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Money & Parenting

Creative Ways to Instill Financial Literacy in Children

By June 6, 2023December 6th, 2023No Comments
A mother and son counting coins

Teaching children financial literacy is incredibly important as it equips them with vital skills and knowledge to make wise money management decisions throughout their lives. When we teach financial literacy to children, we empower them to plan for their future, understand the value of money, and make responsible financial choices. Moreover, it helps break the cycle of poverty by providing children with the tools to make sound financial decisions. By teaching financial literacy early on, we give children the opportunity to build a solid foundation for their financial well-being.

Incorporating creative and engaging teaching methods, such as interactive games, real-world scenarios, and personal finance discussions, makes the learning experience enjoyable and relatable for children.

In this article, we will explore various ways to instil financial literacy in our children.

Benefits of Starting Early in Developing Financial Skills

  • Financial Literacy Principles

Learning and understanding the core principles of financial literacy is crucial for individuals of all ages. These principles include earning, saving, investing, protecting, spending, and borrowing. Starting early can be a good advantage as it can help children build good financial habits from a young age; establishing a solid foundation for their financial knowledge and decision-making in the future.

  • Life Skills and Head Start

Financial literacy is considered a life skill that provides individuals with the ability to effectively manage their money and accumulate wealth. By starting early, young adults gain a head start in life by acquiring finance skills that can set them on a path toward financial security and success. These skills can contribute to their overall well-being and future opportunities.

  • Professional Advancement

Understanding finance and having financial skills can greatly benefit individuals in their professional lives. Financial acumen is highly valued in many industries and job roles. Developing financial skills early on can enhance career prospects, as individuals who possess financial knowledge and accounting skills have a competitive edge in the job market.

  • Building a Healthy Personal Balance Sheet

Starting early in developing financial skills enables young adults to establish their finances and build a healthy personal balance sheet. By learning about budgeting, saving, and managing their financial resources, individuals can lay the groundwork for financial stability. This early start helps in avoiding financial pitfalls and may contribute to wealth accumulation over time.

  • Access to Financial Products

Developing financial skills from an early age is essential for young adults to have access to affordable, safe, and useful financial products. With a strong foundation in financial literacy, they can make informed decisions in the future when selecting financial products, such as bank accounts, credit cards, loans, and investments. This empowers them to choose options that align with their financial goals and avoid potential financial risks.

Starting early in developing financial skills offers numerous benefits that can positively impact our children’s lives. By acquiring financial literacy and skills from a young age, they will be better equipped to navigate their financial journey and make informed decisions.

Setting the Foundation of Financial Literacy

Explaining the Concept of Money and its Value

The concept of money revolves around its value and its role as a medium of exchange, a store of value, and a unit of account. Understanding that money is earned and has a connection to work or income generation is essential.

Teaching about currency denominations, inflation, and the importance of saving and investing further enhances our children’s understanding of money’s value. This knowledge forms the basis for financial literacy, empowering them to make informed decisions and work towards financial goals.

Introducing the Three Key Money Concepts


A simple way to explain earning to children and young adults is through the use of house chores. By showing them that an accomplished task can be compensated by a payment (whether monetary or a specific reward), it can help them understand the basic principle of earning.


Discussing about our children’s wants and needs can be a good opportunity to teach them the value of saving. In today’s fast paced world where delayed gratification is sometimes overlooked, parents should also learn to say no to the whims of their kids. By incorporating the example mentioned in the Earning principle, we can let our kids save up and budget the earnings they receive from doing house chores; which they can then use to buy their wants.


Responsible spending is an important skill that our children should learn early on. If parents would be able to teach their kids the first two principles effectively, then it is highly likely that it would cause a domino effect into being a responsible spender.

In other words:

Hard work (e.g., accomplishing house chores) = earning money / rewards

Earning money = Being able to buy wants

Buying wants = Need to learn to save and budget

Budgeting = Responsible spending

Age-Appropriate Financial Lessons and Activities

Early Childhood (Ages 3-6):

  • Identifying and counting coins and bills: Introduce young children to different coins and bills, their names, and their values. Teach them how to recognise and count money through fun activities like sorting and matching coins, playing store, or using play money. This helps build their foundational understanding of currency and basic math skills related to money.
  • Role-playing activities with pretend money: Engage children in pretend play scenarios where they can take on roles such as shopkeeper, customer, or bank teller. Provide them with pretend money to use for transactions, allowing them to practice basic financial interactions and develop early money management skills.
  • Introducing the concept of needs vs. wants: Teach young children the difference between needs (essential items for survival) and wants (things they desire but are not necessary). Use age-appropriate examples and discussions to help them understand the value of prioritising needs over wants and making wise choices with their resources.

Elementary School (Ages 7-12):

  • Allowance and budgeting exercises: Introduce the concept of allowance and help children create a simple budget. Encourage them to allocate money for different purposes such as saving, spending, and giving. Also teach them to track their expenses.
  • Encouraging goal-setting and saving for desired items: Guide children in setting financial goals, such as saving for a specific toy or game. Help them understand the importance of patience and delayed gratification by encouraging regular savings toward their goals. This cultivates a sense of discipline and helps them understand the value of saving for something they want.
  • Starting a small business or charity project: Engage children in hands-on activities that involve entrepreneurship or giving back to the community. Encourage them to explore ideas for starting a small business or organising a charity project, such as a bake sale or lemonade stand. This allows them to learn about money management, budgeting, and the value of hard work and social responsibility.

Teenagers (Ages 13+):

  • Opening a bank account and managing money: Teach teenagers about the process of opening a bank account, including the different types of accounts available and how to manage them effectively. Help them understand concepts like deposits, withdrawals, online banking, and monitoring account balances. This lays the foundation for responsible financial management as they transition into adulthood.
  • Explaining credit, loans, and interest rates: Teach them about responsible borrowing, the importance of credit scores, and the potential consequences of debt. This knowledge prepares them to make informed decisions when it comes to borrowing money or using credit in the future.
  • Introduction to investing and long-term financial planning: Familiarise teenagers with the concept of investing and the benefits of long-term financial planning. Teach them about different investment options, such as stocks, bonds, and mutual funds. Encourage discussions about setting financial goals, retirement planning, and the power of compound interest. This empowers teenagers to think about their financial future and make informed choices for building wealth.

Incorporating Financial Literacy into Everyday Life

  1. Grocery shopping and comparison pricing: Encourage your children to create a shopping list based on specific needs, and before making a purchase, take the time to compare prices of similar products. It’s important to consider factors like quality, quantity, and nutritional value. By practising comparison pricing, you will be able to teach your children responsible spending habits.
  2. Household budgeting and expense tracking: Encourage your children to help you list out all the household expenses that you have in your home. This can be a great opportunity for you to teach them about budget and expense tracking.
  3. Exploring online resources and apps for financial education: The internet offers a wealth of resources and apps that can enhance your children’s financial literacy. Take advantage of kid-friendly videos that covers various financial topics such as budgeting, saving, investing, and debt management.

Encouraging Entrepreneurship and Money Management Skills

Encouraging entrepreneurship and money management skills in children is a great way to instil financial literacy and a sense of responsibility. Here are some ideas to get started:

  1. Organising a small business or lemonade stand: Help children set up a small business venture like a lemonade stand. This hands-on experience allows them to learn about various aspects of entrepreneurship, such as product development, marketing, and customer service. They can gain valuable skills like communication, problem-solving, and decision-making while having fun and earning some money.
  2. Teaching kids to set prices, manage costs, and track profits: Guide children through the process of setting prices for their products or services. Encourage them to consider factors like the cost of ingredients or materials, time and effort invested, and desired profit margins. This exercise helps them understand the value of their offerings and how pricing affects profitability. Additionally, teach them to manage costs effectively by finding ways to minimise expenses without compromising quality.
  3. Revenue and expense recording: Teach kids to keep a record of their revenue and expenses, including things like ingredients, supplies, and any marketing or promotion costs. This exercise helps them understand how to calculate profit and evaluate the financial performance of their business.
  4. Discussing the importance of saving and reinvesting profits: Use the opportunity to talk to children about the importance of saving and reinvesting profits. Teach them to set aside a portion of their earnings for savings. Explain the concept of long-term goals and how saving money can help achieve those goals. Encourage them to consider reinvesting some of their profits back into the business to help it grow. This could involve purchasing better-quality ingredients or equipment, improving marketing efforts, or expanding product offerings. Reinforcing the idea of reinvestment helps children understand how money can be used to generate more income and encourages an entrepreneurial mindset.

By engaging children in activities like organising a small business, teaching them to set prices and track profits, and discussing saving and reinvestment, you’re fostering their entrepreneurial spirit and equipping them with valuable money management skills. These experiences lay the foundation for financial literacy and empower children to take control of their financial futures.

Financial Literacy through Real-Life Experiences

  1. Bank visits and opening a savings account: Take the opportunity to visit a local bank with your child. Explain the purpose of banks, the importance of saving money, and the benefits of having a savings account. Encourage them to ask questions and learn about the different services offered by the bank. Opening a savings account can be an exciting step towards teaching them the value of saving and the concept of interest.
  2. Volunteering or community service involving financial matters: Engage in volunteer activities or community service that involves financial matters. This could include volunteering at a local charity or nonprofit organisation that focuses on financial literacy education or assisting with tax preparation for low-income individuals. Through these experiences, young adults can learn about financial challenges faced by others and gain a deeper understanding of budgeting, money management, and the impact of financial decisions on individuals and communities.
  3. Family discussions about financial decisions and household budgeting: Foster open discussions within the family about financial decisions and household budgeting. Involve children in age-appropriate conversations about managing expenses, setting financial goals, and making informed choices. This helps them understand the importance of budgeting, prioritising needs over wants, and making responsible financial decisions. Encourage them to share their thoughts, ask questions, and participate in finding creative solutions to manage finances effectively.

By incorporating real-life experiences in teaching children and young adults about financial literacy, they can surely gain practical knowledge and skills that can help build up a strong foundation. These experiences provide valuable insights which can be used as their compass to navigate financial challenges with confidence and make informed choices for their financial well-being.

Remember, the benefits of financial knowledge and responsible money management extend far beyond childhood. It is a lifelong journey that enables individuals to make sound financial decisions, weather economic challenges, and pursue their dreams. By empowering ourselves and future generations with financial literacy, we pave the way for a more financially secure and prosperous society. Let’s seize the opportunity to teach and learn about finances, ensuring a brighter future for ourselves and those around us.

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