5 Age-Appropriate Money Lessons for Kids

Pamela Yellen, a financial security investigator and author of financial advice books, shares five age-appropriate lessons to teach your children about money.

"Most of us have no clue how to pass financial knowledge on to our kids," says Pamela Yellen, a financial security investigator. "So I've gathered some money lessons and training activities you can use, grouped according to age. Keep these activities fun and light. And remember that kids learn best by participation and example, not by being lectured to."

Money is exchanged for things (age 4-8)

"Kids don't necessarily make the connection between money and the groceries, clothes and toys that show up in your home—especially if they only see you take that plastic thing out of your wallet at the store," Yellen says.

Depending on their age and math skills, kids can stack 10 pennies to equal a dime or even make change. Other ideas include having kids make shopping lists and paying for items with cash while they shop with you. Paying with cash helps kids grasp the connection between money and purchases, and studies show people spend less.

"Let your child choose and buy a small item with coins and count out the coins for the right amount to the cashier,” Yellen advises. “The extra time it takes will be well worth the confidence your child gains."

Create Spending Plans (age 4-12)

"Even young children can begin to decide how they will spend their money. Older children can set longer term goals and manage larger amounts," Yellen says.

Some ideas include having kids cut out or draw images to illustrate how they can "Spend, Share, and Save." "Spend is for things they will buy that week (or, for older kids, that month). Save is the money put away for a larger purchase. Share is the money they will give to a worthy cause of their choice. Have them cut out or draw images that represent these concepts for them," she suggests.

Money is Earned (age 4-12)

"Kids don't necessarily grasp that what you do all day while you're away from home is what allows you to put food on the table and Super Mario Brothers in the Nintendo,” Yellen says. “Help them understand how you earn money—and let them earn some of their own."