In my day, even if your parents didn’t explicitly teach you about personal finance, money lessons were inherent to life:
Allowance for kids and babysitting jobs were paid in cash.
Savings accounts meant coins and wadded-up singles deposited into piggy banks and the local bank branch.
Charity meant writing a paper check (remember those?!) to an organization, or dropping bills into the collection plate at church.
Paper receipts were collected for future scrutiny. Carelessness meant that you forgot your cash in the back pocket of your summer cutoffs.
Today, money is something else entirely.
Money is digital. Plastic cards are swiped, receipts foregone.
Allowances can and are paid by bank transfer, and savings accounts may or may not net paper statements mailed out monthly.
The fact that so many financial transactions are digital has led to adults’ poor money habits — consumer debt is on the rise, savings and investing rates far below ideal.
If you — like me — are on a mission to teach your children how to be smart earners, savers, and spenders, this is a whole new world, one in which personal finance lessons to kids are being reinvented as we speak.
Here is my guide to teaching your children about money in our digital age, at every stage of life:
Tips for teaching kids about money, age 4 through grade school
Go paper for allowances for kids
When kids are small, only physical manifestations of money resonate with them.
When should you give kids an allowance?
Kids as young as 4 can and should be given an allowance.
In my family, my kids get $1 per year of age (so my 8-year-old gets $8 per week, etc.).
Pay this money weekly, in cash.
There are hot debates on blogs and in Facebook groups about whether parents should pay their kids a salary, exchange allowance for chores done, and which chores are age-appropriate.
In my house, my kids have regular chores (tidy room, feed cat, clean rooms, take out trash, laundry), random chores that I make up as they need to be done (run to the post office, clean cat litter), and failure to do so have their own consequence. Allowance is separate. This works for my family.
Part of identifying a money message for your family is digging into your own values around the topic. You will likely have your own program when it comes to chores and allowance, and as long as you communicate it with your children and your partner and you consistently enforce it, you're doing great.
Spend, save and give
Buy clear jars (so they can see their stash grow), and label them: Spend. Save. Give.
This sets a clear message from very early on the important parts of money.
In our house, half the money goes in the ‘Spend,’ jar, 25% goes in each the ‘Save’ and ‘Give’ jars.
Gifts for birthdays and holidays can go where the kid chooses.
Open a savings account at your local bank.
Every month, we collect the money in the ‘Give’ jar, and the kids select a charity of their choice.
This is really fun, since you can align your kid’s interest with a charity.
For example, my son is really interested in cheetahs, so he gives to the Cheetah Conservation Fund.
My daughter was upset by the number of homeless people she saw in our city, so we found an organization that supports that population.
Talk about money with your kids
Every day you make financial transactions.
Just talk about things as you do them — even if you don’t think your kids understand.
“I’m choosing this milk over this milk because it is on sale, which means it costs less money than normal.”
“I know you want to go to the amusement park, but that costs a lot of money, and I am choosing not to spend that money right now.”
Teach very young kids about investing
It also important to make sure your children understand the mechanical parts of money—compound interest, the stock market, debt and investing. This can be hard if you are not so sure yourself.
When my kids were 7 and 9, I tried really hard to find a few videos on YouTube using, “teach kids about investing” … here is the problem: everything was hard to understand, too long, boring, and/or featured someone who knows a lot about investing and wants to impress you with their geeky insights.
A 9- and 7-year-old don't care. They think you're boring.
So this is what I said to my kids:
“You guys are really good at saving money, which is important because you never know what might come up in the future that will require you have money. But if you don't invest your money, the cash in your savings accounts actually gets smaller in a way, because it loses its power to buy things. This is because every year, pretty much everything costs more. Milk, gas, toys and clothes get a little bit more expensive. So it is important to invest our money. Investing money is also a great way to make money because if you do it right, there is a very good chance that over a long time, your money will grow much, much faster than if you just park it in the bank, or your save jar.
There are lots of ways to invest. To start, we are going to invest in stocks.
A stock is piece of a company. The company issues stocks as a way to raise money. So, if our favorite bakery wanted to grow, and open a second bakery, they might issues stocks. You and I could buy a stock, which gives the bakery money to grow the company. We buy the stock because we believe that the bakery will be a success and grow and make money. And because we now own a small piece of the company — the stock — when the bakery makes more money, we make more money. That is investing.
Not every investment will go up all the time, and some of them will go way down to zero. That is why it is important to buy lots of different types of stocks in different industries and countries. If you do that properly, you have an excellent chance of making money if you hold on to your stocks for a very long time. It can be complicated, so let's start simple.
Today let's buy two stocks.
They stared at me blankly — more or less how they looked when they watched the stupid YouTube investing-for-kids videos.
Whatever, kids! I'm trying!
Next, I suggested they each use the $40 Christmas money they received from their Great-Grandma Shirley — my grandmother who did very well in her investments with my late grandfather by living a frugal lifestyle, buying Blue Chip stocks and holding on to them for decades and decades.
I skipped those details with my children and focused on the computer, which, as you know, is mesmerizing.
Thankfully, there are incredible online tools that make financial education really simple. Stockpile.
Stockpile is designed as a very easy way to buy any sum of stock (a.k.a. a “fractional share”).
That means that if you can buy $20 worth of Apple, whereas on most brokerage accounts you would have to buy a minimum of one share, which is $201 as I write this.
Stockpile is designed to teach kids and teens about investing. For that, it is awesome.
Using Stockpile's charts, I explained to my kids the importance of buy-and-hold.
“There is always a risk that you will lose money when you invest money. But see how the line goes up and down over time? This will always happen.
It will never go straight up or straight down forever. It is important to hold on to most investments for a very long time, and if you do, the chances are very, very good that you will make money.”
My daughter opted to invest in Amazon and Apple, and my son Tesla and Disney.
The Stockpile purchase took less than a minute each, including transferring funds from my bank, and each cost $.99.
After we went through these transactions, sitting at the dining table, I asked both my kids if they felt like they understood investing.
“Yeah!” my 7-year-old said. “You buy a share of a company, and the company uses that money to grow. Then if the company makes more money, my stock makes more money.”
It might sound like he was just repeating back what I said — but if you're a parent you understand what I mean when I say that I know he got it.
Even more evidence? A couple weeks later my daughter came in while I was working on my laptop. “Can I see how my stock is doing?” she asked. We quickly logged into Stockpile and noted that her two investments were down $.70.
She frowned, and that gave me a great opportunity to reiterate the importance of buy-and-hold.
Tips for teaching kids about money in middle school
Shop in real life, IRL
So much of our shopping is done online, which can be great for finding bargains — as well as stuff we don’t need, or won't use.
Lead by example and curb your online browsing habit.
Try to shop in physical stores with your kids for clothes, household items, as well as browse for books, games and toys for friends’ and siblings’ birthdays.
The selection is smaller, and in-store shopping presents an opportunity to compare two items, side-by-side, including prices.
Teach delayed gratification in children
When your kid expresses that she wants to buy something, adhere to the 24-hour rule: You have to think about it for a full day before you pull the trigger.
If a day later, the kid does not bring it up, then there is no purchase.
Also, during that day, take the opportunity to discuss the pros and cons of buying the toy — including what else that money could be used for.
Help your middle schooler set longer-term goals
Help your child identify larger purchases that require saving for: a bike or expensive toy, for example.
Cut out a picture of the item, and pin it to your kid’s wall or the kitchen bulletin board.
Write down how money from each week’s allowance needs to be saved by a certain deadline in order to have enough for the prize.
For longer-term goals, consider buying a CD, put savings in a money market account to help your child understand how compound interest can help them reach their goals faster.
How to teach high school kids about money and investing
Make giving a function of teen's time and energy
In your money lessons for teens, encourage your student to continue giving a portion of allowance, gifts and job earnings to charity.
But also make a requirement of volunteer time.
Express to your teen:
“Charity is about giving of yourself, which can include money, but is also about your time, energy and talents.”
Teach teens investment basics
My 10-year-old daughter recently asked the associate at our local branch: “My account is getting less than 1% interest. What can you do for me?”
Compound interest is a concept many adults don’t understand, so spell it out with a simple online calculator.
Encourage your teen to seek out a higher-interest savings account if your local bank falls short.
Talk to your teens about your own investment strategy. Perhaps you don't have one yet, in which case, it's never too late. Here is my rundown of investing for women.
Introduce your teen to various types of investments, including stock investing. I am a fan of fractional share investing, like those offered on Stockpile.com.
This site allows you to buy shares of stocks, which means you can invest $20 (or $50 or $200) in Tesla, or Disney, instead of the usual minimum of the price of a single share.
Stockpile has very low fees, and features scores of name-brand companies that your kids will recognize.
Stocks can be an awesome gift, for holidays, graduation, a wedding, bar or bat mitzvah or other life events. Stockpile is equally easy to use to send a fractional share of your favorite stock — or your loved ones favorite stock.
Just select the sum you want to send, pick the stock, and plug in your name, the email address of the giftee and a nice note. A $4.95 gifting fee is added at checkout, which you can pay with a credit or debt card, or Paypal.
Start talking about college costs early and often
The worst message you can give your student is: “Get into the best school you can, and we’ll figure out the money part.”
That is simply unrealistic for all but a very few affluent families.
Instead, start talking about the return on investment for education.
Some degrees and schools may correlate to higher paying jobs, but others will not.
Make it clear how much the adults in your family can contribute financially, and return to that compound interest calculator to help your teen understand the burden that student loans will have on their future.
Teach the drawbacks and power of debt
In addition to education loans, college students are prone to start adulthood burdened with credit card debt.
Pull up your kid’s credit history (children are surprisingly often victims of identity theft!) and discuss different kinds of debt and ways to use credit wisely.
Be vulnerable, and share your own experience with debt — the good, bad and ugly.
Share if you have gotten in over your head, and how that impacted the family’s security, as well as your own feelings about it.
Perhaps you are struggling with debt. Here is a guide to how to get out of debt in 14 easy steps
Keep the message simple and positive
So many adults fail to take control of their personal finances because they feel overwhelmed.
Express to your child the fact that: “Money might seem complicated, but with a few simple habits, including regular saving, paying bills on the time, giving to others, and investing for the future, you will be able to set goals and work towards your dreams.”
Teaching kids entrepreneurship
I have been self-employed for nearly 20 years, and believe that humans are inherently entrepreneurial. After all, until the industrial revolution 150 years ago, the majority of people (as they are globally, today) were farmers and/or tradespeople who worked for themselves, and perhaps within a self-formed cooperative of some sort.
Most moms I know are desperate to work from home, for themselves, and side hustles are one of the hottest topics among people of all ages—with and without kids.
Teach kids about business
Here is a story of my daughter Helena, as a 6-year-old hustler:
Yesterday, Memorial Day, my kids and I joined some friends and my brother for a day of lounging in Central Park: playing catch, soccer, people watching, picnicking on cream-cheese-and-strawberry-jam sandwiches and otherwise enjoying the gorgeous late-spring day.
After an exasperated hunt for lady bugs, which had recently hatched throughout the city, Helena, 6, showed up with a delicate leaf-green winged insect captured in an empty water bottle. She decided to make some coin and proceeded to march blanket-to-blanket and sell her find. “Would you like to buy a bug? $3,” she said to surprised Upper East Side retirees and extended families speaking to each other in Spanish. When that proved fruitless, Helena didn't get frustrated or blame the customer. She switched up her product: a small, stuffed rooster she found in the grass.
“Would you like to buy my chicken?” she asked confused sunbathers who glanced over her shoulder, searching for the kids' parents/boss. The rejections didn't stop her. She kept going.
My brother Josh and I watched this show from afar, giggling at the prospective clients' confused looks and Helena's unwavering pluck. After a few unsuccessful sale she'd stride back to our blanket and Josh and I would coach her on sales tactics: “Try: ‘OK, if you can't pay $3, how about $2?'” or, ‘My normal price is $3, but because I like you so much I'll give it to you for $2,'” and she'd confidently head out to try again.
We noticed she was avoiding a big group of a dozen bright-eyed 20-somethings laughing and drinking beer. But I sensed this was Helena's golden goose and encouraged her to make a move.
She hovered on the edge of the party for a few moments, just far enough away for them to take immediate notice. She was for the first time that afternoon shy. When she hesitated and looked back at me, I gave her a big smile and thumbs up and a visual urge to carry on. And so she took a confident step forward and said, through the laughs, “Would you like to buy my chicken?”
“What's so special about your chicken?” called one woman.
“It makes a noise,” said Helena, giving the bird a squeeze. squeak-sqeeak
“What's your name?”
“Helena,” Helena said.
“How much?” called on straw-fedora sporting guy who was sitting next to a pretty blonde he'd been chatting up all afternoon.
“$3,” Helena said.
And from across the lawn we saw a hand shoot up waiving three $1 bills. A roar of congratulations rose from the group. The customer insisted Helena pose for an iPhone pic with him, holding the merch.
And Helena strode back to her family, a fan of dough in her hand, a smile stretched from ear-to-ear.
The rest of the afternoon was a giddy brainstorm of other ways she could make money. We landed on the ubiquitous lemonade stand, and we talked margins and location and net profit. She decided that homemade drink would be more delicious but also more expensive and labor-intensive. The powdered version tastes worst. But artificial drink with a fresh lemon slice would be a good compromise. Even her brother Lucas, 4, got in on the excitement, and suggested: “I know! I will pour the lemonade and you can hand it out to the pee-pole!”
As a parent I was relived that all these business and money lessons that I aim to teach my kid taught themselves — organically. But as a business person I was inspired.
Here was this kid who figured out the most basic business lessons with out any hangups. She did not take rejection personally. When she failed, she tried again. When one product didn't move, she tried another. When a sales pitch bombed, she switched it up. When she got stuck, she accepted suggestions. And, most of all, Helena had fun.
Emma Johnson is a veteran money journalist, noted blogger, bestselling author and an host of the award-winning podcast, Like a Mother with Emma Johnson. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour, Oprah.com, U.S. News, Parenting, USA Today and others. Her #1 bestseller, The Kickass Single Mom (Penguin), was named to the New York Post's ‘Must Read” list.
Emma regularly comments on issues of modern families, gender equality, divorce, sex and motherhood for outlets like CNN, Headline News, New York Times, Wall Street Journal, Fox & Friends, CNBC, NPR, TIME, MONEY, O, The Oprah Magazine and The Doctors. She was named Parents magazine’s “Best of the Web,” “Top 15 Personal Finance Podcasts” by U.S. News, and a “Most Eligible New Yorker” by New York Observer.
A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Read more about Emma here.