Top Financial Words for Kids: 12 Money Concepts Your Child Can Get (2024)

Account

Dictionary Definition of Account:

An arrangement by which a body holds funds on behalf of a client or supplies goods or services to the client on credit.

Kid-Friendly Definition:

An account is where you put money to spend later. For kids, the most important definition to understand is a bank account, since that will likely be their first real world experience with an account.

Real-World Explanation:

It used to be that a child’s first “account” was their piggy bank. With the world going increasingly cashless, more and more kids are growing up without this childhood staple. There are many ways to introduce accounts to kids.

You can use the My First Nest Egg App to keep digital accounts for your family. This app is primarily for kids ages 3-12 and tracks the “bank of mom and dad,” i.e. no real money is deposited or transferred. It’s a ledger for little kids before they need real accounts and the fees that might go with them. You might also just keep a ledger for your child of money you owe them, and this reflects their account.

As kids grow, start using the word “account” as often as possible to discuss other real world situations. When you are discussing lunch money (which has also gone cashless), use the word “account” when they ask if they can get hot lunch that day. “Yes, we have money in our hot lunch account.” If your family is saving towards a family goal, you can refer to that ledger as your account.

If you make calls when the kids are around to your mortgage or credit card company, let them know you are calling to discuss your account. Using the word first in its simplest sense, and then slowly expanding, will help them to fully understand all of its various uses.

Budget

Dictionary Definition of Budget:

An estimate of income and expenditure for a set period of time

Kid-Friendly Definition:

A plan for how to spend your money before you get it.

Real-World Explanation:

More and more parents are starting to teach their children to budget from an early age with the simple Spend/Save/Give method. Children are encouraged to budget a portion into each bucket every time they receive money. The My First Nest Egg app does this with digital accounts. Some parents do it with three envelopes or jars. This is a very simple introduction to the idea that when money comes in, it’s not all to spend.

It’s very helpful for kids to see their parents have a budget. Money habits are set by age 7, largely from watching and learning from parents. Even if it’s too much to understand an overall budget, kids can understand a budget for specific shopping trips/items. “We are going grocery shopping. Our budget is $40. This is what we need.”

As kids grow, one of the most effective ways to teach them this skill is to give them a budget for their own activities. If your child plays soccer, give them a reasonable budget for the season that has to cover all of the costs associated with playing soccer.

If you think it seems unnecessary to teach a child to budget, just close your eyes for a moment and imagine them at college or with their first job. How will your child, now an adult, spend their money without a budget? If your answer is on the adult equivalent of candy and toys, then you can see the importance of teaching them to budget early.

Cost

Dictionary Definition of Cost:

An amount that has to be paid or spent to buy or obtain something.

Kid-Friendly Definition:

The amount of money you have to spend to get something.

Real-World Explanation:

Profit, Revenue, and Cost are best explained together. If your child has ever set up a lemonade stand, you know that they’re more than happy to let you buy all of the necessary items, and pocket all the money they receive. Kids absolutely love profit, but most often they confuse it with revenue and fail to factor in the cost.

Little kid businesses are the best way to teach your kids the concepts of profit, revenue and cost. Lemonade stands are fun, but tons of work for parents. If you can help your child set one up in the summer, it’s an amazing way to teach these three pillars of business.

However, it might be more feasible to explain with a small family business endeavor. Kids can gain the same understanding by selling cards or bracelets.

Next time your family has a holiday you celebrate with cards, go to the store to buy card-making supplies and save your receipt.

Next, encourage your child to make some holiday cards.

Finally, then help them sell the cards to their family members (or maybe just purchase them for yourself at fair market value).

When they are done you can have them put their proceeds in one pile and explain that this is their revenue. Next to that pile of money, you can put the receipt for the supplies.

Explain that this is their cost. Grab a calculator and subtract the cost from the revenue, and voila! That’s their profit.

This relatively simple exercise can be replicated every time they sell anything, whether it’s to their siblings or cousins, or if they get more sophisticated and open an eBay shop.

Lots of high school kids are combing used clothing stores for vintage pieces and selling them on eBay.

Some kids sell their more valuable toys when they’ve grown out of that trend. Not only are these great business lessons, but they are also environmentally friendly ways to reuse and repurpose so fewer things end up in landfills.

Kids love practicing being adults – whether they’re nursing their sick stuffies or helping their parents cook dinner. Learning the three basics of business – profit, revenue, and cost – can be just as fun and helpful for the future of your little entrepreneur.

Debt

Dictionary Definition of Debt:

Something that is owed or that one is bound to pay to or perform for another.

Kid-Friendly Definition:

Something, usually money, that someone owes to another. A person can have a debt, or a company can have a debt.

Real-World Explanation:

Debt is not a difficult concept for kids to grasp. From the time they are very little, they experience debt in normal relationships. They borrow toys from friends and money from siblings or parents. When you explain debt to children it’s very helpful to put it in context using gifts. When you receive something from another that you do not have to pay back, that is a gift. When you receive something from another that you will have to return or pay back, that is a debt.

Kids ask to “borrow” stuff all the time, but with zero plans to ever pay back. “Mom, can I borrow a quarter for a gumball?” These requests to borrow are a golden opportunity to start introducing the meaning of debt. Start setting terms and enforcing them when you are back home. This might seem draconian, but no one likes someone who doesn’t pay their debts, even small ones.

Another way to explain debt to children is to actively discuss your debts in a healthy way. It’s not a bad thing for your kids to see you paying rent, a mortgage, a credit card, or a car payment. Parents tend to shield children from these big-picture debts, but there is no reason not to teach them about how some big-ticket items are purchased. If your kids see you paying debt on time and understand its role in your life, they will have a fuller understanding of how it is used in the grown-up world.

Childhood goes by in the blink of an eye. One moment our kids are 12 and we’re paying for everything. The next, they’re 18 and potentially signing on a dotted line for hundreds of thousands in debt.

Without any real context for those decisions, teenagers lack a way to really understand that they will actually have to pay that money back. With interest. If they have been discussing with you, and watching you take your debt seriously since childhood, they will be much more careful before making such impactful decisions.

Finance

Dictionary Definition of Finance:

The management of large amounts of money, especially by governments or large companies.

Kid-Friendly Definition:

A fancy way to talk about money.

Real-World Explanation:

Finances are really just another way to talk about money, and it’s an easy word to incorporate into everyday life. Just start replacing the word money, when appropriate, with the word finance.

If your kids are using a financial education system (and we highly recommend they do, since money habits are set by age 7), you can easily start weekly or monthly meetings to discuss their finances. Kids love spending one on one time with their parents.

Having a set time to discuss a grown-up topic will highlight its importance and provide a bonding experience. What have you earned, saved (invested), and given this month? Do you want to improve those numbers? I hear Johnny from your class is investing in a bug collection, how are the numbers on that?

According to the ThePennyHoarder website, 40% of people who did not discuss finances growing up have exactly $0 in savings. Use this opportunity to grow their financial vocabulary and give them the best shot at a healthy financial future.

Inflation

Dictionary Definition of Inflation:

A general increase in prices and a fall in the purchasing value of money.

Kid-Friendly Definition:

A situation in which the cost of things goes up and the value of money goes down.

Real-World Examples:

Inflation has been a hot topic lately, and it is very likely that children have heard the word and felt the effects. However, without a cursory explanation of the term, the exposure is likely lost on children.

The easiest real-world example comes to us courtesy of Dollar Tree. It used to be the Dollar Tree- now it’s the $1.25 Dollar Tree. It doesn’t even really make sense, but that’s what inflation does. It throws things out of whack. Explain to your child that before this latest round of inflation, $1 would have bought most things in the store. Now, you cannot buy anything in the store for $1, because $1 is worth less.

Chances are, your kids have heard you complain about inflation at the gas station and grocery store, so they’ll know it’s impacting your wallet. Turn those complaints into teaching moments by continually reiterating that your money is worth less when inflation is high. $40 used to fill your car with gas, and now it costs $60. That is $20 less you have to spend on other things.

Once they have this basic understanding they will start to see inflation’s effects and hear it mentioned everywhere. They will have their entire life to build context, instead of being introduced to it in a high school economics class for the first time.

Lien

Dictionary Definition of Lien:

The right to keep possession of property belonging to another person until a debt owed by that person is discharged.

Kid-Friendly Definition:

If you borrow money to buy something, the person who lends you money can take that thing back if you don’t pay them back on time.

Real-World Explanation:

If you think about it, you probably have several opportunities to put liens on your kids’ stuff. The next time they borrow money from you to buy something, let them know that you’re going to take it back if they don’t make good on their debt. This will teach them about both debt and liens, which go hand in hand.

When you are in a store, talk to your kids about the fact that you don’t actually own anything in your cart until you pay for it at check-out. You might be holding a cart full of home goods, or carrying legos in your hands, but you don’t own them yet because you haven’t fully paid for them. Once you check out and pay, now these things belong to you. But what if you only paid for half the legos and promised to pay for the other half later? And what if you didn’t pay for the second half? The store might be able to come to get their legos. And not just half!

Needs

Dictionary Definition of Needs:

A thing that is required by necessity.

Kid-Friendly Definition:

Something you must have in order to survive.

Real-World Examples:

Wants v. Needs is one of the core lessons of financial education for children. This is something you can start teaching very early with basic needs. Your child says they are thirsty. You can teach them that they need water, but they want juice.

You are shopping for school supplies together and basic colors are less expensive than licensed characters – the basics are a need for school, and the characters are a want.

Teaching your children wants v. needs will give them the ability to budget more effectively later in life.

Shopping with your children is one of the best ways to reinforce wants versus needs.

Often, we run to the grocery store to get dinner supplies for the evening. You can create a list with your child of everything you need to make dinner.

Next, you can create another column for things your child might want to have with dinner such as ice cream for dessert or sugary drinks. Next, set a realistic budget for your dinner.

When you shop with your child only get the wants once you have purchased all of the needs under budget. Imagine how much this will help them budget for themselves later in life!

Profit

Dictionary Definition of Profit:

Revenue minus cost. The amount one makes on a transaction.

Kid-Friendly Definition:

A financial gain; the money a business has left after paying all the bills.

Real-World Examples:

Profit, Revenue, and Cost are best explained together. If your child has ever set up a lemonade stand, you know that they’re more than happy to let you buy all of the necessary items, and pocket all the money they receive. Kids absolutely love profit, but most often they confuse it with revenue and fail to factor in the cost.

Little kid businesses are the best way to teach your kids the concepts of profit, revenue and cost. Lemonade stands are fun, but tons of work for parents. If you can help your child set one up in the summer, it’s an amazing way to teach these three pillars of business.

However, it might be more feasible to explain with a small family business endeavor. Kids can gain the same understanding by selling cards or bracelets.

Next time your family has a holiday you celebrate with cards, go to the store to buy card-making supplies and save your receipt.

Next, encourage your child to make some holiday cards.

Finally, then help them sell the cards to their family members (or maybe just purchase them for yourself at fair market value).

When they are done you can have them put their proceeds in one pile and explain that this is their revenue. Next to that pile of money, you can put the receipt for the supplies.

Explain that this is their cost. Grab a calculator and subtract the cost from the revenue, and voila! That’s their profit.

This relatively simple exercise can be replicated every time they sell anything, whether it’s to their siblings or cousins, or if they get more sophisticated and open an eBay shop.

Lots of high school kids are combing used clothing stores for vintage pieces and selling them on eBay.

Some kids sell their more valuable toys when they’ve grown out of that trend. Not only are these great business lessons, but they are also environmentally friendly ways to reuse and repurpose so fewer things end up in landfills.

Kids love practicing being adults – whether they’re nursing their sick stuffies or helping their parents cook dinner. Learning the three basics of business – profit, revenue, and cost – can be just as fun and helpful for the future of your little entrepreneur.

Revenue

Dictionary Definition of Revenue:

Income, especially when of a company or organization and of a substantial nature.

Kid-Friendly Definition:

The money you receive in exchange for selling a good or service.

Real-World Examples:

Profit, Revenue, and Cost are best explained together. If your child has ever set up a lemonade stand, you know that they’re more than happy to let you buy all of the necessary items, and pocket all the money they receive. Kids absolutely love profit, but most often they confuse it with revenue and fail to factor in the cost.

Little kid businesses are the best way to teach your kids the concepts of profit, revenue, and cost. Lemonade stands are fun, but tons of work for parents. If you can help your child set one up in the summer, it’s an amazing way to teach these three pillars of business.

However, it might be more feasible to explain with a small family business endeavor. Kids can gain the same understanding by selling cards or bracelets.

Next time your family has a holiday you celebrate with cards, go to the store to buy card-making supplies, and save your receipt.

Next, encourage your child to make some holiday cards.

Finally, then help them sell the cards to their family members (or maybe just purchase them for yourself at fair market value).

When they are done you can have them put their proceeds in one pile and explain that this is their revenue. Next to that pile of money, you can put the receipt for the supplies.

Explain that this is their cost. Grab a calculator and subtract the cost from the revenue, and voila! That’s their profit.

This relatively simple exercise can be replicated every time they sell anything, whether it’s to their siblings or cousins, or if they get more sophisticated and open an eBay shop.

Lots of high school kids are combing used clothing stores for vintage pieces and selling them on eBay.

Some kids sell their more valuable toys when they’ve grown out of that trend. Not only are these great business lessons, but they are also environmentally friendly ways to reuse and repurpose so fewer things end up in landfills.

Kids love practicing being adults – whether they’re nursing their sick stuffies or helping their parents cook dinner. Learning the three basics of business – profit, revenue, and cost – can be just as fun and helpful for the future of your little entrepreneur.

Stock Market

Dictionary Definition of Stock Market:

A market in which securities are bought and sold.

Kid-Friendly Definition:

A place where you can buy and sell stocks. Stocks are a part of a business or company you can own.

Real-World Examples:

While a lot of financial discussions are dull and dry, stocks and the stock market are fun and engaging. Kids are very interested in certain companies: Disney, Netflix, their favorite toy store, and the local ice cream shop. Ask your child if they think those companies make money, and then tell them that they can own a small part of publicly traded companies.

Kids will likely be very interested in owning a piece of their favorite companies (investing in them). Once they’re engaged, spend some time looking up companies they suggest. Disney is publicly traded, but the ice cream shop down the street might not be.

Pull up historical stock prices and explain how you can make money in the stock market. Stock tickers are pretty easy for kids to understand: if you bought when it was down here at $40 a share, and now it’s $60, you would have made $60 a share. It’s a great introduction to the risks and rewards of the market.

Wants

Dictionary Definition of Wants:

Something wanted or wished for, but not necessary for survival.

Kid-Friendly Definition:

Things that are nice to have but not necessary to survive.

Real-World Examples:

Wants v. Needs is one of the core lessons of financial education for children. This is something you can start teaching very early with basic needs. Your child says they are thirsty. You can teach them that they need water, but they want juice.

You are shopping for school supplies together and basic colors are less expensive than licensed characters – the basics are a need for school, and the characters are a want.

Teaching your children wants v. needs will give them the ability to budget more effectively later in life.

Shopping with your children is one of the best ways to reinforce wants versus needs.

Often, we run to the grocery store to get dinner supplies for the evening. You can create a list with your child of everything you need to make dinner.

Next, you can create another column for things your child might want to have with dinner such as ice cream for dessert or sugary drinks. Next, set a realistic budget for your dinner.

When you shop with your child only get the wants once you have purchased all of the needs under budget. Imagine how much this will help them budget for themselves later in life!