Iowa State University Extension

Money skills are some of the most important skills young adults need when they head out on their own. And they can't be learned in a 2-week crash course right after graduation, either! From preschool ages on, children and teens are learning attitudes about money, and they can be learning skills, too.

Skills like...

• coin identification and making change
• comparison shopping
• saving for a special purchase
• managing checking accounts
• using credit cards wisely

It's never too early and it's never too late to help your children (or other children you care about) build the money skills they'll need throughout their lives. 

Below are skills and concepts for younger children (pre-schoolers to pre-teens).  Some of them are so basic you may take them for granted, but no child is born knowing these things.  Start today to create opportunities for your children to see these concepts and skills in action.  (Remember - just telling a young child is not enough. Give him or her many chances to observe and talk about transactions and events in real life.)

Money Skills for Ages 3-5

• Identify coins by correct names
• Identify dollar bills
• Keep money in a safe place
• We trade money for things
• We can't buy everything, so we make choices
• When we spend money it is gone

Money Skills for Ages 6-8

• Learn coin values and equivalents
• Count coins
• Banks keep money safe until we need it
• Writing checks takes money out of the bank
• Deposit money in savings account
• Manage a small allowance

Money Skills for Ages 9-11

• Make change
• Divide allowance between spending, sharing and saving
• Make simple spending plan for one to two weeks
• Keep simple spending records
• Compare prices when shopping
• Realize we can earn money by doing extra jobs
• Save small amounts each week for larger expenses in the future
• Understand and use correct terms for banking transactions

It is natural for parents to pay attention to financial skills as teens are preparing to leave home.  Obviously, however, children begin as toddlers to learn about money, why it is important, and how it should be used.   Efforts to help children build financial skills will be most effective if they begin early.

Let children observe your decisions.   Families make dozens of financial decisions each week.  It is not necessary (nor even possible) to explain every single decision you make.  It is, however, helpful for parents and others to get in a regular habit of talking with children about why they make decisions.   Examples:

“I chose this more-expensive sweater instead of the other one because this one is machine washable.”

“I bought 20 of these notebooks because they were very inexpensive, and we’ll use them during the year.”

Try to let children observe or be involved in decisions that are appropriate to their age.  Young children will be overwhelmed by complex decisions, but older children and teens need the experience of weighing the importance of various pros and cons. 

It is appropriate to tell children about decisions you were unhappy with, as well as others.   If they see that you learn from your mistakes (and your successes), they will learn to do that too.  Avoid sharing information, however, in a way that causes your child to feel guilty or insecure about the family’s finances.

Give children chances to practice.  From grade school on up, children benefit from opportunities to practice making financial decisions.  Two types of practice are particularly helpful:

1)      Managing regular income.  Children can receive regular predictable income through allowances or payment for chores.  When income is predictable, children can plan ahead to meet their needs and wants, using skills similar to those they’ll need as adults.  Be sure there is clear understanding about what expenses the allowance or pay is intended to cover, and then let them be responsible for meeting those needs. 

2)      Managing special sums for special projects.  Allow a certain amount of money for a particular project – such as redecorating a room, planning a birthday party, or buying back-to-school clothes.  Spell out any expectations you have, and stay involved enough so that you can remind the child of important considerations they might forget, but then let the child be responsible for the ultimate decisions. 

Give children opportunities to observe and practice financial decision-making throughout their lives.  They’ll develop skills, clarify their values, and ideally, they will learn to see money as a tool they can control in order to have what is most important to them in life.   

Check out resources from Iowa State University Extension on youth and money:

The Spending Game - PM 1103 (pdf)
The Allowance Game - PM 1776 (pdf)
Child Safety on the Internet - PM 1789e (pdf)
Building College Students' Financial Literacy - PM 1856 (pdf) -- especially appropriate for college staff