Financial Literacy Guide for Kids, Teens and Students

Introduction

We make decisions about money every day. Whether it’s choosing a gift for someone or deciding how much to spend on a new phone, opportunities to manage our money are all around us. Unfortunately, sometimes we don’t have the financial literacy or good knowledge about money to make the best decisions. In fact, many Americans, especially young people, don’t have the necessary skills when it comes to money, and as many as 1 in 5 lack even the most basic knowledge about finances. Compared with other countries, American students do not rank well. But this isn’t because students don’t want to learn. About 83 percent of students think financial literacy should be mandatory, and over 92 percent of teachers think that financial literacy should be taught in schools.

This financial literacy guide can help everyone learn more, especially students in grades five through 12. The first section will provide some general information on financial literacy. The guide will then look at different resources for financial literacy for students in elementary school, middle school and high school. Then it will list helpful personal finance apps that teach about financial literacy; how to budget, save and spend; and how to have fun doing it.

Chapter 1: What Is Financial Literacy?

  1. Definition of Financial Literacy

So what is financial literacy? Financial literacy is knowledge about money and business, along with the right skills and confidence to manage your money and meet your present and future needs. Financial literacy is important because it helps people to make good decisions about their finances and grow their wealth so they have financial security.

Financial literacy is not a goal in itself but rather a learning process that can last a lifetime. Remember, you can always choose to improve your knowledge about money and take control of your finances no matter how old you are.

  1. Financial Literacy Terminology

A big part of improving your financial literacy is learning some key financial terminology, or important words about finance. Knowing these terms can help you understand many aspects of money. Here are some words you should familiarize yourself with:

Budget: Budgeting your money, or having a budget, means dividing your income into different expenses. You may have heard your parents talking about a family budget and how they use a certain amount to pay for groceries, transportation and other expenses. You can also make your own budget and set aside money to spend on things you need. For example, your parents may want you to pay for items such as video games, movies, a phone bill or car gas if you’re a teen.

Saving: Saving your money means setting aside a certain amount of money for future purchases instead of choosing to spend it right away. You can save your money in a jar or a piggy bank, or depending on how old you are, you can ask your parents to open a savings account at a bank. You will quickly see how fun it is to put money aside and watch it grow!

Interest: Interest is a good reason to save your money in a bank account. Banks usually offer interest on the money you deposit, which means they will pay you a certain amount over a given period, such as every month or year. For example, your bank may offer to pay you 2 percent monthly interest, so if you save $100, you will get $124 at the end of the year. If you earn compound interest, this is even better, because you can then earn interest on interest. In the example above, if you save $100, you will earn $2 in interest the first month, then 2 percent of $102 the following month, so your new balance would be $104.04 the month after that, and then $106.12 and $108.2, in the following months. Over the long term, as your money grows, so will the amount of interest you earn on it.

Investing: Investing means spending money on something that you expect to bring you a greater return later on. Many people invest in businesses they think will make a lot of money in the future. Investing always involves a degree of risk, and some people prefer to save their money rather than invest it. Investing, however, can also bring higher profits.

Loans: You may have heard of car loans or mortgages, which are special types of loans for homes. People can take out loans to make big purchases and then agree to pay them back, usually with interest. Interest is not just something you can earn from a bank when you save your money; it is also something you have to pay. The amount of interest a bank will charge you on a loan will depend on many factors, such as the contract you sign with the bank, how long the loan is for, whether you have a good credit score or not (see below) and if you provide the bank with any guarantees on the loan.

Interest Rates: An interest rate is the amount paid after a certain period and is a percentage of the amount lent, also called the principal. It is determined by the terms of the loan.

Credit Score: A credit score is a grade you get from credit bureaus, financial companies that monitor whether you pay back your loans and make your payments on time. If you do this over the long term, you build a good credit history and get a good score; if you don’t, you get a lower score. It’s important to maintain a good credit score throughout your life because it can allow you to get loans, and banks will want to give you better terms on them.

Guarantee: A guarantee is a pledge used to back up a loan in the case you can’t pay it back or need to default. For example, a bank providing a home loan may take the home as a guarantee and can seize the house if you default on payments.

A guarantee can also be called “collateral.”

Credit Card: You may have already heard of a credit card. Maybe you have seen your parents use one at the store, have seen commercials for different cards, or already have a credit card if you’re a teen. A credit card is issued by a bank to make purchases and then pay for the purchases at a later date, usually in the form of monthly payments. Banks usually charge interest for the purchases, which can increase if someone does not pay on time. When used responsibly, credit cards can help create good financial habits and build a good credit history and credit score, which can help you get future loans.

Taxes: Depending on how old you are, you may have heard of taxes. So what are they exactly? Put simply, taxes are payments we make to the government for it to provide us with services. Governments collect taxes through our income and also through sales tax in many states, which means every time you buy something, you pay a few cents more. That additional money goes to the government to build schools, fix highways and provide other services.

Stock: You may have heard of stocks, or maybe you have already started to trade stocks if you’re a teen. When you buy a stock of a company, you buy a part of that company, and in some ways, you become an owner of that company. The value of a company’s stock can increase or decrease depending on its performance and other aspects but also on the overall economy and political events.

401(k): When you get older, you will start to think about retirement. Many companies  offer 401(k) plans or retirement accounts that employees contribute a percentage of their paychecks to. This amount can be withdrawn at retirement. Some companies decide to further help their employees by matching the amount they save so that they have even more money when they retire.

  1. Practical Money Skills

Now that we have looked at some common financial literacy terms, let us study some practical skills that can help you handle your money so that you have enough for your present and future purchases.

One of the most important practical money skills you can learn is saving your money. Putting aside savings is an important part of financial literacy. Simply put, you must learn to spend less than what you get through an allowance or a paycheck. A good rule of thumb is to put aside 10 percent of your money in savings every month. This is often called paying yourself first and can help you to cover big purchases in the future or have money saved for unexpected expenses.  When it comes to saving in a bank account, the earlier you start, the faster you will be able to grow your money through interest.

Steps that students can take immediately to start saving money

  1. Learn the difference between needs and wants: There are things you need, and then there are things that you want or desire but are not necessary. It is important to make this distinction when it comes to finances and choose what to spend on accordingly.
  2. Make a decision to set aside a certain amount every month. It can be a percentage of your income or a designated dollar amount.
  3. If you can, talk to your parents or guardians about setting up a bank account where you can regularly deposit money. Many banks offer special accounts just for kids.
  4. If possible, set up automatic payments into a savings account from an allowance or a paycheck every month, even if it’s a small amount. It can and will add up.
  5. Make a list of things you want to purchase in the short, medium and long term, and make a savings plan to achieve your goals. How much would you need to save every month to reach your goal? You can find a great financial literacy worksheet for that here.
  6. Learn how to compare prices before you buy something. Prices for products and services can differ from store to store. Before deciding to buy something, be sure to check for prices both in stores and online and in marketplaces such as eBay or Amazon to get the best price.
  7. Be a smart consumer. Many companies create ad campaigns that appeal to your emotions and make you feel like you need certain things even when you don’t. Also, always be on the lookout for scams and products that will require recurring payments. Be sure to read the fine print and consult with your parents before buying something.

How saving early can impact the long term

Learning how to save early on and applying the tips listed above can set you up for a lifetime of financial success. You don’t have to start with a large amount; start from where you are. Any positive step you take is a move in the right direction and will bring you closer to your goals. Also, as we learned above, the earlier you start saving, the more time your money will have to earn interest and grow.

Chapter 2: Financial Literacy for Students

Financial literacy for students has never been more important. The consequences of not having enough knowledge about money can be seen in the world of finances and the economy, as well as in the last global recession. Kids today need to learn more about financial literacy so that they are educated and prepared when it comes time for them to make important financial decisions later in life. One of the best things about learning financial literacy today is there is so much great information out there that is easy to access thanks to technology. There are many financial literacy games and websites to choose from. Regardless of your age, you can be on your way to learning more about financial literacy in no time. Click on the links below for some great resources.

  1. Elementary Grade School

Kids in elementary school will have a ton of fun learning about financial literacy from the following money, math and financial literacy games and websites for kids:

The Secret Millionaire’s Club: A fun web series about entrepreneurial kids mentored by                billionaire Warren Buffett.

           http://smckids.com/about.php

http://smckids.com/games.php

Hands on Banking: This website offers a fun course for kids on financial concepts.

https://handsonbanking.org/kids/

My Credit Union: This government website offers some very fun and educational games to increase your financial literacy.

https://www.mycreditunion.gov/Pages/world-of-cents-game.aspx

https://www.mycreditunion.gov/Pages/pocket-cents-game.aspx

Treasury Direct: This is also a government website with some games more focused on currency.

https://www.treasurydirect.gov/kids/games/games_moneymemory.htm

https://www.treasurydirect.gov/kids/games/games_perry.htm

Bizkids: Bizkids has an entire program dedicated to improving financial literacy for kids. Here are some of the games kids can immediately start playing:

http://bizkids.com/games/break-the-bank

http://bizkids.com/games/bring-home-the-bacon

http://bizkids.com/games/dollar-a-glass

Practical Money Skills: A website that provides a number of games, such as financial football and soccer, Road Trip to Savings and many more.

http://www.practicalmoneyskills.com/play

http://www.practicalmoneyskills.com/resources/comics/avengers

US Mint: A government website with cartoons and games that teach kids about coins and medals.

https://www.usmint.gov/kids/aboutus/help.html

  1. Middle School Financial Literacy Resources

Students in middle school also have many options when it comes to improving their financial literacy and practical money skills. Here are some online resources and games they can access.

Stock Market Game: This is a popular game among teens and preteens that allows them to open and manage a virtual portfolio and learn about the ins and outs of stock market trading.

https://www.stockmarketgame.org/

Treasury Direct: This is a curriculum developed especially for kids in middle school and provides information on many math concepts needed to improve financial literacy. It is also written in a fun and engaging way with relatable real-life examples.

https://www.treasurydirect.gov/indiv/tools/tools_moneymath.htm

Hands on Banking: This site provides information on financial literacy for teens in a user friendly way.

https://handsonbanking.org/teens/

My Credit Union: This government website provides games that can strengthen financial literacy for kids of all ages.

https://www.mycreditunion.gov/Pages/world-of-cents-game.aspx

https://www.mycreditunion.gov/Pages/pocket-cents-game.aspx

Treasury Direct: On this website, there are also fun games middle school kids can enjoy while improving their financial literacy.

https://www.treasurydirect.gov/kids/games/games_moneymemory.htm

https://www.treasurydirect.gov/kids/games/games_perry.htm

Some other games and resources:

http://senseanddollars.thinkport.org/

http://www.practicalmoneyskills.com/resources/comics/avengers

  1. Financial Literacy for High School Students

Teens in high school have different needs when it comes to money. They start thinking about college and may already have started their first jobs. Therefore, financial literacy for high school students becomes even more important as they start to build a solid foundation for their futures.

Advanced financial literacy terminology

In addition to basic financial terminology, teens should become familiar with more advanced terms that can help them navigate their new financial world.

Gross vs. Net Income: If you’re a teen earning a paycheck, you will quickly learn that when you get paid, you don’t get to keep all of your money and that you pay a number of taxes and deductions. Teens should know the difference between gross income, or their overall salary, and their net pay, which is what they actually receive.

APR: As a high school student, you may already have experience with a credit card and may already know about interest rates. The annual percentage rate includes not just the interest rate but also all the other fees related to the terms of your loan. When choosing a credit card, you should compare interest rates and APR. Even if a company offers a lower interest rate, the overall APR might make it more expensive in the long run.

The Federal Reserve: The Federal Reserve, often referred to as “the Fed,” is the central bank of the United States. It was created to conduct monetary policy by adjusting national interest rates to ensure the economy is always healthy with maximum employment and stable prices. The Fed also supervises other banks and acts as a bank to other banks.  

Treasury Bonds: In the first chapter, we defined stocks as pieces of a company that you can own. Bonds are another type of security and a loan with interest, which can be made by a bondholder to an entity such as a government to finance long-term projects, for example. The principal amount with the interest, also called a “coupon,” is paid throughout a certain period, usually at least 10 years.

Commodities: If you are a little familiar with investing, you may have heard of commodities, or goods and services that are priced through a global marketplace. Commodities are highly fungible or exchangeable. Some well-known commodities are oil, copper, gold and even livestock.

Preparing for college

One of the most important topics you will have to deal with as a teenager is preparing for college. College can be expensive, and if you want to get a higher education, there are options available to you to help pay for it. You may be getting assistance from parents and other family members, or you may be considering student loans to finance your education. If you are, you’re not alone. Almost 70 percent of Americans have to get loans to go to college. There are several types of student loans available to you: either federal student loans or private loans from banks and other financial institutions. Let’s look at the differences between the two.

Federal Student Loans: The government provides federal student loans through the Department of Education. If you’re considering a student loan, you should think about applying for a federal student loan first because it has many advantages:

  • Interest payments are usually lower than private loans and are fixed throughout the repayment period.
  • There are flexible payment plans that usually don’t start until you finish school and that vary with your income.
  • In some cases, the government can help pay the interest on your loans, and if you work in certain fields such as public service, part or all of your loans could be forgiven by the government after a certain period, and in some cases, you may be eligible for loan cancellation after 20 to 25 years.  
  • The amount of money you can get through loans can depend on your financial need, how much in contributions you get from family or the military, and whether you are going to undergraduate or graduate school.
  • You don’t need a good credit score or a cosigner to get federal student loans.
  • There are different types of loans depending on your needs, such as subsidized and unsubsidized loans.

Private Loans: It is always recommended that you consider getting federal student aid first before turning to private loans because of all the advantages we listed above.  Compared with federal student aid, private student loans are less popular, making up only about 11 percent of student loans in the United States, according to the College Board in 2016-17.

But if you have exhausted all your other options or still have an amount not covered by federal student aid, you can apply for loans from banks and other lenders such as credit unions. The loans usually require a credit check and can have either fixed or variable interest rates. Unlike federal student loans, there are usually limited repayment options after you take out a loan; however, in some cases, you can make payments while still in school, which can lower your overall loan amount.

Scholarships and Grants: Many students rely on scholarships and grants to finance their educations. Unlike student loans, scholarships do not have to be paid back and can be based on either merit or need. If you are a teen and want to go to college, you should start researching scholarships and grants as soon as you begin high school to learn about all your options. Here are some websites that can help you find a scholarship or grant:

https://www.fastweb.com/

https://www.collegeboard.org/

https://www.scholarships.com/

https://www.collegenet.com/

Saving Money: As a teen, you will notice that your expenses and responsibilities are increasing as you get older. You may be earning your first paycheck, paying for a car and getting ready to live on your own. It’s important now more than ever to learn about money: how to spend it, save it, manage it and grow it. Here are some websites and resources to help increase financial literacy for high school students:

https://www.stockmarketgame.org/

https://www.philadelphiafed.org/-/media/education/teachers/lesson-plans/PurposesandFunctionsGrades9-12.pdf

https://handsonbanking.org/teens/

http://www.practicalmoneyskills.com/teach/lesson_plans/grades_9_

Responsible Borrowing: As a high school or college student, you will have your first opportunity to borrow money. If done correctly, responsible borrowing can help build a good credit history for you. Here are some ways to be a responsible borrower:

Borrow what you need: If you are taking out student loans to pay for school, remember that you will have to pay them back, so you should borrow only as much as you need for tuition and expenses.

Establish good credit: As a teen, you may already be using credit cards. When used correctly, these can be a great way to establish good credit. Be sure to get a credit card and make purchases only if you can pay back the amount owed every month.

  1. Financial Literacy Games, Books and Worksheets

Financial Literacy Games

In addition to the many games we listed above, there are many other financial literacy games that can help you increase your knowledge about money. Think about games such as Monopoly, Pay Day and Game of Life. Other games that involve role-playing or simulation can also be great tools for learning about various aspects of spending and saving.

Financial Literacy Books

Books can be a great way for kids to learn more about money. Here are some financial literacy books that can help:

The Everything Kids’ Money Book: From Saving to Spending to Investing – Learn All About Money! by Diane Mayr

Not Your Parents’ Money Book by Jean Chatzky

The Young Entrepreneur’s Guide to Starting and Running a Business by Steve Mariotti

Growing Money: A Complete Investing Guide for Kids by Gail Karlitz and Debbie Honig

The Ultimate Kids Money Book by Neale Godfrey

Financial Literacy Worksheets

There are many financial literacy worksheets out there that can help you learn more about money:

Worksheet to help set short-, medium- and long-term goals:

http://financeintheclassroom.org/downloads/FinancialGoalsWorksheet.pdf

Worksheet to analyze your paystub:

http://financeintheclassroom.org/downloads/AnalyzePayStub.pdf

Federal student loan fact sheet:

https://studentaid.ed.gov/sa/sites/default/files/federal-loan-programs.pdf

Avengers-themed budget worksheet:

http://www.practicalmoneyskills.com/assets/presskit/BudgetBlaster.pdf

Monthly spending plan:

http://financeintheclassroom.org/downloads/SpendingPlan.pdf

Student guide on making decisions about money:

https://www.incharge.org/wp-content/uploads/2015/07/Student-Guide-Lesson-One.pdf

Chapter 3: Personal Finance Apps for Students


Thanks to technology, improving financial literacy for kids and managing your money has never been easier or more fun. There are many apps out there that can help with every aspect of financial management, such as budgeting, spending, saving, investing and more.

  1. Budgeting Apps

If you’re looking to manage your paycheck or allowance, budgeting is a great way to get the most of your cash. There are many apps out there that can help.

Mint: Mint helps you budget and manage all your finances online as you pay your bills and create a budget.

Spendee: Spendee is designed to help you track your spending and expenses and links to your bank account for easy tracking. You can also create manual wallets and share them with family and friends.

GoodBudget: This app helps you create a budget and stay on top of it. It’s based on the principle of the envelope budgeting method, where you can set aside money for different expenses depending on what’s most important to you. You can seamlessly keep track of your expenses with other family members or friends.  

FamZoo: This is a good app for busy parents who want to automate allowance payments to their kids based on the chores they complete and can be divided into different purposes, such as saving, investing and donating to charity. Parents act as the bank holders, with their children as the bank account holders. Payments can be distributed to children’s accounts through a prepaid card.

The Game of Life: The Game of Life app is a great way to learn about different life stages through minigames, such as going to college, getting a job and making good financial decisions.

  1. Saving and Investing Apps

Acorn: Acorn has been highly praised for its ability to help young people get started with saving and investing. It rounds up purchases and uses the spare change to invest in thousands of stocks.

Robinhood: Robinhood is a great app to get started with investing without paying any commissions or trading fees; however, this also means that you need to do your homework before trading to ensure that you make good decisions.

Wealthfront: This great app for investing offers free management advice and strategies throughout software specifically tailored to your spending habits and goals and allows you to make the most out of your money.

Stockpile: Stockpile is a great app for kids because it allows users to purchase fractions of stocks of companies they may know and be interested in, such as Google or Disney, which can otherwise be expensive. The app specifically caters to kids with logos of their favorite games and characters to keep them engaged in investing and allows them to graduate to more sophisticated trading when they’re ready.

  1. Finance News

Another way to improve financial literacy for kids is to stay on top of finance and economics news that can impact their money. Here are some great sites and resources to help:

Yahoo Finance: Yahoo Finance is a popular finance website that provides real-time updates, news, chats and in-depth financial information and analysis, including a wealth of historical data.

Google Finance

TheStreet

Bloomberg App: The Bloomberg app is a great resource to get business news, analysis and market data on the go.

CNBC

CNN Money

Reuters: Reuters is also a great resource if you want finance news on the United States, other countries and events that impact the world economy.

Conclusion

Throughout this guide, we have given you information and resources to increase your financial literacy to help you get a head start on your financial life.

Learning financial literacy terms, applying money-saving tips and practical money skills, budgeting, preparing for college, and investing can all help you build a great financial foundation so you can meet your short-, medium- and long-term goals. We have also listed additional resources, such as games, books and worksheets, you can check out if you want to learn more.

Remember that increasing your financial literacy can help you take charge of your finances no matter how old you are or what’s happening in the financial world. It can allow you to live the life you want to live and have a more successful future.

Sources:

https://www.treasurydirect.gov/kids/kids.htm

https://www.treasury.gov/resource-center/financial-education/Documents/NationalStrategyBook_12310%20(2).pdf

http://councilforeconed.org/wp/wp-content/uploads/2016/02/sos-16-final.pdf

https://www.financialliteracylessons.com/wp-content/uploads/2017/05/national-standards-for-financial-literacy.pdf

https://www.financialliteracylessons.com/wp-content/uploads/2017/05/National-Strategy-2016-Update.pdf

http://www.oecd.org/pisa/PISA-2105-Financial-Literacy-USA.pdf