How to Help Kids Better Understand Financial Concepts

girl holding up 100 dollar bill

How to Help Kids Better Understand Financial Literacy Concepts

With schools preparing to reopen, many teachers are worried about how to address the learning loss caused by the coronavirus pandemic. Pre-pandemic research shows that an average 5th-grade classroom includes students performing math at seven different grade levels—which means some are lagging behind further than others.

And because math is a cumulative subject that requires you to master the basics before advancing, any struggle with math will make it harder for students to understand financial concepts as they get older. Math education and financial literacy go hand in hand, so parents and educators need to work together to improve student understanding.

Why Financial Literacy Concepts Can Be Scary

For many children, math is boring, irrelevant, and unnecessary. A lot of these negative perceptions stem from math anxiety, which develops when students don’t master early math skills.

When they are expected to learn increasingly abstract mathematical concepts without strong fundamental knowledge, students tend to develop a deep dislike for the subject. They don’t understand what is being taught and why it’s being taught in the first place. This educational gap follows children as they become adults—without basic math skills, grasping financial concepts is a challenge.

For example, a child who hasn’t mastered fractions, decimals, and percentages may grow into an adult who doesn’t know how interest rates work. Low financial literacy also contributes to this issue. Taking a personal finance and economics course in high school is required in some states, but there is also a decrease in the number of states that require testing for it.

Math anxiety turns into financial anxiety when children become adults. Even before a teenager turns 20 years old, they need to make dozens of important financial decisions (like borrowing student loans) without adequate preparation. Many adults who aren’t mathematically skilled may also be intimidated by the complexity of financial products.

How to Make Financial Concepts More Relatable

Parents can help their children become more financially literate and overcome math anxiety at the same time by showing numbers at work. When students see how math concepts are applied in personal finance and vice versa, they would be less afraid to learn. Here are a few ways to make financial concepts more relatable for your children:


1. Use real-world items to illustrate concepts

As a parent, the best thing you can do to teach complicated concepts is to lead by example. Older children can be taught about savings accounts or Certificates of Deposit (CD) at home. A CD is a product offered by consumer financial institutions that provides an interest rate premium, in exchange for a customer agreeing to leave a lump-sum deposit untouched for a specified time. Building a CD ladder is a great way to increase your assets’ liquidity. It is essentially spreading your investments across several CDs, which means part of your money is always accessible when one of your accounts matures.

You can create a parallel system at home, where your children can have a CD-like system; they may agree to hand over their piggy bank to you, in exchange for you agreeing to deposit a few dollars every month if they can keep it untouched for a year. Aside from teaching them the value of saving and delayed gratification, they can also understand interest rates and investment better.


2. Find fun products that can help

Children learn well through sensory exploration and hand-to-mind connections. Special math kits with Snap Cubes®, number lines, and two-color counters can help students better visualize numbers.

Number-centric board games like PayDay and Monopoly not only make math feel less intimidating, but they also teach children about making money last and calculating risks against rewards.


3. Incorporate financial literacy concepts into everyday life

Knowledge in math, finance, and economy are not just isolated facts or methods, students need to develop the ability to transfer these concepts into new situations.

Conceptual learning through examples, nonexamples, and real-life instances help students make stronger connections to what they know. It helps to explain economic news to your children and involve them in conversations, so they see how different financial concepts work together.

17 days ago
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Ashley Morrison

Ashley Morrison is a part-time tutor and a full-time mom. She’s dedicated to helping students overcome educational roadblocks. When she’s not reviewing with her students, she unwinds by watching cartoons and movies on Netflix with her two children.

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