The holiday season is a time of excitement, celebration, and, often, extra expenses. For young children and middle schoolers, it’s also the perfect opportunity to build essential financial literacy skills that will benefit them well into adulthood. By involving kids and tweens in holiday shopping and budgeting, you can help them learn how to manage money, make informed spending decisions, and understand the value of saving. Be sure to grab the free resources at the end of this post to help introduce financial awareness lessons to your child.

Five Practical Money Lessons for Kids

1. Making and Following a Budget Together
The first step in teaching financial literacy is helping your children understand the concept of budgeting. Sit down together to create a holiday budget. You could break down the budget into categories, such as gifts, decorations, and food, to show how expenses add up.

• Lesson: Explain that a budget is a plan for how money will be spent. Once you’ve set a total amount, help your child allocate funds for each category, keeping track of what they’ll need and what they’d like to spend.
• Tip: If your child has savings, let them set aside a portion for holiday spending. It can help them understand the value of their own money, rather than just seeing it as an abstract concept.

2. Make a Shopping List and Compare Prices
Once the budget is set, work together to make a list of people they’d like to give gifts to or items they might need for the holidays. Then, take some time to research prices online or in stores.

• Lesson: Show them how to compare prices to find the best deals. Explain concepts like price-matching, discounts, and seasonal sales. This activity helps kids see how planning and patience can stretch their budget further.
• Tip: Give them a target amount to spend on each person. This keeps spending under control and helps them prioritize.

3. Differentiate Between Wants and Needs
The holidays can stir up a desire for splurging on things that might be unnecessary. Use this as a teaching moment to talk about the difference between “wants” and “needs.”

• Lesson: Walk them through practical decision-making. For example, ask questions like, “Is this item something that will be used often, or is it just something that looks fun right now?” This helps kids think critically about purchases and avoid impulse buys.
• Tip: Consider giving them a small amount of “fun money” as part of the holiday budget. Let them make their own decisions with it, even if that means they may regret spending it all on something trivial. It’s a safe way to experience the consequences of financial choices.

4. Introduce the Concept of Giving Back
Financial literacy isn’t just about spending and saving; it’s also about giving. During the holidays, talk to your child about setting aside some money or time for charitable causes. This can help build empathy and instill the importance of generosity within their financial values.

• Lesson: Discuss how some of their budget could go toward donations, like buying a gift for a toy drive or supporting a local charity. Teaching them to give back can reinforce the idea that finances can make a positive impact on others.
• Tip: Let your child research charities or community programs. They’ll learn about budgeting for donations and understand the value of financial contributions to causes they care about.

5. Reflect on Spending After the Holidays
Once the holidays are over, revisit the budget and spending together. Review what was purchased, how much was spent, and what they might do differently next time.

• Lesson: This is an opportunity to introduce the idea of evaluating financial decisions. Praise them for areas where they made smart choices, and discuss any regrets as learning points.
• Tip: Encourage them to think about ways to save in the future. Could they have made any gifts themselves, or waited for a bigger sale? Discuss how small changes can have a big impact.

A Few Final Tips for Success

By taking small steps in introducing financial literacy skills, you’ll equip your child with skills that build over time.

Depending on the age of your child, you may need to help them understand financial literacy vocabulary words, such as:

• Afford — to have enough money to buy something
• Budget — a plan for spending and saving money that you receive
• Need — something that a person must have
• Want — something that a person would like to have
• Prioritize — to figure out what is important and what is not
• Income — money that you earn or receive as a gift
• Expense — something that you pay for
• Balance — the amount of money that a person has or owes right now
• Donation — money or item that is given away to help people

Additional Free Resources for Parents

This holiday season, give your kids a gift they can use for life: a foundation in financial literacy that starts with smart holiday spending!