Explaining and Teaching preschoolers to teenagers by strategically answering their innocent money questions is the best way to start their financial education.
Kids have a natural curiosity about the value of money. How parents answer these innocent but insightful questions can lay the foundation for financial literacy and children's money habits should start at a young age to ensure they'll become financially savvy in their adult years. In this article, we break down 20 common questions kids ask about money across different age groups, offering age-appropriate answers that help children understand money concepts such as the difference between wants and needs, using cash versus credit, setting aside a certain percentage for every dollar they receive and how to manage it responsibly in a way they can grasp.
AGE GROUP A: 2-5 Years Old
QUESTION 1:
“Why can’t I have everything I want?”
Explain that we have to make choices with our money to afford important things first. “We save money for what we need, like food and clothes, and sometimes there’s extra money to buy things we want, like toys or treats.”
“Imagine if you used all your crayons on one drawing; you’d run out! Money is like that, so we use it carefully to make smart money decisions.
QUESTION 2:
“Why do you have to work to get money?”
“When grown-ups work, they get money as a reward to take care of the family.”
Example for Child: Let’s explore some fun activities to teach you about saving and spending wisely. Here are some activities to teach you about money management. Saving money now can lead to a good time to start a lifetime of financial success. Teaching children about money can start with simple lessons on needs versus wants. You can open a savings account to keep track of your money and watch it grow. Consider giving them a piggy bank to save for your favorite toy. Discussing how to spend money wisely helps kids understand the concept of financial responsibility. Using a debit card can help kids learn about money management and understand how to manage their money effectively.
“Just like when you clean up your toys and get a sticker, grown-ups get money when they finish their jobs.”
QUESTION 3:
“Why can’t we get more money from the store?”
Explain that money is earned, not just available in stores.
“Money is something people earn by doing jobs, not something we just buy or find.”
Example for Child:
“Imagine if you earned stickers every time you did a chore, instead of just getting them anytime."
QUESTION 4:
“Why do we save money?”
Tell them that saving money helps us have enough time to teach important things in the future, like skills they need for smart money management. “We save money so that if something special comes up, we can afford to spend money on it.”
Example for Child:
“If you save your allowance each week, you can get that big toy you’ve been wanting, instead of spending it on little things, which is a smart money management choice.”
QUESTION 5:
“Why do we give money to other people?”
Answer to Child: Learning how to use their money wisely will help you in the future. Let’s have conversations about money to help you understand it better. “Just like Schwab teaches about money management, sharing is also a way to help others.” You can earn extra money from your savings account by doing a summer job. Remember that your savings can grow through compound growth if you keep it in a bank. You can also think about giving some of your savings to charity to help others. Start teaching your kids about money management, as it’s never too early to set them up for a successful financial future. It’s important to teach your kids about the value of saving and spending wisely to help their kids develop money management skills. Teaching your kids about money management is essential for their future. Start teaching your kids about financial education early on; it’s a good way to teach kids about their future retirement plans. Explain that sometimes we share money with others who need it.
“Giving money helps other people get what they need, like food or a home.”
Example for Child:
"Remember when you shared your snack with your friend?" Giving money to others is a bit like teaching children about money; it helps them understand the value of sharing.
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AGE GROUP B: 6-10 Years Old
QUESTION 6:
“Why do people get paid different amounts for work?”
Answer to Child: Different jobs need different skills, and some jobs pay more because they require special training in personal finance. “Some jobs need years of learning, so people who do them earn more, illustrating a good way to teach kids about career paths.”
Example for Child:
"Think about a doctor who studied for many years to help people. They get paid more than someone who does a job that takes less time to learn". It's a good way to teach kids about the value of education."
QUESTION 7:
“What’s a budget?”
Answer to Child: Explain that a budget helps us plan how to spend our money responsibly so we don’t run out. “A budget is like a plan we make to use money carefully.”
Example for Child:
“If you have $10 to spend at the fair, you’d plan how many games and treats you can get without running out, which is a healthy money decision.” That’s a budget!”
QUESTION 8:
“What happens if you run out of money?”
Answer to Child: Explain that we sometimes need to wait before buying extra things, which is part of smart money management. “If we run out, we have to save more before we can buy new things.
Example for Child:
“If you use up all your allowance, you’ll have to wait until next week to get more, which is a good lesson in how kids make money decisions.” It’s the same for grown-ups when it comes to money management; they also have to set aside money for different financial goals.
QUESTION 9:
“Why do you use cards instead of money?”
Answer to Child: Explain that a debit card is a way to borrow money and pay later, an important lesson in personal finance that plays a crucial role in teaching kids about budgeting and money basics.
“We use cards to pay, and then we have to pay the bank back for what we bought.”
Example for Child:
“It’s like if you borrowed a toy from a friend and promised to return it. With cards, we borrow money and have to return it later". It's an important part of smart money habits and making responsible financial decisions.
QUESTION 10:
“Why can’t I buy toys every time we go shopping?”
Answer to Child: Explain that we buy things we need first, like food, before using our money to buy toys.
“We need to make sure we save for important things, so we buy toys sometimes but not every time.”
Example for Child:
“If you spent all your allowance on candy every time, you wouldn’t have enough for that big toy you wanted later.”
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AGE GROUP C: 11-14 Years Old
QUESTION 11:
“Why do people take out loans?”
Answer to Child: Loans let people buy big things, like houses, and pay for them over time.
“Loans are a way to buy something now and pay for it little by little.”
Example for Child:
“It’s like if you needed a new bike and didn’t have all the money yet. With a loan, you’d get the bike now and pay each month".
QUESTION 12:
“Why should I save my allowance?”
Answer to Child: Explain that saving helps them buy bigger things they might want in the future, like a bike or a summer job.
Example for Child: “Imagine saving for a new game. By not spending on smaller things, you’ll be able to afford the game sooner". This helps teach your child about money management.
QUESTION 13:
“What does ‘interest’ mean?”
Answer to Child: “When you put money in a bank, it can earn a little extra as a thank-you for saving.”
Example for Child:
“If you saved $10 and the bank gave you $1 extra after a while, that’s interest!”
QUESTION 14:
“How much do things really cost?”
Answer to Child: Share the cost of basics, like groceries, and explain how it adds up over time. “The price of things like food, clothes, and bills adds up and needs careful planning.”
Example for Child:
“If one meal costs $10, imagine how much food costs for the whole month!”
QUESTION 15:
“Why do we pay taxes?”
Answer to Child: Taxes help fund things we use, like schools, parks, and roads. “Taxes are like a group contribution that everyone makes to help our community.”
Example for Child:
“It’s like if everyone in your class chipped in a dollar to buy a new soccer ball for recess.”
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AGE GROUP D: 15-18 Years Old
QUESTION 16:
“Why is credit important?”
Answer to Child: Credit helps people borrow money for big purchases and build a reputation for paying it back, which is crucial in financial education.
“Good credit shows banks you’re responsible, so they’ll trust you with bigger loans in the future.”
Example for Child:
“It’s like if you always returned borrowed books on time; people would trust you with more valuable things, leading by example in responsible borrowing.”
QUESTION 17:
“What’s the difference between saving and investing?”
Answer to Child: “Saving keeps your money safe while investing helps it grow over the years.”
Example for Child:
“Saving is like keeping a seed, while investing is planting it so it grows into a tree.”
QUESTION 18:
“Why can’t we just print more money?”
Answer to Child: Printing more money would make things cost more and affect our understanding of money management, emphasizing the importance of money basics. “If everyone had a lot of money, prices would rise, making it harder to buy things, which is why understanding money basics is important.”
Example for Child:
“If your whole class had candy, it wouldn’t be as special, and people would want more to feel special.”
QUESTION 19:
“Why do some people struggle with money?”
Answer to Child: Sometimes unexpected costs make it hard to manage money and develop good money habits. “Everyone’s financial situation is different, and sometimes life costs more than we can save, which is why it's important to teach your kids about budgeting.”
Example for Child:
“If you had to replace a broken bike, you’d have less to save for other things.”
QUESTION 20:
“How can I be smart with money?”
Answer to Child: “Learning about money helps you plan for the future and make wise choices.”
Example for Child:
“If you want a special trip, saving little by little will help you get there, which is a smart money habit.”
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THE IMPORTANCE OF TEACHING KIDS ABOUT MONEY MANAGEMENT AND FINANCIAL LITERACY
Answering kids' questions about money in ways they understand helps build their financial literacy and prepares them to start forming healthy money habits, including how to set financial goals by setting aside savings. From explaining the basics of budgeting to teaching their kids about money, each answer builds toward a stronger foundation of financial education and resources for teaching. Teaching kids early helps young savers to make responsible choices later in adulthood, equipping them for eventual financial independence. So embrace their questions; each one is a good way to teach kids to foster lifelong financial skills.