There is a free kids’ paycheck template near the bottom of this post. Make sure you grab it before you leave!
Easy Navigation
The Secret to Teaching Financial Literacy to Kids
Today, I am sharing the secret to teaching kids financial literacy with you, which is actually something that I have debated sharing for quite some time now. In fact, I have been formulating this post in my mind for almost a year.
Teaching kids financial literacy is so important. How many adults do you know who can’t handle a budget, a bank account, or a credit card? How many adults do you know who have made more than one crippling financial mistake?
Or better yet, how many adults do you know who can make sound financial business decisions: the kind of decisions that will literally make or break a business venture? These are the kinds of skills that need more than a printable worksheet to really be able to grasp.
We (my husband and I) have been blessed to have been surrounded by many financial and business experts who have been generous with their wise advice. Because of this, we have been able to take advantage of the tools and resources we have been given and now we are well on our way to setting up a financially stable life and future for ourselves and our family.
I don’t say this to brag, but rather I say this to illustrate how actionable and useful the advice we have been given was.
And now that our kids are getting older (our 11-year-old is about to enter middle school) it is time for us to pass this same financial education wisdom onto our kids. We have been dripping little tidbits of advice into their young minds over the years, but earlier this year, we sat them down and had an official, formal lesson with the hopes that when the time comes, they will be prepared for the real world.
Today, I am sharing that lesson with you so that you too can teach your kids financial literacy.
This article may contain affiliate links. Please see our disclosure policy for more details.
On this topic, I recorded a video for the 2020 Homeschool Mom Conference. That conference is now over, so I am sharing that video here, with you lovely folks! I hope you find value in this information.
What is Financial Literacy
Now financial literacy is more than just knowing what money is and how to make more of it: financial literacy involves a whole new way of thinking.
When you are preparing to teach young children money management, they need to be taught more than just how to make money and how to save money: they need to be taught how to set and achieve real financial goals. And they need to be taught how to make proper financial decisions that will guide them on their road to a secure financial future.
In short, kids need to be taught how to be money smart.
How to Teach Kids About Money
The topic of teaching financial literacy to kids is of such great importance. When you successfully teach financial literacy to kids, you also successfully teach kids personal finance and how to handle their own money, as well as how to make smart financial decisions.
Don’t we all want that kind of mindset for our children?
To begin with, understand that we want our kids to be able to think like a business owner, or an investor. Did you know that business owners and investors think about money differently as compared to the rest of the population?
It’s true!
Thinking like an investor or a business owner involves more than just getting out of debt or building up a savings account. The proper way to set yourself and your children up for financial success is to think about your longterm financial situation right now and to be willing to invest in yourself and your future financial independence today.
To better illustrate this principle, we taught our children about the concept of the cashflow quadrant. The cashflow quadrant is discussed heavily in Robert Kiyosaki’s book, “The Cashflow Quadrant.” For middle school or high school students, you could have them read the book, but we simplified it for our younger children.
Essentially, the cashflow quadrant illustrates how the methods for making money are sectioned off into one of four categories. These four categories are employment, small business, big business, and investments.
Everybody who makes money falls into one of these four categories. The real secret to financial success is not to have a huge savings account or be debt-free, although these are good things. The real secret to financial independence is to move from the left side of the quadrant to the right side and settle into the world of big businesses or investments.
The reason it is not enough to just be debt-free or have a lot of savings is that we don’t know what the future holds. You could get an injury or an illness and have to spend your piggy bank on something other than your retirement. A natural disaster could come along and wipe your savings out completely. Or nothing bad could happen to you but your money will still not go as far due to inflation.
It’s better to be in complete control of our finances, which requires understanding how money works and how businesses and investments work.
Teaching Financial Literacy to Elementary School Students
It is important to begin teaching children financial responsibility and smart money lessons from an early age. When teaching elementary school students financial literacy, it is best to start with a simplified version of the cashflow quadrant. Draw out, or show them, the quadrant (shown above) and give a few examples of each category.
Such as:
Employee Examples
- Waiter/waitress
- On-staff coder
- Janitor
- Teacher
- Professional football player
Small Business Examples
- Contract coder who hires out on a project-by-project basis
- Doctor at a private practice
- At-home daycare provider
- Franchise owner (Mcdonalds, etc)
- Real estate agent
Big Business Examples
- Any business that has 500 or more employees and/or $10+ million in revenue
Investment Examples
- Owning multiple rental properties
- Stock market, gold, or FOREX investments
- Investing in other small business ideas
- Writing/publishing books, music, videos, a blog etc
- Independent coder making and selling apps or programs individually
To further illustrate the idea of this financial mindset, we told our kids the story of the parable of the pipeline. This parable originally came from the book, “The Parable of the Pipeline” by Burke Hedges. I will embed a video of Ben telling that story below so you can show it to your students.
And finally, to complete our elementary students’ financial literacy training, we ran them through how to set up a budget (shared farther down). Keep reading or jump to the budgeting section now.
To reinforce these lesson plans, I made a paycheck template for my kids (you can get a template below) and my kids now earn a paycheck every week, based on work they do during the week above and beyond their regular expectations. They are expected to take the money earned from this paycheck and follow their budgets. (Again, more on that below.)
For more financial literacy support, you might also consider the game Cashflow for Kids as it also does a good job of teaching children and supporting them in these financial education lessons.
Teaching Financial Literacy to Middle School Students
When teaching financial literacy to middle school students, I would recommend you consider not only going through the cashflow quadrant lessons, but also reading the book “The Cashflow Quadrant” with your students.
Middle school students will be able to handle more in-depth lessons and concepts than elementary school students, but the basic lessons are generally the same for all ages.
- Cashflow quadrant
- Parable of the pipeline
- How to make a budget (discussed below)
- Cashflow game (for deeper learning)
These young people are right in that age gap where they might benefit from advancing to the Cashflow 101 board game, or they might not be beyond the Cashflow for Kids board game yet. Follow your child’s cues to determine where they will fit best. You can easily test this out by playing the free online version of the Cashflow 101 game here.
Furthermore, I would also highly recommend your middle school students read “The Legend of the Monk and the Merchant” by Terry Felber. Dave Ramsey actually foreworded this book and requires all of his staff members read this book within the first 30 days of being employed by him, because of the principles it teaches.
“The Legend of the Monk and the Merchant” uses a fun story format to illustrate points such as:
- Being rich vs being poor does not determine your levels of righteousness.
- Not all of God’s work is in the church – He has work for us to do out in the world as well.
- With great power (wealth) comes great responsibility.
Teaching Financial Literacy to High School Students
High school students can and should be treated like adults when it comes to financial literacy lessons and economic education. As such, young adults should definitely read “The Cashflow Quadrant” and consider playing either the board game version or the online version of the Cashflow 101 game.
High school students, like middle school students, should absolutely read “The Legend of the Monk and the Merchant” because of the principles and mindsets it teaches.
And don’t assume that just because your student is older that he or she won’t benefit from the storytelling and imagery found in The Parable of the Pipeline (embedded above). Parables are a great way to reinforce lesson plans, no matter your age.
Now I will discuss the components of a successful budget in just a few minutes, but keep in mind that for older students, they are capable of a much more detailed budget, as well as more ambitious goals in regards to investments.
Components of a Successful Kids Budget
Teaching children from an early age how to keep smart money habits and properly manage a budget might just be the most important thing you can do for a successful economic education. Yes, learning to think like a business owner/investor is important, but none of that matters if your child can’t stay within his or her budget.
Help children learn to live within their means by teaching them now the components of a successful budget. Every kid should definitely know how to manage a budget.
The most important aspects of a successful budget are:
- Income (obviously)
- Tithing/charity
- Investments (pay yourself so you have money to invest)
- Bills/expenses
- Savings (save for something you need or for a rainy day)
- Fun money (very important for mental health)
Now let’s discuss why these aspects were included.
Income
Income is obviously included because without an income there can be no (successful, balanced) budget.
Tithing/Charity – 10%
Tithing and charity may seem unimportant, especially for those who are not religious. But giving selflessly is a critical part of any successful budget because learning to give first points you in the right direction.
When you get a paycheck you are getting and it puts you in a mindset of things coming to you, but when you pay tithing it immediately puts you in a mindset of giving. Imagine trying to build a fire without first GIVING it fuel or talking a bank into giving you interest on your money without first GIVING them the money. Being good at giving is the key to successful receiving and paying tithing is the faster way to get you pointed in the right direction.
This is from a purely secular outlook. For a religious outlook see Malachi 3: 10 and 3 Nephi 24: 10-12. Those scriptures will be enough to show the wisdom in paying tithing financially.
Investing Money/Paying Yourself – 10%
Teaching kids while they are young to ‘pay themselves’ and to invest in themselves is the best way to ensure they always have money to spend on their business. Investing in oneself is a step that cannot be skipped if you want to have financial stability. You need money to invest in tools, resources, education, and more.
When you fail to set this money aside at the very beginning, then when the time comes to spend money on your business or investment, you will find you are unable to afford the resources/education and so you let them pass you by.
Bills/Expenses
Bills and expenses go without saying. If you have figured out how to keep a budget without any expenses, then my hat’s off to you! But for the rest of us mortals, bills are a way of life and we must teach our kids to adjust their budgets to meet and exceed these bills.
Savings
Setting aside money for savings is a good idea. You might be saving up for a big-ticket item, such as a car or a house (or for kids, a fancy toy) or you might just be setting aside some money for a rainy day (such as a job loss or a broken yet critical item).
Teach kids while they’re young to set aside a little bit of money for savings with each and every paycheck.
Fun Money
Some people don’t think it’s important to budget for fun money, but I’m here to tell you that if you don’t plan on some fun money every pay period, then either your budget is going to suffer due to overspending, or your mental health is going to suffer due to depriving yourself.
Making sure to take some downtime and ‘sharpen the saw’ so to speak doesn’t have to be expensive, but it is still an important thing to budget for. In our family, my fun money looks like out-to-eat money, and my kids’ fun money looks like new toys.
What you choose doesn’t really matter: just make sure you choose to set aside something.
Teach Kids About Money with a Kids’ Paycheck Template
To better illustrate these financial education concepts, as well as to give our kids some real-world practice with money management and intelligent financial decisions, I put together a kids’ paycheck template that we now use regularly.
Basically, instead of giving our kids an allowance, we give them a list of chores and expectations they are required to do every week. These are above and beyond the typical things we require of them just for being a part of our family.
Each child receives a set amount for completing a daily chore. For example, currently, each chore is worth $0.25 apiece. Each child also has a list of ways they can earn extra money. These extra jobs are worth anywhere from $0.50 to $5.00 apiece.
When the kids work hard and complete their chores in a timely manner, they have the potential to earn a decent amount of money (for their ages). However, they also have the potential to lose money with taxes. In our family, they get taxed for things such as missing a chore deadline, failing to complete a chore altogether, leaving a door open, lying, or picking on a sibling.
These taxes give them the opportunity to learn about real-world taxes, as well as learn how to make proper decisions in their lives, and how each of their decisions can negatively or positively affect their financial goals.
Every week, we have a family payday and distribute the kids’ paychecks. Each child has the opportunity to go through their paychecks with a parent and run through what went well and what didn’t go well that week. Then, each child gets to take their paycheck, ‘cash’ it in the bank of mom, and fill out that week’s budget.
We have been using this paycheck template for a few months now, and we are very happy with the results. As the kids get older, the amount they can make per chore will go up, along with the difficulty of each chore and expectation.
It just so happens, I have put together a kids paycheck template for you to use as well! Your kid’s paycheck can be easily edited to meet your own family’s needs.
Feel free to use this paycheck template to teach kids about money and to reinforce your own family’s financial education.
Teach Kids Money Management with a Kids’ Budget Worksheet
I put together a quick little budget worksheet for kids in Google Sheets. You’re welcome to have a copy of your own, no opt-in required. Just click the button below to get your free kids’ budget worksheet.
Or if you’d rather, have your kids draw up and put together their own budget just using a pen and paper. Then you can keep track of all their money in a piggy bank or in your own bank account, but this budget will help you and your kids keep track of how much money they are working with.
Alternatively, I’ve got a fantastic Money Saving Planner Set in the shop if you want to check it out! It’s got 6 pages of kid-friendly worksheets that will help guide you and your child through important financial discussions and get them started setting financial goals.
Show Me The Planner Set Now!
Keep in mind, if you don’t keep things in multiple bank accounts (including piggy banks), you are going to want to come up with your own version of what Dave Ramsey calls ‘the envelope budgeting system‘ so you can easily keep track of your child’s fun money, investment money, and so on.
We use the app called “Goodbudget” and we really really love it, but other Dave Ramsey fans swear by just using tangible envelopes.
Related Posts:
- A Simple and Free Chore Point System for Kids
- 100 Success Principles You Should Teach Your Kids
- Teaching Kids to Work Hard
The Secret to Teaching Kids Financial Literacy
- Author
- Recent Posts
Charlene Hess
Charlene Hess is the founder of Hess UnAcademy. She spent many years teaching before she had her own kids. She now has 8 kids of her own, whom she has been homeschooled for over a decade.
She has now moved on from Hess UnAcademy to focus on her family and her new site, Secret Life of Homesteaders.
