Less than half of states in the US require that students at public high schools take a personal finance class before they graduate.
“Even if they have personal finance being taught in high school, that’s too late,” explains Gregg Murset, certified financial planner and founder of MyJobChart.com, a free tool that teaches kids about money.
Kimberly Foss, certified financial planner and founder of Empyrion Wealth Management, echoes this sentiment: “Our values, insights, and habits about money are really formulated when we’re young, just like everything else, so the earlier you start, the better.”
Here, we’ve compiled money lessons you can introduce to your kids as early as kindergarten — and strategies to help convey these basics.
No guarantees they will grow to be millionaires, but if you can emphasise these concepts from a young age, they will be ahead of the curve.
The concept of earning
The earlier parents establish the concept of earning, the better, says Murset. Kids need to understand where money comes from, and that it requires a job and work ethic to get money in your wallet.
Strategy: Introduce the concept of an allowance, and give them specific jobs around the house that will earn them a bit of money each week.
Note that giving an allowance the wrong way -- not having discussions about how to use the money and simply handing over a certain amount each week -- can do more harm than good. Check out the most effective way to give your kids an allowance so they're actually learning about money.
If they're older, encourage them to participate in a bake sale or lemonade stand, so they get hands on experience with earning.
Foss likes to incentivise good grades. She gives her 11-year-old son $20 for every A on his report card, $10 for every B, and he owes her $10 for every C -- straight A's results in a bonus. You can adjust these values depending on what you see fit, but the point is to teach them that they have to put in hard work in exchange for earnings.
What it means to save, share, and spend
Once your kids understand the concept of earning money, teach them the three things they can do with their earnings: save, share, and spend.
'If you can relay the concept of earning and then splitting it up -- I save for the future, I share with charities or causes I care about, and I spend on things I want or need -- that's powerful stuff,' says Murset. 'It's really personal finance 101.'
Strategy: Once your kids have earned money from a bake sale or having completed jobs around the house, explain that in addition to being able to spend it, they need to save and share some.
Foss pays her son for completing his chores every other week, like a typical employer would. She then has him set aside 10% for savings, 10% for charity, and the rest is for spending. He has three envelopes labelled accordingly and has to do the maths every other week to determine how much goes into each envelope.
Open a savings account for your child so they get in the practice of saving for the long term. Have them deposit money on a consistent basis to solidify the habit -- plus, they will like watching it grow over time.
As for sharing, help them find a charity or cause that interests them and pick a day each month to donate. Make sure they're the ones making the donation.
When it comes to spending, take them to the store with you so they can see what $5 or $10 can buy -- let them know that they don't have to spend it right away and that waiting will mean more savings in the future, but let them make the final decision.
Make sure they bring their own money, Foss emphasises: 'Tell them they need to bring cash with them. One of the biggest mistakes parents make is facilitating the purchase and telling their kid they can pay them back. That doesn't do it. You need to let them think about the purchase because that will help control impulse buying in the future.'
How debit and credit cards work
The concept of debit and credit cards is more difficult than ever for kids to grasp, explains Murset: 'We used to be able to pull out our purse or wallet and there would be a wad of money. Now, it's always a card or phone -- something invisible -- which makes it even more difficult to teach kids about money.'
It's important for them to understand that the swipe of a card means money is being removed from an account, Murset says.
Strategy: When you're checking out at the store with your debit or credit card, let them help you enter your PIN number and use it as a chance to explain how the card works. You can also show them the different cards you have and explain how using one card -- the debit -- will take money out from an account right away, while the credit card will send a bill at the end of the month.
How coupons work
Introducing the concept of coupons will help to ingrain conscious spending habits, which will pay off in the long run as they get older and start spending their own money.
Strategy: Have your kids cut coupons out with you and then use them together at the grocery store or pharmacy. To help them understand that you saved money, you can show them, or let them keep a portion of, the exact dollar amount the coupon saved.
What it means to match contributions
You can introduce the concept of matching from a young age, says Murset. 'If you get that into a kid's brain really early -- that matching works and grows their money -- what do you think they're going to do the first time they get a job and have a 401(k)?' he says.
Strategy: If your kids decide to save their money instead of spend it, match what they save. You can match them 100% or 10% -- any amount will help them understand the basics of the concept.
Foss started a car fund for her son and told him that anything he contributes, she will match 100%, up to $5,000. She's not only instilling the concept of saving for big, future purchases, but she's simulating the 401(k) match, which will come in handy when her son enters the working world.
How interest works
Multimillionaire and best-selling author Tony Robbins says the number one thing to teach kids, or anyone, is the concept of compound interest.
'You'll never earn your way to freedom,' Robbins says in a podcast with Lewis Howes. 'But you can compound your way there.' If you want to teach your kids how to grow rich, teach them how to manage their money, Robbins emphasises, starting with the concept of compound interest.
Strategy: How do you teach elementary schoolers a concept that many 20-somes don't fully grasp? Well, you start with just plain interest, and go from there.
'Frugal Dad' introduced the concept of interest to his 8-year-old daughter by giving her a handful of pennies and telling her to 'deposit' one penny into 'The Bank of Dad' each morning for a week. He added a penny from his own collection every other day to give her an additional four pennies at the end of the week.
'I explained that her original seven pennies had grown to eleven pennies because every couple days the bank paid her a penny for letting them use her money -- that's interest,' he writes on his blog.
Then, you can try explaining that compound interest is simply interest earned on your money plus the interest you'd already earned, meaning you get more money over time. Even if your simulation is not realistic in the real world, the important thing is that your kid starts to get a grasp for the concept.
The difference between a need and a want.
Differentiating a 'need' from a 'want' is harder than ever in today's consumer driven society, but will pay massive dividends down the road, particularly when your kid starts earning more and more money.
Instilling this distinction will help your kid become a diligent and conscious spender, a habit that could prevent them from future overspending and accumulation of debt.
Strategy: If your kid asks for a pricey pair of Nikes or a sweatshirt way beyond your price range, explain the amount you're willing to spend on these basic needs -- if your budget for new shoes is $50 and the ones they want cost $75, tell them they can have them if they contribute the additional $25, Foss advises. Don't forget to reinforce why one pair of shoes falls under the 'want' category and the other under the 'need' category.
Or, consider the strategy of one father, who impressed the concept on his daughter starting at the age of six by simply requiring her to order water at restaurants, rather than chocolate milk.