How I Teach My Kids To Invest For Financial Independence

Studies showed the money beliefs of our kids are settled by age 7! They start to grasp how we treat money at the early age of 3. I knew I want to teach my young children how to invest for financial independence and give them that strong foundation of knowledge right from the start. But it seemed impossible at such a young age. She is just too young, right? Wrong. My little girl had to show me that she understands much more than I expected at the age of 4.

In this post I will share with you the best financial education tools I use to teach my daughter (age 4) about investing for financial independence that will surprise you. I will first focus on younger children aged 4-8. Then, I share with you tips for kids at the age 8-12+ that work just as well for young adults. Let‘s start.

First, I will show you our favorite money board games and some truly life-changing kids books. Those really help those little brains of the next generation to become money savvy kids. Then, I will share with you the 3 fun money activities that had the biggest impact on my little girl. One is a simple family activity, the other two are powerful money exercises for everyday life to teach money management. In detail: I will share our own version of the prominent piggy bank exercise where I like to match my daughters’ savings. Also, I will show you the pocket money exercise but in a bit different way. I love combining such a money lesson with using visual savings trackers. Let’s see exactly how you can take advantage of those too.

Top Board Games And Favorite Money Books – Ages 4-8+

With every game or book we had the same experience: we needed to add 1-2 years to the recommended age to make it work for us. For example, a book recommended from age 3 is a great read from age 4-5. So, here are our favorite board games and books for around the ages 3-8. Those can really help your child figuring out what those right financial decisions are, how to invest and manage money in general:

1. My First Monopoly – board game, age 4+ years
2. Monopoly Junior – board game, age 5-8 years
3. Monopoly Classic – board game, age 8+ years
4. PayDay – board game, age 3+ years
5. Pop to The Shops – board game, age 5-9 years
6. Shopping List & Shopping List Extras – board game, age 3+ years
7. Money Plan – book, age 3-5 years: Mia and her mother go on their weekly grocery shopping trip on Saturday morning. When Mia sees her favorite treat, her mother denies. But even more. She starts talking about the why behind: money management. Wonderful read in rhyming verse and a very colorful book.
8. Save It! – book, age 3-5 years: It‘s one of the famous „money bunny books“ – a series of 4 books each focusing on another element of basic financial literacy: saving money, earning money, spending money and giving money. The book „Save It” tells the story of the little rabbit Honey who has 5 siblings. When she takes care of them she earns 2 carrots. Honey has a goal: a bag full of carrots to pay for his dream of having her own little space just for herself. But therefore she needs to be patient and resist the urge to give herself a treat along the way.
9. The Four Money Bears – book, age 5-8 years (in our opinion as there‘s no age recommendation): It has beautiful big illustrations with little text on each side. The book‘s 4 bears – spender bear, saver bear, investor bear, giver bear – shows what happens if you only save or spend or give your money away. It teaches the importance of money management and balancing it all.
10. A Boy, a Budget, and a Dream – book, age 4-8 years: Kass already budgets her money as a little girl to pay for what she wants to buy. Not so her brother Joey. He likes spending. But he has a dream and asks Kass to help him. They plan out a budget together and Joey starts saving until he can buy his dream.
11. Rock, Brock, and the Savings Shock – book, age 4-8 years: Adorable book and the only one explaining the power of compound interest at such a young age. It tells the story of twin brothers in rhyming verse. Rock, a spender, and Brock, a saver, were both given 1 $ per week from his grandpa for doing chores during summer break. He promises to double each $ saved. By the end of summer Rock was broke while Brock accumulated > 500 $. The book illustrates this compounding effect in tables and showed Rock‘s money make-over at the end.

Finance Schools And Top Money Books – Ages 8-12+

Here are our friends and colleagues top money books and finance schools for the ages 6-12+. Those offering age-appropriate lessons for kids about investing money and money management in general:

1. Investing for Kids: How to Save, Invest, and Grow Money – book, age 8-12 years: It‘s a practical guide how to start investing money into the stock market like opening up a savings account. But even more, it tells how growing money can pay for your dreams like early retirement. That is unique for a kids book.
2. Money and Sense: A Fun Guide to Financial Skills for Kids: Learn, Save, and Grow Your Wealth from an Early Age – book, age 8-13 years: It gives your kid a head start in financial literacy. It‘s a very engaging book including activities and challenges to try that are really fun. What I liked most were the stories about some remarkable kids achievements money-wise. Not only if investing money but especially when trying the entrepreneurial road. Also, it emphasizes the difference between needs and wants for spending money. Simply a unique book.
3. A Dog Called Money – book, age 9+ years: Kira is a 12-year-old girl. Her parents constantly argue about money and mostly have too less of it. One day, Kira finds an injured dog and takes him home. She is allowed to keep the dog until the owner is found who is a rich old man. The dog starts talking to Kira to her surprise. But only about money, giving advice and telling money stories he learned from his rich owner. So, Kira calls the dog money. She experience quite some adventures with Money. In the end, she helped her parents to get out of their financial struggles and started to build a small fortune on her own. Inspiring!
4. The „Learn Bright“ YouTube Channel offers financial literacy for kids
5. „KidVestors“ is a financial e-learning platform with curriculums for ages 6-18
6. MoneyTime offers online financial literacy courses for kids ages 10-14
7. BizKids is a show featuring money content from young entrepreneurs from real kids launching real businesses

Favorite Family Activity: Shopping With A List & Cash

I believe the easiest way to teach our kids about money is by showing them how to do so in everyday life. Simply make it a habit to somehow give money lessons each day. Talk, talk, talk about money and how to manage it. Then financial discussions are much more likely to happen when our kids are older and might really need it.

There is one simple but powerful exercise I LOVE using to teach my little daughter about the concepts of debt, budgeting and saving money in general. I take her with me when I go into the grocery store. She loves it. I recognized that she loves buying things. So, it‘s crucial to teach her how to do that in such a way that it doesn‘t break her bank when she will be old enough to handle that on her own.

This is exactly how we do shopping with a list and cash. First, we prepare our shopping trip. We put the bags into the car. I show my shopping list and my wallet filled with cash to my little daughter. I tell her „when the money is gone, there is no more money to spend.“. She waits with me at the checking counter line and then pays with my wallet. She takes the receipt and I explain why: I budget our money. That process provides her with hands-on experience of managing her money.

I also like to show my little one how to grocery shop. I explain that I compare the quality of products. The best quality wins the game. To lower the price I buy in bigger quantities and seasonal. Recently we started to only go grocery shopping at farmers directly. Things like oils, nuts or oats we order or buy from a local store.

However, a couple of days ago I had overspent while shopping with my girl. Sometimes I still have a hard time with impulse buying and I will reveal everything you need to know in the next articles about the 3 main triggers for impulse buying and the simple 2-step-process to fix it. So, I had put stuff in the cart that was not on my list. We were at the checking counter and the guy said „27 Euros please“. I had only 20 Euros with me. „I need 7 more please“. My little girl looked at me not knowing what she should do. I was about to grab my credit card. And then it hit me. No. That is not what I want her to learn. So, I asked the guy to put back a couple of items until we only have 20 Euros left to pay. The checking counter line became longer. I felt a bit ashamed. Finally, we could pay 20,05 Euros. Those 5 cents I found in a corner of my wallet. We went out to the car.

This day I truly understood that my little girl learns and copies how I treat my money. Fun fact is that I actually had a lot more money with me in another wallet. As she knew that, she asked „why did you not take that money mommy?“. I answered „Because I need that money to pay for something else honey. If I spend it now here I cannot buy that other thing anymore.“. On our way back she was so unusually quiet that I could almost see her through-thinking what just happened. From that day I intentionally showed her how to treat money well. Take that family activity, and when you feel like your kid understood the messages behind, go the next step. Start teaching how to invest money.

Setting Small Savings Goals First

For me, it took a long time to learn about the best ways of managing my money the right way. It should not only pay for my needs and wants but also for having a comfortable financial future. But therefore, I had to learn to live on less. That allowed me to save my money to then start investing this money.

The kids book A Dog Called Money I mentioned above explains this concept just perfectly. It talks about opening a bank account and a savings account as a kid, about investing money into the stock market (with friends) and much more. I had a good time reading it even as an adult and will definitely buy it when my daughter is old enough to read. It‘s just a great introduction to the concept of money in general and to the real value of money. It can teach your kid financial responsibility.

But if you’re like me, you haven‘t always been a mom (or dad) that saves money. Do you remember how you‘ve started becoming a saver? A great place to start is always to simply start small. If you set small savings goals first that just feels much more manageable. What that also does is allowing your child having that first sense of achievement. Your kid can work towards that small savings goal in a short period.

Typically kids get encouraged to first save towards a new toy or a special treat. I actually don‘t like that. Because what do I teach my kids? They save money to then consume that money for a thing. Why I don‘t like that is because kids nowadays are almost drowning in toys and books and stuff in general. So, I don‘t want to encourage my daughter to save towards another new barbie – she already has 10 dolls and barbies but only plays with 1 or 2. Instead I want to encourage her to focus on those 1 or 2 dolls she loves playing with AND saving towards an experience she wants to enjoy. There is one way that worked out perfectly for that money lesson.

The Piggy Bank Exercise & Matching Savings

Open 2 savings accounts. Do it with your kid. Here‘s how we‘ve done it. I took 2 piggy banks we‘ve got as a present for my two daughters. But as one is still a baby she won‘t mind taking her for this exercise. Funnily the pigs are dressed like super heroes in pink and blue.

In 1 piggy bank I saved towards my daughter‘s and mine short-term savings goal. We wanted to consume that money for a trip. We started saving 5 Euros a week so that over the course of one month we had saved up 20-25 Euros. You can also do this exercise over the course of 1 year to save up 500 Euros. But I found that especially small kids need to have short-term savings goals to first learn about this money concept. This allows your kids to experience a future success and build confidence in their ability to reach financial goals. Also, they learn to deal with delayed gratification.

The 2nd piggy bank is for long-term savings. I thought that will be very challenging for her but it turned out it wasn‘t. I told her that in this piggy bank we let the money make more babies over time. For each 5 Euro we put in each week we will get another 5 Euro in return. But we will have to wait and constantly feed our pig. So, I started matching savings. My little daughter took it very seriously. She constantly checked her piggy bank and asked when will be Monday again. She saw her role in checking that piggy bank every Monday morning and putting those 5 Euros in. It was almost like she had got a Tamagotchi – some of you who are old enough might remember that little kids toy.

We committed to constantly raise the amount we save in that piggy bank. We didn‘t know yet how. But we wanted to figure out the steps that are necessary to take in order to achieve our long-term savings goal. So, what was the goal?

My little daughter always wished to just be together with mommy for a couple of days and do whatever she wants. Mostly that was eating ice cream and sweets. She is a sweet one and has once climbed on the kitchen counter to reach her sweets. However, I told her that therefore I had to stop working. I thought what a wonderful chance to show my little one that we can free up our time from work if we just have enough money in the (piggy) bank to support our living expenses during that time.

The Pocket Money Exercise

I‘m sure the age will come when I start giving my little daughter pocket money. She then could use this to do the piggy bank exercise on her own. With her personal short-term and long-term savings goals. At least I will encourage her to do that besides also keeping some money to spend. But I will always preach what I practice myself: save more than you spend or at least the same. When I will start giving her pocket money I want her to have the bare minimum. Why? Because I want her to get creative about earning money herself as soon as possible. I know that for the long-term it will benefit her much more than if I give her a lot of pocket money. The BizKids Show illustrate that just perfectly.

However, to me age 4 is simply too young for getting pocket money. But my little one has her own small wallet. It is intense blue. Funnily it comes from Macy‘s in New York – not really the place to save but rather spend money. She is very excited every time when she gets some money to put inside. Usually I like to give her the exchange money when we go grocery shopping. She is loving it. Of course, it is her own money! Real money. To my surprise she wants to save her money. She shows no interest in spending it.

But for weeks she has started to talk about being „in the big water“ on vacation. In other words she wants to go to the beach. That‘s because last time when her kindergarden closed some kids went on vacation to the sea and they talked about that. I thought how could I use that wish and combine it with the money from her blue wallet. A piggy bank would be just perfect for saving towards a vacation even if she could not save enough of course but she could contribute. But our piggy banks already have their own purpose.

Visual Savings Trackers

As my little daughter loves painting and art in general I decided one day to print out a visual savings tracker. I let her choose one. She wanted a house with 100 little spaces to paint. I thought we would be better off with a simpler version but she wanted her house. For her it represents going on vacation. That‘s because her first vacation was in a house nearby the German North Sea during the Corona crisis.

Whenever she gets some money to put into her blue wallet she takes out her savings tracker and starts painting in a part of that house. She takes that process very seriously. When the house will be fully painted, we will count the money. I tell her that by doing so she can contribute to pay for our family vacation. She truly feels empowered and I love seeing that. What I learned from that is I want to continue encouraging her to pay for a new experience with her savings rather than for buying the next thing.

Visual savings trackers can be great for kids to learn about saving money. Here are my personal favorites for free and for little money to buy on Etsy:

1. Savings Tracker Bundle for Kids
2. Savings Tracker: The Kids Jar
3. Beach Vacation Savings Tracker (our girl already chose this as her next tracker)
4. Savings Tracker: The Piggy Bank
5. Mini Saving Trackers: Farm Theme
6. Savings Tracker: Honeycomb 
7. Free savings trackers from The Budget Mom
8. Micky Mouse / Disney Fund
9. Savings Tracker: The Luck
10. Savings Tracker: Coins
11. Savings Tracker: The House
12. Savings Tracker: Thermometer
13. Savings Tracker: The Simple Jar

When you walk away today with at least one new idea or resource to improve your (and your kids‘) personal financial journey towards F.I.R.E. I’d love to show you some more in the next post. If you haven’t already, you can apply to become a part of the community to not miss any new release. For that you can subscribe to our Newsletter below in the green footer.

Now, I‘d love to hear from you: what tool do you already use to boost your kids financial education? Which of the exercises above seems most powerful to you for teaching your kids how to invest for financial independence? Let me know in the comments below.

Title image source: Bermix Studio on Unsplash