its Various Aspects 

As our kids enter late adolescence, they become more mature and independent, with greater financial responsibilities and challenges. They can now apply their financial knowledge and skills to real-life situations, such as planning for further education, finding a job, or moving out. 

Here are some topics and activities for this age group: 

• Money earning: Discuss strategies for finding part-time or full-time jobs, starting a small business, or investing in the stock market. Teach them about income tax brackets, deductions, and credits. Provide insights into the Australian labour market and employment trends. 
• Money saving: Emphasise the importance of saving for long-term goals like further education, buying a car, or traveling. Discuss the impact of inflation on purchasing power and the need for higher returns. Encourage them to explore various savings and investment products. 
• Money spending: Teach them about managing credit and debit cards responsibly, understanding loans and mortgages, and using financial tools like calculators and apps. Educate them about Australian consumer rights and protections. 
• Money investing: Continue to deepen their understanding of investing by exploring various asset classes like shares, bonds, commodities, and cryptocurrencies. Discuss investment principles and strategies, including value investing, growth investing, and passive investing. 

In conclusion, teaching our kids about money and investing is a vital life skill that can help them achieve financial well-being and independence. By starting early, using everyday situations and examples, involving our kids in financial decisions and activities, making it fun and playful, and making it relevant and realistic, we can help our kids develop a positive and healthy relationship with money, acquire essential life skills, prepare for the future, and build wealth to achieve their goals. 

We hope this comprehensive guide has given you valuable insights and ideas on how to teach your kids about money and investing. For additional resources and tools, you can visit websites such as Moneysmart.gov.au, a website by the Australian Securities and Investments Commission (ASIC) that provides free and impartial guidance and tools on money matters for Australians of all ages and stages of life. You can also explore Banqer, an innovative platform that helps financially educate students and has made a positive impact on teaching critical life skills. 

Please don’t hesitate to call, email or message us to talk through any questions you have after reading this article. Also we would love to hear feedback or know about future topics you would like us to cover. 

7Wealth Pty Ltd ABN 44609210246 is a Corporate Authorised Representatives and is authorised through Cobalt Advisers Pty Ltd ABN 64 628 654 099 who is an Australian Financial Services Licensee 512550. 7Wealth Pty Ltd is a Credit Representative of Australian Finance Group Ltd ABN 11 066 385 822 (AFG) Australian Credit Licence 389087. 

This blog contains information that is general in nature. It does not constitute financial or taxation advice. The information does not take into account your objectives, needs and circumstances. We recommend that you obtain investment and taxation advice specific to your investment objectives, financial situation and particular needs before making any investment decision or acting on any of the information contained in this document. Subject to law, Cobalt Advisers Pty Ltd nor their directors, employees or authorised representatives, do not give any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of the information contained in this document.