Children’s dreams are limitless and often full of imagination and wonder. Many children dream of becoming firefighters, teachers, veterinarians, artists, writers, or astronauts. Some children never waver from their dreams, while other kids’ dreams evolve as they grow up. Either way, the path to achieving their dream will likely require hard work, a higher education path, and a plan to cover the costs associated with it. At Washington Education Savings Plans (WA529), we believe it is never too early (or too late) to start saving for a child’s future. 

April is recognized as National Financial Literacy Month. It highlights the importance of teaching children about money and how to manage it. Financial Literacy Month is a great reminder to have meaningful conversations with kids about money. Early in life, children may notice money and observe basic concepts like where we keep it, when and how we use it, and other money habits we model without even knowing it – like saving. There are so many clever ways and resources to teach children basic money concepts and incorporate valuable financial lessons into their daily lives. By teaching children about the significance of money in our daily lives, we help them prepare for their dreams.

Start by teaching basic concepts

Children are naturally curious about everything, including money. Turning their curiosity into tangible life lessons can be as simple as showing them coins and dollars from their pockets or wallets and talking about the value of each one. Recognizing different coins and bills and how much each is worth is a priceless first step to a child’s financial awareness. 

Playing matching games with money from toys and board games is also a great way for children to learn about money.  Engaging kids in creative shopping games at home can help them relate to how we use money in everyday life, too.  

Find financial lessons in daily life

Nearly every outing we take with our children can be turned into a conversation about money. It only takes a few minutes to discuss if the outing is free (a visit to the library or the park) or if it involves spending money (a visit to the zoo, the grocery store, or the dentist). Eventually, conversations will get deeper and more involved. Parents can discuss that while the visit to the park is free, transportation to get there and parking are not necessarily free, and while the trip to the grocery store costs money, it is a necessary expense.

Another important financial lesson is helping kids understand the difference between things they need and things they want. Understanding needs and wants is a key element that guides spending decisions. It leads to conversations about earning money and whether we need to use the money right away or save it. Children’s books, board games, educational workbooks, virtual games, and websites or apps can be excellent resources for inspiring these conversations. 

Children also observe our work routines and notice other people working. The concept of earning money is another valuable financial lesson to teach. Talking with our kids about how our jobs help us earn money to pay for family needs (and wants) helps them understand the value of money.

Model good money habits

The timeless phrase “lead by example” applies well to teaching our children money management. Our kids learn a lot by observing. If they see us budgeting, saving, and making thoughtful spending decisions, they will likely follow our lead.

When they start earning money, it’s a great opportunity to talk to your kids about money management and both short- and long-term savings goals. “Kids learn by watching us. By modeling good money management, like saving for education, we help them develop healthy financial habits for the future,” says WA529 Director Lynda Ridgeway.

Another great method for teaching kids money management is setting up money jars. Have kids create one jar for spending, one for saving, and one for giving. When they earn an allowance or receive money as a gift, encourage them to contribute a certain percentage to each category based on their money management plan. 

Pave the path to their dreams 

Parents can also model future savings and planning by talking to kids about their higher education plan and how to cover the costs associated with it, whatever path they choose. According to recent studies, children are more likely to pursue higher education when they know they have financial resources set aside to help them achieve their dreams.  

Opening a GET Prepaid Tuition Plan or WA529 Invest Savings Plan account and contributing to it regularly can help kids visualize how savings add up over time. “Washington Education Savings Plans offer families a tax-advantaged way to save for future college and career training expenses,” says Ridgeway. “GET lets families prepay for a child’s future college tuition at today's price, protecting against the rising cost of education. On the other hand, WA529 Invest offers flexibility, allowing families to choose from a variety of investment options based on their risk tolerance."

By teaching kids about money and involving them in saving for their higher education, parents can help them develop sound financial habits that will serve them well into adulthood.