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Financial Literacy for Kids: What Money Lessons Can Parents Teach?

May 9, 2022Written in partnership with Citi Wealth Advisory Team
financial literacy for kids

The wealth that we earn is no doubt empowering: it provides access to education, life experiences and the opportunity to create a family legacy. But, what are the most important money lessons parents should teach their kids and teenagers to give them the wisdom to live with wealth as they enter adulthood?

If you’re considering opening a savings account for your children, or advice for guiding your teen or young adult, you have the perfect opportunity to build character through a steady approach to saving, spending, and strategies that can serve them well for life.

Financial Literacy for Kids

Be open. Talking to kids from an early age about what you do for work leads to an understanding of how money is earned – and what it provides for your family.

Helping children develop financial literacy today requires new strategies in an increasingly cashless society. Show young kids how to pay for small items, and count change. When you pay with a wave of a card or your smart watch, explain what you’re doing. Show your children the receipt so they begin to understand a transaction was made and that items and experiences don’t flow into our lives effortlessly.

But one of the best ways to teach kids how finances work is by creating opportunities to manage money.

Starting with Pocket Money

Involving children in tasks around the home builds independence, organisation skills and a perspective of the needs of others. You might reward your kids for a job well done with extra privileges or pocket money for completing extra tasks. Imparting wisdom on how to manage the money your kids earn – or may receive as gifts – is the next step.

Try giving your children a larger amount of pocket money, less often, such as once a month or every three months. This will make them think more about how they’ll use it – and how to make it last until next time. If they’re little, set up a chart to help track their progress.

The Balance of Saving, Spending and Budgeting

As soon as you decide to give your children the responsibility of managing some money, get them used to a balance of saving, spending and budgeting.


Introduce the concept of paying for an item via a ‘Spend’ fund. Use this fund for short-term needs or treats: a new toy or app. Older kids and teens could use this for entertainment when they are out with friends. You can pay for items on behalf of your children – remove the money from their ‘Spend’ fund afterwards.


Give them a budget for what they are able to spend. Learning the discipline of budgeting will serve your children well when they enter the real world.


This fund is for big-ticket items your children have their eyes on. Consider giving your children an incentive for saving, such as a bonus for each milestone they reach.

Getting Digitally Savvy: Advice for Older Kids

If your children are receiving pocket money and hold a mobile phone, consider introducing them to an age-appropriate app that features pocket money, savings and chore tracking features.

If you’ve already set up your children with a bank account, it may be good to get them more involved as they approach their teens. Go through the transaction history with them. Talk about when a deposit was made and why, and how much interest they’re earning as their savings grow via the bank’s mobile app.

Beyond Saving: Teaching Teens About Growing Wealth

Time has a strong impact on generating long-term wealth: the sooner your teen or young adult thinks of making their savings work for them, the better equipped they are to achieve their own goals in life.

If they have a dream, such as a year of travel, use that goal to demonstrate the power of compound interest versus simple interest, and the cumulative effect of interest on the base amount as it grows.

The next step in making their money work harder is an introduction to investing. It’s still wise to start small with products, services and brands that they know while they build a sense of judgment and strategy. Teens may not own stocks or financial assets outright, but you can consider establishing a custodial or a joint investment account* to hold a stock portfolio.

And if you feel it’s time for a supplementary credit card*, show them how to use one responsibly by understanding and assessing the terms and conditions, and how to take advantage of a rewards program.

The key to setting your children up for success is communication and collaboration. At this stage of the journey, include them in conversations and decisions around finance on a deeper level to build their awareness of the family vision and strategy for wealth management.

Alongside developing a strong work ethic and learning how to use wealth wisely, growing up with an understanding of financial health is perhaps one of the best lessons you can pass on.

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