Teaching Children Financial Literacy

When should a child start learning about money?

For some families, the answer might be when they start earning their own money. For others, it might be when they open their first bank account or get their first job.

But children begin forming ideas about money much earlier than that.

They watch their parents make purchases, hear conversations about bills, receive pocket money, ask for things they want, and increasingly interact with a world where money can be spent with the tap of a screen. Even when children do not fully understand what money is, they are already observing how the adults around them use it.

That makes childhood an important time to begin building financial literacy.

Financial literacy is more than knowing how much something costs. It involves understanding concepts such as saving, spending, budgeting, needs and wants, and making informed financial decisions. The OECD describes it as a combination of knowledge, skills, attitudes and behaviours that help people make sound financial decisions.

And children are already making financial decisions.

A child deciding whether to spend their allowance immediately or save some for later is making a financial decision. So is comparing two products before buying one, deciding whether something is worth its price, or understanding that spending money on one thing means having less available for another.

These may seem like small lessons, but they introduce concepts children will encounter throughout their lives.

Money Doesn’t Have to Be a Taboo Topic

Adults sometimes avoid talking about money with children because they believe children are too young to understand it.

Financial conversations do not have to involve complicated discussions about investments, taxes or mortgages. They can begin with everyday experiences.

If a child wants an expensive toy, for example, parents can use the opportunity to talk about saving towards a goal. When a child receives money as a gift, they can discuss different ways it could be used. A trip to the supermarket can become an opportunity to compare prices and distinguish between something that is necessary and something that is simply desirable.

The goal isn’t to make children worry about money.

It is to help them understand it.

Research from the OECD’s PISA 2022 financial literacy assessment found that students who regularly discussed spending decisions with their parents tended to perform better in financial literacy. The assessment also found that financially literate students were more likely to report behaviours such as saving and comparing prices before purchasing.

Financial Literacy Is Also About Independence

Teaching children about money isn’t about turning them into miniature adults.

It is about gradually giving them the knowledge to make appropriate decisions for themselves.

As children grow older, they will eventually have to decide what to spend, what to save, what is worth paying for and what isn’t. They will encounter advertisements, online shopping, mobile payments and increasingly sophisticated financial services.

The earlier they begin understanding the principles behind these decisions, the more prepared they can be to navigate them.

This is particularly important in a digital economy where spending can feel almost invisible. Tapping a phone to make a payment can feel very different from physically handing over cash. Children therefore need to understand not only how money is used, but also what is happening when money moves digitally.

Start Small

Financial literacy doesn’t need to be another subject children have to study for an examination.

It can be part of everyday life.

Give children age-appropriate opportunities to make choices. Let them save towards something they want. Talk about why your family makes certain spending decisions. Explain that money is limited and that choices have consequences.

Most importantly, let children ask questions.

A financially literate child is not simply a child who knows how to save money. It is a child who is beginning to understand the relationship between choices, resources and consequences.

That is a lesson worth starting early.