Most money experts will tell you that the number one money skill is investing. It’s the best way to make a lot of money doing the least amount of work. In fact, you can make a lot of money doing almost zero work. In the United States, it’s often better to own a company than work for a company.
Yes, it’s great to save money. You’ll need to save money if you are going to invest it. However, if you save money and stick it under your mattress, you’ll be missing out on potentially millions of dollars over your lifetime.
Yes, it’s great to be frugal. If you spot a bargain, you’ll have a much better chance to be financially independent at a young age. If you are frugal, you’ll be able to save more money to invest it.
Yes, it’s great to earn money. When you earn a lot of money and are frugal, you’ll be able to save a lot of money and invest a lot of money. Everything plays a role, but investing is where personal finance becomes fun. Where else can you turn one dollar into $32 by doing nothing?
We’ll get to that $32 example at the end. For now, let’s focus on how to teach kids about investing at the various stages of their lives.
Teach Preschoolers about Investing
It may sound silly to teach preschoolers about investing. In a lot of ways it is. At this age, kids have the concept of money buying things like goods and services. However, they don’t have the concept of money making money.
Plant some seeds and water them every day. As the seeds grow into a plant the kid will see the “investment” and the results. If you have a garden, you can show how a few seeds can grow into a lot of real food. When I was a kid, my parents grew tomatoes and cucumbers. We always had tons – more than enough to give away to neighbors.
Read the Little Red Hen. My kids read this in Kindergarten – it was part of their curriculum. Even though they are in the 2nd and 3rd grades now, I still use the lessons in the book. You do the work and you get the reward. The Little Red Hen invested her time and effort and got to enjoy the cornbread.
Teach Grade Schoolers about Investing
For kids in elementary school, my best recommendation for teaching investing comes from The First National Bank of Dad. Author David Owen gives his kids extremely good interest rates to emphasize the point of compound interest. Nowadays, banks fail kids, they are boring locking up money in their vault returning barely more than a zero percent interest rate.
You might also consider explaining the very basics, such as “What is a stock?” This video covers it well in less than 5 minutes:
Teach Tweens about Investing
The options to teach investing around really expand around the ages of 10 to 14. Personally, I love MoneyTime. Over the last couple of years, kids have gotten a lot more experience learning online. It’s certainly not what we wanted and far from ideal. However, it’s very rare to find an in-person class on investing for kids. MoneyTime is a great way to get experts to teach your kids money.
If learning from a computer course isn’t for you, you are not alone. I know I learn best by doing. That means that I have to get my hands dirty and invest. This is a great age to open up a custodial brokerage account and buy some index funds.
Teach Teens about Investing
Unlike younger kids, teens can work real jobs and make a good amount of money. It’s a perfect time for them to invest in a kid Roth IRA. Since their retirement is fifty years away, every dollar invested will grow many times.
This is a great age to introduce them to Rule of 72. The rule of 72 is a way to estimate how fast your money will double. You divide 72 by the interest rate to get the number of years it takes for the money to double. If you were able to earn a 12% interest rate, your money would double in 6 years (72 divided by 12% = 6 years).
I like to assume that money will double every 10 years. That’s a 7.2% return, which is usually a safe estimate. With 50 years of compounding, every dollar can double 5 times. That means that every $1 becomes $2 (age 25), which becomes 4 (age 35), which becomes 8 (age 45), which becomes 16 (age 55), which becomes 32 (age 65).
Turning $1 into $32 is magical. A kid would “only” have to invest $33,000 one time at age 15 to have a million dollars in his retirement account at age 65. Of course, it’s very hard for a 15-year-old kid to earn and invest $33,000. However, all is not lost. A kid could continue to invest for several years and keep seeing that compound interest grow after age 65.
How to give your child an allowance? That’s easy, you just hand them money, right?
While the physical act of giving an allowance is easy, there’s more that you may want to think about first.
Should you Give Your Child An Allowance?
There’s no right and wrong answer here. There are many kids who never got an allowance growing up. Many are now parents and say, “Hey, I grew up okay.” There’s nothing wrong with that.
My opinion is that managing money helps your child begin their financial education. They get to start to make choices of what’s important to them. They learn to plan and save for more expensive purchases.
Getting access to money is the first step in their financial journey. I think it’s easier to do it through an allowance, or payment for extra work around the house. Otherwise, they may have to wait until they get a job like a paper route, lawnmowing, or babysitting.
Earning a Basic Allowance
I believe it’s important for kids to understand that they earn the allowance. They have to do some chores around the house. It could be making their beds, doing laundry, cleaning dishes, whatever you feel is most appropriate for their age group.
I believe children should also be given the chance to earn extra money for extra work. In our house, that means cleaning up after the dog or making him breakfast. It isn’t always clear what should count as basic work and what should count as extra work. This is a case where I think you just have to use your best judgment.
How Much Allowance to Give Your Child
The general rule of thumb is that every child should get a weekly allowance equal to their age. My 6 year old would get $6 and my 8-year-old would get $8. When I first read that, it seemed like too much. I cover many of their expenses… why do they need so much money?
However, the $1 a year rule of thumb will make more sense when you read the next section. When you budget that allowance it won’t seem like so much.
Teaching Your Kids to Budgeting Their Allowance
There are three basic things that kids can do with their money. They can give it to someone in need. They can save it for something in the future. Finally, they can spend it.
Many people get physical jars of Give, Save, and Spend so that the allowance can be divided out.
I believe it’s important to start with the amount of money to give. As parents we don’t focus on giving. However, we have to cover basic needs like housing, transportation, and food. We also have to pay taxes. Kids have life good. They don’t have to pay any of those.
They can afford to give money. I think it’s valuable to get them thinking about others who are less fortunate, especially if they are as fortunate as my kids are.
The rule of thumb is to put one-third of the money in a giving jar.
My favorite jar is the saving jar. I’ve always been the type to save my Halloween candy for a rainy day. The comfort of having those “savings” meant a lot to me.
Saving money is important in three ways. A child can learn that they can save money for something extra special. A child doesn’t necessarily need an emergency fund, but saving lays the early groundwork for that. Finally, savings are necessary to take the critical step towards building wealth: investing.
Spending is very important. Children can learn a lot by spending money. They may even learn more when they make “mistakes” or realize that maybe they should have spent differently.
Give, save, spend… you have noticed that the math is easy – simply divide the allowance by three. If it doesn’t divide easily, I’d put the extra dollar in the saving jar.
When Should Give Your Child An Allowance
If there’s one theme to remember with everything when it comes to allowances, it’s that there are no firm rules. My 6 and 8-year-old don’t get an allowance yet. It’s not that they don’t deserve one or that we don’t believe they should get one. We’re simply very busy with a lot of other activities between karate, Boy Scouts, archery, and homework. The days go by so fast that we never get to everything.
I hope to get them started on an allowance in the next couple of weeks. I want to have a plan of standard chores and bonus chores. I’m also looking at getting this spend, save, give jar. We might also make due with a few mason jars and some rubber bands to hold them together.
Final Allowance Thoughts
Much of this article is based on my gut and only a little quick research into the best way to give a child an allowance. Like everything in parenting, I’m learning as I go. I’m sure there are more than a few things that I haven’t thought of. If you happen to have more experience or even different gut feelings, I’d appreciate it if you drop me a line in the comments.
The tween years (10-13) is the most exciting time to teach a kid about money. It is perfect for four reasons:
Tweens have enough math skills to handle some difficult concepts.
Tweens are old enough to want more expensive things. This means they’ll need to save money.
Tweens are old enough to make money on their own through side hustles.
Tweens still look up to you and don’t have the freedom to ditch you for their friends just yet. In other words, you can still influence them.
Tween math and money skills
When I was a kid, the concept of compound interest got me hooked on personal finance. Back then banks were paying interest rates between 6-8%. The act of saving money was the same as investing it. Banks aren’t paying that kind of interest nowadays, but you can open up your own bank and subsidize those great interest rates.
When I introduced my 8-year-old to MoneyTime Kids it was a little cruel. It’s designed for tweens between the ages of 10-14. While he could understand many of the concepts the math was difficult and he wasn’t able to take full advantage of it. He’s nine and a half now and I think that 18 months has made a big difference. He went from only knowing half of his multiplication tables to multiplying 3 digit numbers and long division.
Tweens want more expensive things
There are still some times that my 8 and 9-year old boys are fine with a cheap knick-knack. However, more and more they are becoming more interested in expensive things. It started with the Switch and now it is games for the Switch. Fortunately, the Pokemon games they like tend to have a lot of replay value.
Soon my kids will be hanging out with friends more and spending money with them. I’m sure they’ll want to fit in with the latest shoes and clothes. While we’ll always get them certain shoes, if they want the best designer brands, they’ll have to cover some of the cost. That’s an opportunity for them to learn about saving and budgeting.
Tweens and side hustles
Tweens aren’t old enough to work “in the real world.” I had to wait until I was 16 before I could work at a fast-food restaurant. I saw that Mcdonald’s was advertising for kids age 14 to work there.
Fortunately, tweens can do some side hustles. Babysitting and mowing lawns is perfect for many 12 and 13-year-olds. This is a good way for them to earn significant money.
Tweens will still listen to parents – some times.
I know that when my kids are teens they’ll have better things to do than listen to me give them money lessons. They may not agree with me, but at least there’s a chance that they pay some attention.
Final thoughts about tweens and money
There are so many different directions you can go to teach your tween about money. Beyond what I already included in the article, this is a great age to give them insight into the family finances.
Note: This article may sound like an advertisement, but it isn’t. I’m simply a fan of the Cartoon Network show Teen Titans Go!
I’ve worked from home before my kids were born. It was easy for me to watch television with my kids. When we discovered Teen Titans Go! it was simple self-preservation for me. I was desperate for a new show. I had enough of watching the “Fat Controller” berate Thomas the Tank Engine and his friends for not doing their job, while ignoring the employees who are on the train.
While we’ve tried a variety of other shows, one of the first ones that stuck was Teen Titans Go!
For those who don’t know the Teen Titans Go! characters, they are five teenage superheroes. However, instead of saving the day, they are usually doing something silly. For example, they find out what the Tooth Fairy is really doing with all our teeth. (Spoiler: He eats them!)
Each of the episodes below, I’ve watched at least 3 times. Some of them are probably in the double digits by now. Kids love reruns, right?
There are over 300 episodes of Teen Titans Go! The episodes cover a lot of mundane adult topics. For example, the episode tonight is about trademark law. There’s an episode tomorrow about health insurance. Clearly, these are the kinds of topics that weigh deeply on your 9-year-old’s mind. Don’t worry, kids love it because it is so silly. You’ll love it as you nod and say, “It’s so true!”
At least one of the writers is a big fan of personal finance. The Teen Titans have about a dozen episodes that center on personal finance topics. Let’s dig in and see what money lessons we can learn from them.
Top Personal Finance Lessons from the Teen Titans
Money is Whatever Currency We Choose
In the episode Two Bumble Bees and a Wasp, Robin (of Batman fame) tries to teach the rest of the gang about money:
“Money is not to be wasted on things that bring you happiness and joy! Money is to be hoarded until you have enough money that your money makes more money.”
I’m not sure too many children are going to pick up on that last point, but it certainly caught my attention.
Turning to a cartoon representation of money we get this lesson:
“I am paper, but I am also money. All I am is an agreed-upon representative of credit. Something you trade for goods and services! So I can be anything.
They go on to ask whether money can be a pineapple. (Actually, pineapples have historically been used as money.)
After Beast Boy insists that money is evil and rips up a dollar bill, Robin decides not to pay anyone until they respect money.
Flash forward to a day later and Beast Boy has a pizza. Robin would like a slice and offers to buy one with a dollar. He soon learns that the rest of the team has agreed that the new currency is bees.
Yes, bees. I told you it was a silly show.
It’s a good episode to build a foundation about how money works. It’s also useful to start a conversation about cryptocurrency.
In the episode, Think About Your Future, Robin announces that he’s buying all the Teen Titans expensive jackets.
Raven has an epiphany:
Raven: Aren’t you guys worried about wasting money?… So we have some later? Starfire: But the later is not until the later. Currently, it is the now. Raven: I know, but aren’t we going to get old one day? Beast Boy: Yeah, but later. Cyborg: And it’s the “now” right now. Raven: Oh, okay, that makes sense.
So they buy the jackets. And then they celebrate with pizza, but not just any pizza it’s “extra-large, extra-extra cheese extra-extra-extra pepperoni, plus “large jugs of the soda” and “a gallon of ranch dip.”
Raven once again warns that perhaps they should eat healthier to avoid health problems later. Again, the rest of the gang doesn’t care about “later.”
The scene ends and we jump ahead to 70 years later.
The gang is old with many health problems. They can’t afford their medications because they don’t have any money.
They suddenly realize that Raven was right. So they do what anyone would do. They build a time machine and send their old selves back to talk to their teen selves into making more sensible choices.
That brings us to this clip about learning how to eat healthy, starting a 401k plan, and an explanation of compound interest.
Everything goes perfectly… too perfectly. The rest of the episode isn’t educational, but it is entertaining.
No cartoon is dumb enough to create an episode around a boring topic such as building equity from rental properties. No cartoon except for Teen Titans Go!
With episode after episode about silliness, the writers created, Finally a Lesson.
The best part of the episode is Robin explaining rental property and how to build equity:
If you can’t watch it, here’s Robin’s explanation:
“Equity is the amount of a property you truly own. It’s the difference between your loan balance and your property’s market value. If you sold your property and paid off the bank, the value of your equity is what you’d walk away with. When you build equity, you increase the net value of your asset. One way to do this is by paying off your mortgage.”
The episode takes them through all the steps. First, they find the right property – a run-down apartment building. Then they get to the financing, which involves getting 20% for a down payment. They do it the way that “everyone else does” ask someone else for that 20%.
Then we get to the other fun parts of securing a rental property… the loan process. There’s an explanation of credit scores, securing the right lender, filling out the paperwork, and getting a good faith estimate.
The gang is starting to get very bored, but Robin assures them they’ll be very satisfied in the end. For now, they have to turn their attention toward fixing all the problems with the building.
There’s a fun twist, but finally, Robin gets us to the satisfying end, “It takes decades to actually build equity, but in 30 years, it will provide a modest cash flow to pay for our numerous old people medications.”
For a cartoon geared towards kids, it’s as good of an overview that you’ll get. As my kids have gotten older and started to ask why we have rental properties, I just cue up the episode on the DVR (or Hulu) and ask if they have any specific questions.
In the episode Who’s Laughing Now Beast Boy gets underarm hair, signaling that he is becoming a man. That means finding his spirit animal, which is “like college for dudes who turn into animals.”
With that, we are off on a Teen Titans Go! tangent questioning the value of college.
Raven: Uh, isn’t higher education usually really expensive? Robin: Yes, but if he chooses the right spirit animal it will open a lot of doors for him. Beast Boy: That’s right, Robin, my man. And then me and my hairy pits will be on easy street. Cyborg: Whoa, whoa, whoa. While spirit animals are great, they aren’t necessarily for everyone. I’d hate to see you saddled with so much debt and in this economy, whoo! Personally, I think spirit animals have just become big business. Focus more on sports and partying, than education. Now with the money you’d spent on a spirit animal have you instead considered investing in, say, a rental property? Or what about looking into a training school?
Beast Boy: Whoa, check out those bears. Nice. That’s what I want my spirit animal to be! Cyborg: But the cost of being a bear is astronomical. Maybe you should find a two-year community spirit animal, like that old donkey. Then transfer to the bears. In the end, you get the same spirit animal.
Beast Boy gets accepted by the bears and talks to his friends.
Robin: But how are you going to pay for this? I got some government loan of salmon and honey. Raven: Whoa, that’s a lot of salmon and honey. It will take forever to pay that back. Beast Boy: Once I’m a bear, I’ll be rich. Cyborg: While data shows having a good spirit animal leads to a better paying job, there’s no guarantee those spirit animals are going to give you the experience you need to make it in the real world.
When things don’t go well with the bears, Beast Boy realizes that he made a mistake.
Beast Boy: I think you’re right, Cyborg. I should have bought a rental property. Cyborg: Booyah. Told ya. Raven: Well, consider it a lesson learned.
The last line is a reference to the rental property episode, Finally a Lesson that I covered above.
The episode goes off on a silly tangent, like all the episodes, before circling around to one last wise thought.
Cyborg gives a last shaming to the bears after defeating them:
That’s what you get for convincing people to spend thousands of dollars just to learn things they could figure out for free. Leave them with an amount of debt and a useless piece of paper that reads, “Diploma.” They’re pedaling a dream that doesn’t exist anymore.
In the episode Teen Titans Vroom, we get another lesson about college debt and career choice. This time it comes from villain Dr. Military. Dr. Military isn’t really a bad guy though, he’s a victim of the student loan system. Let’s start with this witty banter about his career choice:
Dr. Military: Actually, I’m a… veterinarian.
Titan: Everyone knows that’s not a real doctor.
Dr. Military: That may be the perception, but it took me ten years to earn my veterinarian degree. And statistically, it’s more difficult to get into veterinarian school than med school, which means I had to work twice as hard for half the respect and money of a so-called “real doctor.”
Titan: Sounds like you should’ve been a people doctor, bro.
Dr. Military: Enough. If I wanted to listen to someone criticize my career choice, I would have called my parents.
Now let’s get to the root of Dr. Military’s evil doings:
Titan: Please, give up the evil scheme, Dr. Military. You do not have to do this.
Dr. Military: Actually, I do. I need the ransom money to pay off my massive school loan. The high cost of veterinary school combined with my low salary as an animal doctor has put me in quite the financial bind. My evil plan is the only way out of this crushing debt.
My 8 and 9-year-old boys don’t know much about college yet, but this will be something we can revisit as they get older.
How Taxes and the IRS Work
In Fat Cats (Season 7, Episode 22), the Titans win a big cash prize, but then learn that they have to pay taxes on it. This allows the writers to explore what a tax-free world looks like. It isn’t pretty:
It’s a great introduction to kids about why we have taxes.
Pyramid Schemes Will Make You Broke
I almost didn’t include this episode, but my wife mentioned that I should. I know quite a bit about MLM/Pyramid schemes and I didn’t feel this episode addressed the topic very well. However, many adults can’t understand pyramid schemes, so I can’t expect the Teen Titans to teach kids this complex topic well. As usual, my wife is correct and it’s just my own extensive writing that artificially raised expectations.
The Teen Titans Go actually have a very good description of a pyramid scheme in this 2 minute clip:
The key money quotes almost always come from Robin and this is no different:
Robin: This is a pyramid scheme!… Not that kind of pyramid! A pyramid scheme is an unsustainable business model, that promises payments to participants, based on the amount of additional people they enroll in the business, instead of focusing on the sale of goods or services to the public… As you can see here, the exponential growth of the “business”, will eventually cause the entire operation to collapse, leaving the participants at the bottom of the pyramid bankrupt, while those at the top walk away rich…
Starfire: I do have the question. Did the mummies build the pyramids?
Robin: There are no mummies! It’s not a literal pyramid!
Almost everyone in MLM doesn’t understand this concept and still go meetings to learn how to show the plan or enroll people in the business. In fact, the people who make the most money in every MLM are the people who have the largest downlines of enrolled people, not sales of goods or services to the public.
Beast Boy joins and makes Pyramid Scheme money which leads to this awesome song:
Of course, the rest of the gang (sans Robin) want all the money, so Beast Boy enrolls them as “money deputies” with himself as a “money sheriff.” Robin warns them, “You are participating in a fraudulent business” and “This pyramid scheme is going to leave you broke, Titans.”
Everything spins out of control and gets mixed in with mummies wanting their money back and the Teen Titans not being able to deliver. They get out of it with some silly stuff that doesn’t make sense, but by this point, they’ve addressed the topic fairly well.
I really don’t know how much financial information my kids are absorbing from this, but I know that they remember nearly everything they see.
I’ve watched my share of cartoons and I can’t think of any other general cartoon that covers half of the financial topics in Teen Titans Go! There are still a lot of episodes that I haven’t seen, so I might have missed a few money lessons.
Recently, I wrote about how to teach your preschooler about money. It included a lot of basic things like recognizing coins have different values. Once they get to elementary school, they can start to tackle bigger money issues.
Before I get into the money part, I need to address one elephant in the room. There doesn’t seem to be a good name for children ages 6-10. They aren’t preschoolers and they aren’t tweens. I found a couple of places calling them grade-schoolers, so I’ll go with it.
One of the great things about this age is that you can do so many things that you couldn’t for a preschooler. Let’s look at some of the things:
Savings and Spending
By grade school, kids often have an allowance. That means they can make more of their spending decisions than a preschooler. My kids started to want more complicated things. Sadly, the days of decorating a big cardboard box like a rocketship and flying to the moon isn’t enough. They wanted to save up for a Nintendo Switch and the latest Pokemon games. Now I spend most of my time trying to pry them off of video games. That’s a topic for a different blog or article.
Unfortunately, with the example of the Nintendo Switch and Pokemon games, we couldn’t shop around and try to stretch a dollar. We got one a few months before COVID hit and considered ourselves lucky that we got one at all.
Grade schoolers can do extra chores around the house to make some extra money. My kids help out with the dog boarding business that I run at home. It’s only fair that I give them some money. Unfortunately, it’s uncommon that kids can reasonably help in your professional life.
There are other things that kids at the upper end of this age range can do. They may be able to babysit a younger sibling for a short time. They may be able to bake some pastries for a bake sale.
A lemonade stand may sound antiquated but it can work. Our area has limited the places where lemonade stands can be. I guess they didn’t want kids pestering the tourists. We run a virtual lemonade stand using a version of a lemonade stand game I played as a kid. This is a great way for kids to about supply and demand.
Other Financial Education
This age group is a great time to teach kids money with televsion. Some episodes of Teen Titans Go make learning about real estate investing fun. Other shows like Warren Buffett’s Secret Millionaire Club are greatly focused on personal finance.
Additionally, you can start to share the family finances with your kids. You don’t need to share everything, but you can share some of the necessary expenses that the family has.
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I am not a financial adviser. Kid Wealth content is for educational purposes only and the information should not be construed as professional financial advice.