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It’s no secret that many Americans struggle with financial literacy. In fact, only 30% of us can answer basic financial questions correctly. Here in Pennsylvania, our financial literacy fares better than some states—but there’s always room for improvement. 

Unfortunately, schools are not required to teach financial literacy skills in the Commonwealth. That’s where you—supportive parents and guardians—come into play. In this post, we’ll discuss everything from setting up an allowance to helping your kids open a bank account. Keep reading to learn more!

When to Teach Your Kids About Money

As with any important life skill, preliminary financial habits begin to develop from a very young age. In fact, according to Parents.com, “our kids' money patterns and habits are largely established by elementary school.” Children watch their caregivers, observing their habits, daily routines, and even their decision-making processes when they go shopping. By the time your child is talking, they already have a foundation of basic knowledge that you can further develop through conscious practices.

Whether it’s introducing the idea of wants vs. needs at playtime or taking them along with you when you go grocery shopping and actively including them in the experience, there are many opportunities in day-to-day life to get your preschool-aged children started on a conscientious path. As they get older and are able to understand more complex financial concepts, you can continue to expand your approach to match their growth.  

How to Teach Your Young Kids About Money

As we mentioned above, there are many points during the day, as you navigate your routines or interact with your child, that can serve as opportunities to introduce financial concepts. Rather than force complex, direct lessons, it’s better to simply work them into daily life in microlessons. These can include:

• At the store: Explain how money is traded for items at the store, like toys or food. When they request an item, talk about the difference between wants and needs.
• When they ask about your job: Talk with them about how you earn money to pay for things like your home, your car, and everyday needs.
• At the bank: Bring them along on trips with you and make a point to visit the inside of the bank branch to introduce them to the teller and explain how banks can safely store money for you.
• When they help around the house: Offer small amounts of money to help with set chores to teach the basic concept of working for income. 
• When they get money: When your child receives smaller sums of money in cash or change, have them place it in a piggy bank or jar for safekeeping. Help them count the money, discussing the difference between bills and coins and keep track of the total. Larger amounts and checks should be deposited in their own bank account (more on this later!).
• When you work on your family budget or pay bills: When you do your own financial management, take a minute to let them know what you’re doing and why it’s important, keeping the conversation simple and brief.
• When you read together: Incorporate money-themed books at reading time. These can include classics like “The Berenstain Bears' Trouble with Money,” “Alexander, Who Used to Be Rich Last Sunday,” and Dr. Seuss’s “One Cent, Two Cents, Old Cent, New Cent.” 

Start the Saving Habit Young with a Savings Jar or Piggy Bank

You can start saving on behalf of your child at any age—whether it’s depositing their birthday checks or contributing to their college fund. But your children themselves also need to develop the mindset to set aside money for savings, and the sooner they do this, the more likely this habit will stick.

As your child is learning to grasp the concept of money and learning how to count coins and bills, create a special place for them to save. Piggy banks are the classic choice, but a clear jar where they can see how much money is there and watch it grow makes a great, easy solution.

• Encourage them to add any money they receive as a gift or for a chore, counting it and adding it to a running total.
• Use a ratio system for saving and spending. For instance, ask them to save half of all their received money, and allow them to make purchases with the other half. While allowing spending may sound counterintuitive, it will give them the chance to navigate spending choices and understand the concept of “easy come, easy go.”
•  Help them set a small savings goal, like a toy or special item they want. Setting a goal will help them understand how savings works and instill the value of a dollar.

When your child gets older and their savings grows, you can transfer the savings habit to a real bank account! 

Give Them an Allowance in Exchange for Chores

Gift money is great, but it doesn’t really teach children how money is earned. The concept that most people have to work for their income is important for children to understand. And requiring them to help with chores will also help your children learn domestic responsibilities, too!

Giving children an allowance offers several benefits: it teaches them the value of money, encourages budgeting skills, and provides hands-on experience in managing finances. By regularly receiving and managing their own money, children learn to make decisions, prioritize spending, and understand the importance of saving for future goals. This practice helps instill responsible financial habits early on, setting them up for better money management in adulthood.

Not everyone is in favor of tying money to chores, arguing that household participation should be expected—not paid. In HerMoney’s post, The New Rules of Allowances for Kids, they suggest giving your child money only for “above-and-beyond chores—things like cleaning the garage, shoveling snow, or raking leaves.”

Teach Them About Opportunity Costs

Money is finite, no matter how much you have of it. Even smaller purchases, when they add up, have an opportunity cost. As they start managing their own money, teach kids to consider trade-offs by explaining that choosing one purchase may mean forgoing another. For instance, if they buy a new game on their tablet, they might not have enough left for that pack of Pokémon cards. 

This is important at every age—but especially as they begin working and handling larger sums of money. For example, a new $500 video game console will require more than 50 hours of work at $10 an hour—or 5 weeks of work if they currently work 10 hours a week. This approach helps them grasp opportunity costs by linking purchases to the time spent earning the money. 

Built into this discussion is the perennial idea of wants vs. needs. When you have a limited amount of money to work with, you have to make decisions about how to allocate that money and needs and obligations always come first. As we mentioned earlier, a great way to introduce this concept is to simply take them shopping. For instance, at the grocery store you can let them know you have $200 to spend—what might seem like a lot of money. Include them as you make decisions on what to purchase and talk about how you can’t buy every treat you want, but there might be money leftover once needs are met. 

Include Them in Household Budgeting

Your children will be managing their own household budget one day, which is why it’s important for them to have an inside view into how it works. Start by discussing your family's budget openly, from the time your children understand basic math. At first, simply take time to explain how income is allocated for various expenses like groceries, utilities, and savings. And when you make bigger decisions about spending, let them sit in on the process to help them understand trade-offs and priorities. 

As they get older, you can start expanding how they are included, showing them how to review account statements for errors and create plans for paying off debts and building savings for individual goals. You may even want to let them weigh in on major financial decisions, like purchasing a car or taking a big trip, setting a budget and researching options. 

Teaching them the importance of budgeting emphasizes how spending decisions are guided by financial limits—even when dealing with larger sums of money than what they’re used to. Show them money isn’t magical or impossible to control, and that careful planning can ensure that your essential needs are met and there’s money left over to build savings, too. 

Lead By Example

Because children learn their financial habits primarily by observing their parents, if you want them to develop good skills for their future, you need to work hard to be a good model. Keeping debts low and well-managed, paying bills on time, and setting aside money for savings are all important ways to lead by example.

If your money skills haven’t been the best or you’ve made some common financial mistakes in the past, see this as an opportunity to improve your own habits, too. Whether it’s creating a plan to get out from under debt, starting a savings habit, or reigning in spending with a budget, your child can be part of your planning and implementation process. Celebrate milestones together and feel good knowing that you are being a good financial role model. 

Take Your Child to Open a Savings Account

As the money in their jar or piggy bank grows and your child no longer needs to see the money to understand the value, it may be time to open a savings account. Minors will need a guardian to co-own the account, and opening a savings account makes the perfect opportunity to walk them through the process of opening and account and help them get to know their local bank better. 

Most banks offer some basic, fee-free options that make good savings accounts for kids.

At Citizen Savings Bank, we have a Free Personal Savings Account with no minimum deposit to open. A $100 minimum balance is required in order to avoid the $2 monthly service fee.

This savings account also comes with a free debit card, for those 16 years of age or older who have obtained a parent/guardian’s signature. However, using your savings account for direct purchases is never ideal. That’s why opening a separate checking account—while leaving savings separate and safeguarded—is the way to go.   

Get Your Teen a Checking Account with a Debit Card

As our society becomes increasingly cash-free, it will be harder and harder for your kid to navigate personal spending if they don’t have access to an electronic payment option, like a debit card. Debit cards also allow them to better track their spending, to see where their money is going, and make plans to keep their budget on track if they are spending too much. 

Because teens under the age of 18 will require an adult on the account with them, you’ll be able to keep an eye on their spending through statements as well as looking at the account online or through your bank’s mobile app. 

So, when should they get their first checking account? Around the time they get their first paid job might be a good idea. It will provide a place for employers to direct deposit paychecks and give them a better platform to manage their money, now that they will have more of it.

Look for a free checking account with no minimum deposit or no minimum balance requirement, like our Advantage Checking Account. Or, try our Free Kasasa Tunes Checking Account which offers several rewards, and only a $15 minimum deposit to open. Additionally, our Free Kasasa Cash Back Checking Account is another great option that requires only a $25 minimum balance to open. 

Teach Your Kids Financial Literacy with Citizens Savings Bank

Your children are the future leaders of our communities in Scranton, Mount Pocono, Taylor, Clarks Summit, and Honesdale, and we want to support them as they grow and develop the important life skills to ensure their success. That’s why we work hard to make financial literacy accessible. 

We welcome you to bring your children into your local branches so they can see what banking is like, and we’re always happy to answer their questions! When they’re ready to open an account to start building their savings or managing their money, we’ll help you find the right account to make it simple and easy. Reach out to a branch in Northeastern PA today to make an appointment and get started.

Citizens Savings Bank has multiple locations throughout Lackawanna, Wayne, and Monroe Counties. For branch locations and hours, visit our website. We also have a Customer Support Team ready to answer any questions you may have. Call us today at 1.800.692.6279 or email [email protected]. Member FDIC. Equal Housing Lender.