Youth Financial Literacy

Teaching the basics of economics and finance at any age

A child’s mind is exceptionally malleable, making what they learn during their early years incredibly important. With just 57 percent of American adults demonstrating financial literacy, teaching children about personal finance should be imperative for every parent and educator.

By age three, children can grasp basic financial concepts. And many children establish money habits for the rest of their lives at just seven years of age. We’ll review the keys to teaching youth financial literacy and the best approaches you can take to ensure success.

Components of financial literacy

Financial literacy involves several different components, the sum of which provides the framework for educating children on understanding and managing finances.

If you’re looking for an all-encompassing financial literacy program, Operation Hope’s award-winning Banking On Our Future (BOOF) is a great option for students in grades 4-12 in addition to all the beneficial resources provided below.

Earning

Adults know money doesn’t grow on trees, but children may not comprehend this seemingly simple concept. Teaching children that you have to earn money, and the various means to do so is a crucial element of financial literacy.

Saving

Delaying gratification can be challenging at any age, so it’s best taught early. Teaching children to save from a young age will help them start to save earlier in life. Simply put, saving is the linchpin of any financial plan and one of the foundational components of financial literacy.

Investing

Investing is a more advanced concept of financial literacy, but an important one, nonetheless. Allocating funds toward investing will help children prepare for the future and put their money to work, earning interest and growing.

Budgeting

If earning, saving, and investing are the tools used to attain financial literacy, budgeting is the manual that teaches you how to actually use these tools. You can tell children about earning, saving, and investing, but teaching them about budgeting is how you’ll ensure these ideas connect with one another and are put into practice in real-life.

Understanding investments

There are many different types of investments, each with its own set of unique characteristics and benefits. From traditional investments like stocks and bonds to alternative investments like precious metals, it’s important to start educating young people on the pros and cons of different investment choices.

Understanding investments vs. purchases

Children quickly learn how to spend money, so you have to teach them how to distinguish between a purchase and an investment. Both purchases and investments involve an exchange of money. However, children may not recognize that the latest Apple watch or pair of trendy sneakers is a far cry from buying gold bullion to hedge against inflation.

There are countless resources to aid in your quest to teach youth financial literacy, including a more formal education and more practical activities with real-world applications. Utilizing these resources will improve the chances of successfully equipping young people with the financial management skills they need to succeed in life.

Pre-Kindergarten (infant-preschool)

Children younger than kindergarten age are unlikely to comprehend financial principles, but parents and guardians can take steps toward saving for their children’s future educational and general expenses. Opening up an UTMA or UGMA is often a more efficient way to transfer assets to someone, while a 529 and Coverdell ESA provide tax-advantaged avenues for funding education. You can use these accounts to teach children important financial lessons as they grow up by explaining the concept of investing and earning interest by showing them the account (and growth) at different points in their childhood. And you can explain what they are for.

Areas of financial literacy education

Even though children four and under won’t possess the ability to comprehend most basic math skills, you can still teach financial literacy lessons through a child’s ability to observe your actions. Starting a coin jar or piggy bank can make saving a fun activity. Using gamification to teach basic math skills can help children get off to a fast start understanding addition and subtraction. Playing make-believe and simulating you and your child selling and purchasing goods at a market or a store is a great way activity that is both fun and educational.

At age four or five, you can even start teaching children about the value of coins, emphasizing that each coin has a value and that more coins don’t necessarily mean more value (for example, five nickels have the same value as one quarter).

Finally, it can be helpful to use cash from time to time, so that children can observe the exchange of money for goods being demonstrated in a real-life scenario.

Resources for this age group

• Sagevest Kids: Short, simple lessons can go a long way in laying the foundation for youth financial literacy. Promoting learning through play, talking about money, making savings fun, and setting a good example are some great tips for parents or guardians of very young children.
• Bright Horizons: There are many great financial literacy activities for kids in the pre-kindergarten stage. Teaching children about needs vs. wants can help expose them to money management decisions, while age-appropriate books and gamifying money through play will help maintain their interest.

Lower elementary students (grades K-2)

This age group is a pivotal one since children at this age are developing their basic math and comprehension skills while rapidly absorbing information.

Areas of financial literacy education

This is the age where it’s appropriate to teach children the value of money, habits of money management, and the basics of earning, spending, and saving money. Educating children on what money is and how it works will help them recognize the different denominations of currency.

Introducing children to simple spending decisions and allowing them to make these choices will prime them for more difficult spending decisions later in life.

Teaching Example

A great teaching example for children in the K-2 age group is walking them through a toy store with a predetermined amount of money. As you browse through the products in the store, explain that each item has a cost and that the more expensive items mean having to wait and save up enough money to afford the higher-priced toys.

Resources for this age group

• InCharge offers lessons on how money works, including earning and spending it. InCharge’s free lesson guides provide an organized, easy-to-follow structure to help both teachers and young students.
• VentureLab is an excellent resource with programs and curricula designed for specific age groups and a variety of different topics to choose from.
• The Consumer Financial Protection Bureau (CFPB) can serve as a helpful guide for parents, caregivers, and teachers educating children on how to be financially literate. CFPB has a list of what to expect at each age, behaviors to look for, and tips.
• My Classroom Economy is a classroom management system that incorporates fun experiences into the classroom to help teach financial responsibility. My Classroom Economy offers programs with particular objectives for K-1, Grades 2-3, and beyond.

Upper elementary students (grades 3-5)

By grades 3-5, children start to understand and be able to deal with more complex concepts, like inflation.

Areas of financial literacy education

Financial literacy education for upper elementary students includes more advanced topics like earning an allowance, budgeting money and balancing spending and saving. Children in this age group can manage their own money and understand how depositing money into the bank and using a debit card works.

Though young, upper elementary students can even begin working with money management apps. You should introduce the idea of inflation and how investing and diversifying can help beat inflation. At this point, you can also speak generally about precious metals as an investment option that can be particularly attractive when inflation increases.

Teaching example

Giving children in this age group an allowance can help them grow accustomed to the concept of earning a regular income. Offering help and guidance on how children can budget to save for the items they want will build good savings habits and teach them how to plan for the future. For example, if you give a child a $10 weekly allowance, but the toy they want is $50, they’ll understand and experience what it means to save their entire allowance for five weeks to buy the toy they want.

Resources for this age group

• The My Classroom Economy for grades 4-5 has a set of experiential activities that teaches valuable lessons to upper elementary students, including earning a paycheck and receiving it on payday, dealing with fines, paying rent, and participating in an auction.
• Bankaroo is a virtual bank for kids that simulates a person’s relationship with a bank. Bankaroo helps students learn how to manage money and practice making money choices in a more realistic scenario than the commonly used game of Monopoly.
• The iAllowance app leverages technology to help parents and students manage allowances, chores, and rewards. Parents and caregivers can set up goals with rewards to motivate children, provide automatic, recurring allowances, and create chore and transaction reports within the app.
• Rooster Money is another excellent allowance app that can help children build good money management habits. Rooster Money has a virtual money tracker to catalog allowances and spending, a start chart for rewards, and a chore manager.
• VentureLab has several different educational programs for children in grades 3-5, including two entrepreneurship courses.

Middle schoolers (grades 6-8)

By sixth grade, children can get more hands-on with savings, budgeting, and investing. At this age, students are usually ready to move from simulations and practice exercises to dealing with real-life money management.

Areas of financial literacy education

Middle schoolers’ financial literacy education should include regular interactions with banking, such as balancing allowances with spending and opening a savings account. Children in this age group can also learn about more advanced banking products and concepts like loans, lines of credit, and interest.

Teaching example

One easy teaching example is helping your child open a savings account at a local bank. Explain how a savings account works, how savings add up over time, and how interest grows on the money in the account. Take this lesson a step further and make it even more interactive by setting goals and helping encourage continually saving to meet those goals.

Another teaching example is centered around inflation and showing children how the value of a dollar buys you less over time. Using an item like a candy bar, explain in simple terms how when the student was born, a candy bar cost $1, but when mom and dad were children, a candy bar only cost $0.50.

Resources for this age group

• • VentureLab’s courses for middle schoolers are an excellent tool for financial literacy education. VentureLab has a great selection of courses for middle school students in areas like entrepreneurship and career exploration.
  • CFPB shares a list on its website of money ideas to talk about with children. This list includes earning, saving, planning, shopping, borrowing, and more.
  • The My Classroom Economy course for grades 7-8 provides helpful core objectives, which it aims to achieve via learning about real-world economic activity, understanding taxes, and opportunity cost.
  • Columbia University has a list of 20+ resources to introduce money management to children and support financial literacy education.
  • Banking On Our Future (BOOF) financial literacy curriculum from Operation Hope. The program teaches checking and savings maintenance, power of credit, investments, budgeting, and other money basics to students in grades 4-12. Plus, it comes at no cost to students.

“To meet the needs of the community in the midst of COVID-19, Operation HOPE created and launched a virtual model for school-age youth programs. The virtual model creates the opportunity to gain real-time feedback that has also allowed us to learn ways to engage with communities and young people digitally regardless of geographical location or available technology, furthering the Financial Literacy for All movement”  Mary Ehrsam, President of HOPE Partnerships

High schoolers (grades 9-12)

High schoolers are fully capable of comprehending complex financial ideas, like portfolio diversification and long-term planning and budgeting. High school is often when many people get their first jobs, learn to drive cars, and begin preparing for college. There are many important lessons to teach during this time, such as budgeting, planning for the future, and net income after taxes.

Areas of financial literacy education

In high school, students should spend time focusing on different investment types and how to build a smart investment portfolio. This includes covering stocks, mutual funds, and bonds, as well as precious metals and other alternative investments.

Once students have an understanding of the investment types, you should teach them about the importance of investing to beat inflation and how to allocate assets to achieve a diversified portfolio, such as hedging against inflation through owning precious metals. High schoolers should also learn about financial planning, which will help prepare them for expenses like car ownership and college tuition.

Teaching example

One of the best teaching examples for high school students is setting up a paper trading investment portfolio. Discuss how stocks are valued and traded, and be sure to explore the benefit of adding precious metals and other alternative assets to your portfolio. After allowing the student to choose the investments and asset allocation, track them over time to see how they perform. Show the students how markets move and discuss possible reasons for why assets move in a particular direction.

Resources for this age group

• EVERFI is a digital education program that offers financial literacy lessons for high schoolers on topics like banking, income and employment, credit and debt, consumer skills, and insurance. EVERFI uses immersive digital environments as teaching aids, taking a modern approach to youth financial education that translates to real-life money management skills.
• OppU’s financial literacy guide gives an overview of key financial literacy concepts for high school students, plus a list of resources and real-world financial scenarios to help improve retention.
• Champlain College explores the urgent need for high schoolers to receive financial literacy lessons both in school and at home, using statistical evidence to show the long-term benefits of youth financial literacy.
• InCharge’s financial literacy lessons for high school students provide the structure for teachers and students to approach financial literacy in an organized, thoughtful manner. The high school teaching curriculum has 14 lesson plans and worksheets, diving into topics of real-life personal finance such as buying a home or car, consumer awareness, budgeting, and living on your own.

Post-Pandemic Changes in Education

It should be no surprise that the COVID-19 pandemic impacted education. In 2020, children of all ages (K-12 and beyond) saw a mass exodus from the classroom and into an e-learning environment. And while most have returned to in-person teaching, most educational facilities still use the remote teaching infrastructure for special cases or have integrated “e-learning days” into their regular schedule. Unfortunately, remote learning isn’t the best for all students. But, with some resources, parents, teachers, and students could improve and optimize the remote learning experience.

Resources

• Top Digital Education Tools for Teachers and Students provides a comprehensive list of tools that help with communication, teaching, and learning between students and teachers.
• The Best Online Learning Tools for Students and Teachers gives a list of free unique applications that help students and teachers manage documents, edit videos, and take notes.
• 8 Tips for Successful Online Learning reviews tips for staying disciplined, motivated, organized, and on schedule in a remote learning environment.
• How to Make the Most of Online Learning lists top study habits for successful remote education.
• 5 Online Learning Tips for Student Success– The Ohio State’s online guide for students’ success in online learning.
• 21 Ways to Reduce Digital Distractions During Online Classes and Homework Time– “Going to school” at home means you’re never physically separate from personal distractions. This guide reviews 21 methods to stay focused on your curriculum while learning from home.

Prioritizing financial literacy

Youth financial literacy should be a priority for every child and is an attainable goal if you start early, plan appropriately, and stay consistent. Many financial literacy teaching concepts and objectives for different age groups share similarities, with plenty of crossover between ideas.

Ultimately, the key to improving financial literacy is through helping children apply their math and critical thinking skills, translating them into real-world economic ideas and decisions. Today, there are so many modern resources you can use to help teach and reinforce these ideas at home and in a school setting. Online lessons, along with apps and other software, are great tools to make financial literacy education more approachable, simplifying new and practical approaches to tackle this complex, crucial subject.