The key to building generational wealth isn’t just money—it’s knowledge. Knowing how to teach kids about money is crucial for creating lasting financial success. Why? Even if you accumulate significant wealth, your children and grandchildren will need the skills to manage, grow, and sustain it.

Consider this startling statistic: 90% of wealthy families lose their wealth by the third generation. By teaching a few simple yet essential financial literacy lessons, you can empower your kids, grandkids, and even spiritual children to thrive financially.

How to Teach Kids About Money: 10 Financial Literacy Lessons

It is never too early to start teaching financial literacy lessons. That said, some lessons will resonate more with young children, like budgeting and saving, while topics like interest, investing, or real estate may be more appropriate for teens. Below are ten critical lessons to equip your kids with financial wisdom for life.

1. How to Build a Budget

A budget is the foundation of financial success. Teaching kids how to track their income and expenses is a great starting point. Encourage them to create a budget for their allowance and/or job income, and share your family budget with them so they understand how much things cost. 

• Saving: Explain the importance of setting aside money for the future. For younger children, use visual tools like jars or envelopes for savings, spending, and giving.
• Smart Spending Habits: Help them distinguish between needs and wants. Show them how to prioritize essential expenses and plan for treats rather than impulse-buying.

Tools to help: How to Create a Biblical Budget: 5 Keys to Mastering Personal Finance Basics 

2. The Cost of Debt

Depending on how you use it, debt can be a tool or a trap. Teach kids how to borrow money and how interest grows over time. That way, they will know the true cost of decisions such as whether or not to take out student loans or finance a car.

• How Interest Works: Use real-life examples to show how borrowing money can lead to paying back significantly more over time (bad debt) or earning more with compound interest (good debt).
• Practical Lessons: With older kids, simulate a loan by “charging interest” on an allowance advance to illustrate the cost of debt.

Tools to help: The Best Way to Get Out of Debt: 9 Steps to Success

3. Generosity

As Christians, generosity is what building wealth is all about. The earlier your kids understand this lesson, the better! Teaching generosity early cultivates gratitude and a healthy relationship with money. When renowned businessman R.G. LeTourneau was a young man, his parents taught him to tithe 10% of the income he received from his paper route to the church. So, he devoted a dime out of every dollar to God. Fast forward several years, and R.G. gave 90% of his multi million a year earnings to churches and philanthropies. Starting generous habits from a young age can make a huge difference! 

• Tithing or Giving: Encourage kids to set aside 10% of their money to give to church or a cause they care about. Explain the concept of giving and receiving–that God can make their 90% more than their 100%!

Tools to help:

• 25 Bible Verses on Giving

• Free Money Mastery Devotional: Fill out the form below to get a two week devotional to go through as a family!

4. How to Invest in Themselves

The first thing anyone should invest in is themselves. A key financial literacy lesson is teaching kids how to pursue personal growth and create a lifestyle of learning. Teach kids to focus on increasing their value through education, skills, and good habits.

Explain that money is attracted, not pursued. If they become the kind of people they should become, the right people and opportunities will be attracted to them.

• Learn Together: Pick a book or course to go through together, or commit to learning the same skill. As you progress, be sure to celebrate your milestones!
• Reward Good Habits: For instance, you could pay interest for completed chores, reward learning achievements, or do something fun together every time they finish a book.

Tools to help: 10 Ways to Invest in Yourself in 2024

5. Assets vs. Liabilities

One of the most important lessons is understanding the difference between assets (things that put money in your pocket) and liabilities (things that take money out).

• Passive Income: Teach kids that they can save for a toy or fun activity by using money they earn from an asset. For example, have them start a lemonade stand and use profits to pay for something they want.
• Big Purchases: Introduce older kids to the idea of buying assets like stocks or real estate to fund significant future expenses like a car.

Tools to help: Assets vs. Liabilities: How to Stop Wasting Your Cash on Trash

6. The Law of Conversion

Explain how money can “convert” into other forms of value. The Law of Conversion is about making things more valuable! It means you can turn something worth less into something worth more. Instead of just spending money, show kids how to use their money wisely—like buying things that grow in value or help us earn more in the future. It’s like planting a seed that grows into a big, strong tree instead of just picking a flower that won’t last long!

For example, show them how investing time and resources into a project now can lead to financial growth later. I showed The Law of Conversion to my grandson, Brayden, when he was eight years old. We went out on a Saturday morning and found a garage sale that had an old, broken-down red wagon. It was rusted over and missing a wheel. We paid $2, and the hunk of junk was ours. 

We took the wagon home, and I found some black and red paint in my garage. We bought a new wheel. Then, Brayden did a lot of the sanding and painting. When it looked like new again, we put it out in the driveway with a ‘for sale’ sign. We were able to sell it for $20! Brayden and I made a handsome profit, and all we had to do was spend $2, buy a cheap wheel, and put a little sweat equity into the project. 

7. Business Basics

Encourage entrepreneurial thinking by introducing kids to the basics of starting and running a small business.

• Side Hustles: Ask your kids to think about small business ideas, like selling baked goods or handmade crafts.
• Marketing 101: Teach them how to promote their product by creating simple ads or leveraging social media.
• Profit and Loss: Help them understand how businesses track revenue, expenses, and profits by creating a mock profit and loss statement.

Tools to help: 30+ Side Hustle Ideas to Earn Extra Income

8. Real Estate

Introduce older kids to the fundamentals of real estate as a wealth-building tool. If you own investment real estate, let them in on the process of fixing and flipping, property management, or the monthly finances. Consider renting out a room in your home, basement, or ADU to explore AirBnb, VRBO, or other short-term rental strategies together.

At our Real Estate Workshops, real estate attorney Bill Bronchick often shares the story of a fourteen year old who bought and a flipped house in Florida – your kid or grandkid could do the same!

Other topics to explore:

• Renting vs. Owning: Explain the pros and cons of renting versus owning property.
• Mortgages: Break down the concept of a mortgage and how people buy homes over time.
• Rental Income: Share how owning property can generate extra money through tenants.

Tools to help: Real Estate Investing for Beginners

9. Time Value of Money Through Investing

The younger you start investing, the better! A valuable financial literacy lesson is how your money is worth more today than tomorrow. 

First, explain the present value of money: what their money is worth today. For example, a ten dollar bill in your hand today is worth ten dollars. 

Then, explain the future, or time value of money. If you invest that ten dollars at an interest rate, it would be worth more money over time. An amount of money is really worth more now than it will be in the future due to its earning potential. 

Finally, show them the potential of their money using The Rule of 72.

The Rule of 72 explains how investments double over time. It states that you can divide any number into 72 and the answer will be the number of years it will take for your money to double at that interest rate.

If you want your investment to double in a specific number of years, you can reverse the Rule of 72 by dividing the number of years into 72. Your answer will be the interest rate that is required for your money to double in that time. This simple formula is an easy way to determine the value of an investment!

How to Open Roth IRA for Minor

As a parent, you can invest in a Roth IRA for your child as soon as they are born. All you have to do is create a business and “hire” them through that business, which could be as simple as putting them on your logo and paying them a modeling royalty. Then, open up a custodial Roth IRA in their name. Let’s say you pay them $200 in wages a month starting when they are born, and they invest them in their Roth IRA, which happens to earn a 10% return. By the time they are 18, they will have $109,438.02 in their investment account! If they keep up that pace, they will have over 7.2 million dollars (tax-free!) by the time they are 60. That’s a pretty good retirement! 

For example, let’s say that your goal is to get a 12% return on your Roth IRA. If you divide 72 by 12, you get six. Your investment will double in just six years. Imagine how powerful it is if you start investing from a young age and hold your money for ten six-year cycles. Your money would compound through those ten cycles, growing exponentially with each doubling!

To really see the power of the time value of money, check out what happens if your kid waits until they are 25 with a modest paying job to invest $200 a month at a 10% interest rate. Instead of 7.2 million dollars at age 60, they’ll have $650,000. That’s still much better than nothing, but imagine the generational legacy you could start in your family if you started this when your kids or grandkids were born.

10. Generational Wealth Mindset

Above all, the goal of how to teach kids about money is to develop their character and capacity to do good in the world. Instill the mindset that true wealth is not just financial—it is the wisdom and generosity we pass on to the next generation. Teach and show them that money is a tool for transformation, and you can use it to care for others, your community, and the world.

Tools to help: 10 Tenets of Biblical Generational Wealth

Teaching financial literacy lessons takes time and creativity, but it’s one of the most valuable gifts you can give your children and grandchildren. When they learn to manage their resources wisely, they are empowered to make a positive impact on their own lives, their communities, and future generations. Start today, because it’s never too early to teach your kids how to build a strong financial foundation.