Estimate Time5 min

5 ways to teach your kids about money

Key takeaways

  • Start young kids off with real money before introducing them to the digital world of money.
  • Make sure kids know that using digital money is not a game and will have real consequences.
  • Introduce teens to safe digital spending using financial tools, such as debit cards.

Today, digital money is business as usual, as more people use their smart devices to conduct their financial transactions. As a result, how do you teach children about money in this digital age?

Medium of exchange

Language is one of the early experiences a child will have with abstract, symbolic concepts. They grasp that silver coins and green slips of paper can be exchanged for tangible things they want. The question is: When do they begin to understand?

If you ask your children what you do with money, and if they can answer "buy things with it," then they've grasped the basic concept of using money as a medium of exchange.

Talking to your kids about money

Explore more stories that can help facilitate money conversations with your children and teens.

Because this young generation has grown up in the digital world, they're incredibly comfortable with the virtual universe. They probably were introduced to this world through video games. Many video games, and even educational ones, reward players with virtual money they can use to buy in-game rewards, like pets, clothes, furniture, and more. Subtly, kids are being introduced to the concept of medium of exchange, and the power of earning and spending.

However, playing these video games and "earning" fake money can cause confusion between digital gameplay and the real world of money—which can lead to unwanted problems in adulthood.

Here are 5 tips to help you introduce your kids to digital money:

1. Make money real for young kids

It's the tangibility of money that makes it such a useful tool in teaching children how the world is structured. To make lessons real, start with actual currency before introducing your kids to the digital kind. Coins and bills are tangible and visible. Kids still see them every day, and they quickly grasp the general concept.

Incorporate counting and coin-sorting activities into your gameplay. Get some items out of your pantry and put "price tags" on each, then give your kids a pile of change. Have them count out the right amount to buy every item. As they grasp this concept, you can start to teach them how to make change, an important life skill.

2. Visit the bank

When they're elementary school age, kids should be ready to understand electronic spending. If they receive an allowance, take them into a physical bank. Show them how you deposit their allowance into their joint savings account with you. Show your kids how you're paying them by putting money into their online account. When they want to spend physical money, a trip to the automatic teller machine (ATM) to get cash will reinforce how real money can become digital money, and vice versa. Explain that banks hold both, hard currency and virtual money.

It's also great to discuss what ATM fees might be involved. Explain how the bank is providing a service that must be paid for; the ATM needs to be serviced by real people, who load the machine with bills. Some banks or financial institutions may not charge or may reimburse fees, but in general it's good to prepare kids to pay attention to fees. Also, explain that ATM cardholders get a secret personal identification number (PIN)—that should never be shared with anyone—that allows them to deposit and withdraw money.

3. Explain how paper checks work

Although the paper check is not used nearly as much as in previous years*, knowing how to write a check is still a useful life skill. Physical checks are still useful and preferred in many instances. For example, some companies mail check refunds, paying rent, and, some service based small businesses like lawn care or independent contractors prefer checks. There are even several instances when cash or digital payment isn’t accepted, making checks a viable option.

Show your kids how to write a check so they understand how they work.

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4. Start with debit cards

Teens innately understand digital money. However, they may need help understanding that money, digital or not, is a finitedebit cards can help.

Explain that a debit card may look like a credit card, it uses the existing money in your account to purchase things. When you run out of money, the debit card doesn't work and/or you'll be charged an overdraft fee. Teens also have many payment and money movement options available to them, but begin with a debit card, and then you can expand the lessons to include other monetary tools.

5. Build smart online consumers

Older teens understand the world of online advertising and know that social media gives them important information to make them savvy consumers. Teens can research their choices, shop sales, read reviews, compare products, and hopefully hold off on impulse shopping.

Taking a 2-week time-out to really research an expensive purchase can help to distinguish a "need" to a "want" for a teen. See if your teen will agree to "press pause" for 2 weeks to think about why they want to buy something and if they're committed to using their own money. If your teen is earning their own money, their spending decisions will be even more valuable to them.

We live in an exciting new electronic world, but it's our job as parents and guardians to prepare our next generation for the influences of the new world. It's also important to teach teens to protect themselves from hackers and lurkers. Their private information can be stolen and they need to learn how to keep their information safe.

When it comes to money and children, it's not important what form it is, how it's created, or how it movesit's about teaching money values and life skills.

Help your teen learn about money

The Fidelity Youth® Account gives teens the power to save, spend, and invest their money.

More to explore

* "Cancelled: 5 Reasons Why Paper Checks Are Disappearing", Walden University, 2024, https://www.waldenu.edu/programs/business/resource/cancelled-5-reasons-paper-checks-are-disappearing.

The views expressed are as of the date indicated and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of Fidelity Investments. The third-party contributors are not employed by Fidelity but are compensated for their services.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

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