Financial literacy for kids

What It Means

Financial literacy for kids is the set of money skills, habits and knowledge a child builds on the way to managing money as an adult. The CFPB breaks it into three building blocks: executive functionExecutive functionThe mental skills that let a person plan, focus, remember instructions and control impulses: working memory, mental flexibility and self-control. See more (planning, focus and self-control), financial habits and norms, and financial knowledge and decision-making skills. Each block comes into focus at a different age, and children pick up much of the second one by watching their parents.

How It Sounds at Home

• "We're trying to teach her the value of a dollar."
• "He has to save up for it himself."
• "Let's talk about money at dinner tonight."

The Breakdown

Worked example. Theo is 9 and gets $4 a week. He wants a $20 kite, so he puts $2 a week in his save jar, and it takes 1010,000 stepsA popular daily step goal that began as the name of a 1960s Japanese pedometer; later studies find health benefits begin well below it. See more weeks. Each Sunday his mom asks what he plans to do with his spend money, the kind of allowanceAllowanceA set amount of money a child gets on a regular schedule to manage, often with an agreement about what it has to cover. See more talk the CFPB's Money as You Grow calls the most important part.

What the result means. Ten weeks gives Theo practice at waiting without losing interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more, and a goal that would take a year is easier to reach in smaller steps.

The building blocks by age, per the CFPB

The ages and blocks come from the CFPB; the ideas in the last column are suggestions.

Good to Know

The CFPB's building blocks report, published in 2016, found that by age 7 children begin forming basic valuesPersonal valuesThe principles and qualities a person holds most important, such as honesty, family or creativity, which guide their choices and how they judge events. See more and attitudes about money and start to understand the math behind it, and that in middle childhood they pick up money habits mostly by watching their parents and peers. For teens and young adults, the CFPB recommends "just-in-time" learning, such as helping with a first job application or researching what college or a big purchase costs, at the moment they're ready to decide. Its Money as You Grow site has activities by age, and the FDIC's Money Smart programSave More TomorrowA savings plan by Richard Thaler and Shlomo Benartzi in which you agree now to raise your retirement contribution each time you get a pay raise. See more publishes parent and caregiver guides by grade, starting with pre-KPre-KPrekindergarten: school-readiness classes for children, typically 3 and 4 years old, in the year or two before they start kindergarten. See more to grade 2.

Related Terms and Categories

• Allowance

  A set amount of money a child gets on a regular schedule to manage, often with an agreement about what it has to cover.

• Spend save give jars

  A way of teaching kids about money by splitting each allowance or gift into three jars: one to spend, one to save and one to give away.

• Chore money

  Money a child earns for jobs around the house, often paid for extra work beyond the chores everyone in the family is expected to do.

• Needs vs wants

  The split between costs you must pay to live, work and protect what you have (needs) and extras that would be nice to have (wants).

Household money and budgeting