Why Financial Literacy Matters
Money management is a life skill that schools often don't teach. Research from Cambridge University shows that money habits are largely set by age 7. The financial attitudes and behaviors children develop early follow them into adulthood—for better or worse.
"Children who are taught to save money develop persistence and learn delayed gratification, skills that predict academic success and life outcomes better than IQ."
- Stanford Marshmallow Study Follow-Up ResearchThe Cost of Financial Illiteracy
Adults who didn't learn money skills as children are more likely to:
- Carry high-interest credit card debt
- Have no emergency savings
- Make poor investment decisions
- Experience financial stress in relationships
The Good News
You don't need to be a financial expert to teach your kids about money. The fundamentals—earning, saving, spending wisely, and giving—can be taught through everyday conversations and hands-on practice. The earlier you start, the more time your lessons have to compound.
Money Lessons by Age
Financial education should be developmentally appropriate. A 5-year-old isn't ready for investment lessons, but they can understand saving coins for a toy. Here's what to teach when.
3-5 years
Key Concepts
- Coins have different values
- Money is exchanged for things
- Waiting for something you want
Activities
- Play store with real coins
- Piggy bank for birthday money
- Simple choices: "This OR that"
6-8 years
Key Concepts
- Earning money takes work
- Saving for goals
- Wants vs needs
Activities
- Allowance (simple system)
- Three-jar method (save/spend/give)
- Shopping with a budget
9-12 years
Key Concepts
- Budgeting across categories
- Interest and growth
- Comparison shopping
- Basic banking
Activities
- Own debit card
- Managing weekly budget
- Savings account
- Price comparison research
13-17 years
Key Concepts
- Compound interest
- Credit and debt
- Income taxes
- Investing basics
Activities
- Part-time job
- Checking account
- Budget app
- Investment account (custodial)
Deep Dive: Financial Literacy Curriculum
Get detailed lesson plans, conversation starters, and activities for each age group in our comprehensive financial literacy guide.
Read: Kids Financial Literacy GuideSetting Up Allowance
Allowance gives kids regular practice managing money. But how much should you give? Should it be tied to chores? Weekly or monthly? Here's how to design a system that teaches.
How Much Allowance?
Common approaches:
$0.50-$1 per age year
10-year-old = $5-$10/week
Most commonBased on responsibilities
Covers lunch money, activities
Older kidsFlat family rate
All kids get $10/week
SimplestAllowance + Chores: Three Approaches
1. Unconditional Allowance
Kids receive allowance regardless of chores. Money teaches money management; chores teach responsibility—two separate lessons.
Pros: Clear separation of concepts, no battles over chore completion
Cons: Misses opportunity to teach work-earning connection
2. Commission Only
Kids earn money per task. No work = no pay. Direct connection between effort and income.
Pros: Teaches real-world work-pay relationship
Cons: Kids may only do tasks when they need money; can feel transactional
3. Hybrid (Recommended)
Base "family contribution" chores are expected but unpaid. Extra "job" tasks earn commission. Combines both values.
Example: Making bed and clearing dishes = expected. Washing car or weeding = $5 each.
Complete Allowance Framework
Get detailed allowance amounts by age, weekly vs monthly strategies, and how to adjust as kids grow in our full allowance guide.
Read: Allowance Guide by AgeThe Save, Spend, Give Framework
Teaching kids to automatically divide their money builds lifetime habits. The "three jars" method (or digital equivalent) ensures they practice saving and giving, not just spending.
The Three Categories
Save
Long-term goals: big purchases, college fund, investments. Teaches delayed gratification.
Spend
Day-to-day wants: toys, candy, entertainment. Teaches budgeting and choice.
Give
Charity, gifts for others, causes they care about. Teaches generosity and perspective.
Recommended Ratios
| Ratio | Save | Spend | Give | Best For |
|---|---|---|---|---|
| 50-30-20 | 50% | 30% | 20% | Building savings habits |
| 40-40-20 | 40% | 40% | 20% | Balanced approach |
| 30-60-10 | 30% | 60% | 10% | Kids with specific spending needs |
Making It Work
- Automate the split: When allowance is given, divide it immediately—before they can spend it all
- Make saving visible: Clear jars, savings app progress bars, or bank statements
- Set savings goals: A specific target (bike, video game) is more motivating than generic "savings"
- Let "give" be their choice: They'll engage more with causes they choose themselves
Kids Debit Cards Explained
Kids debit cards are prepaid cards designed for children, with parent controls and educational features. They bridge the gap between cash allowance and adult banking, teaching digital money management in a safe environment.
Benefits of Kids Debit Cards
Parent Controls
Set spending limits, block merchants, freeze instantly
Real-Time Tracking
See every transaction, no surprises
Savings Goals
Visual progress toward specific targets
No Overdraft
Prepaid means they can't spend more than they have
When to Get a Kids Debit Card
Consider a debit card when your child:
- Understands that the card represents real money (around age 6-8)
- Has some experience with cash allowance
- Will be in situations where a card is useful (stores, online)
- Can be responsible for a physical card
Top Kids Debit Cards
ChoreSplit
Gamified chores + debit card
Best for chore-based earning
Greenlight
General kids banking
Most features, higher price
GoHenry
International availability
Best for UK families
Current
Teen banking
Best for older teens
Full Comparison Guide
Detailed feature-by-feature comparison of all major kids debit cards, including pricing, age requirements, and parent controls.
Read: Best Kids Debit Cards ComparedCommon Mistakes to Avoid
Bailing them out of bad decisions
Natural consequences teach better than lectures. If they spend all their money on candy and can't buy the toy, that lesson sticks.
Hiding family finances
Kids learn by observation. If money is never discussed, they develop anxiety and misconceptions about it.
Making money emotional
Using money as punishment ("No allowance because you were bad") or excessive reward creates unhealthy associations.
Starting too late
Money habits form early. Waiting until teens means years of missed practice.
Being inconsistent
Sporadic allowance or constantly changing rules undermines trust and prevents habit formation.
Real-World Practice Opportunities
Money lessons stick when kids apply them in real situations. Look for everyday opportunities to practice financial skills.
Grocery Store Budget
Ages 7+Give them $10 to plan a meal or snacks for the week. They decide what to buy within budget.
Comparison Shopping
Ages 9+Before buying something they want, research prices at different stores and online.
Vacation Budget
Ages 8+Give them a spending budget for souvenirs/activities during trips. They manage it across days.
First "Business"
Ages 8+Lemonade stand, lawn mowing, crafts to sell. Experience earning, expenses, and profit.
Birthday Party Budget
Ages 10+Give them a budget to plan their party. They learn trade-offs (big cake OR party favors).
Monthly Expense Ownership
Ages 14+Teens pay for their own phone bill, gas, or entertainment from their earnings.