19 Financial literacy terms every kid should know by age 18

Financial literacy is extremely important in adult life. Even so, most of us don't have the opportunity to take a financial literacy course in school, and instead have to learn on our own. As a result, one-third of Americans are considered financially illiterate. 

However, you can help your kids get a jump start by teaching kids about financial literacy early. They have to learn somewhere, and parents can provide the foundation that will help them through their entire lives. As kids grow up, their financial literacy vocabulary should grow as well. We've broken down a financial literacy vocabulary list​ to help you understand when kids should know certain terms.

19 financial literacy terms to teach kids:

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1. Cash

2. Save

3. Spend

4. Budget

5. Goal

6. Income

7. Interest

8. Account

9. Deposit

10. Withdraw

11. Savings

12. Invest

13. Return

14. Credit

15. Debt

16. Credit score

17. Taxes

18. Gross pay vs. net pay

19. Compound interest

Financial terms for kids ages 6-8

When kids enter elementary school, they're beginning to gain some independence. Kids that go to school on their own should have a basic concept of money in case of emergencies. They may be receiving an allowance or occasionally want to "pay" for something for the family. To understand the basics of how money works, introduce them to these terms:

• Cash: Money in the form of coins and bills.

• Save: Money that you set aside rather than spend immediately, often with a purpose, like buying a new video game.

• Spend: Using money to purchase items, instead of saving it. Money you spend is money that you cannot save.

Use real-life scenarios to show kids the difference between cash and other types of currency, and how you spend and save money yourself. If you're giving them an allowance, Greenlight's Save, Spend, Give tools are a great way to demonstrate how kids can allocate their own allowance.

Financial terms for kids ages 9-11

Kids who are a little older may have a stronger grasp of arithmetic and a better sense of the future. They may be ready to think about savings goals or even open a bank account. These kids can begin exploring more intermediate topics, such as:

• Budget: A financial plan that tracks your spending over a period of time.

• Goal: Often tied to savings, a goal is something you want to achieve with your money, like buying something new.

• Income: The money you receive through work, allowance, or other sources.

• Interest: For young kids, introduce interest as money you earn for keeping money in a bank. Interest is more commonly used to refer to the cost of borrowing, but an 11-year-old isn't taking out a loan.

The Greenlight app can help kids master these terms by allowing them to set savings goals and track spending.

Financial terms for kids ages 12-14

Financial literacy for kids and teens is especially important as they reach an age when they begin to think about how to earn their own money. Now, it's time to understand how money management works.

• Account: What you use to store money, usually opened with a financial institution like a bank or credit union.

• Deposit: Putting money into an account.

• Withdraw: Taking money out of an account.

• Savings: The money you set aside for later, either as an emergency fund or with a plan to meet a long-term financial goal.

• Invest: Using money to buy assets, such as stocks, bonds, or real estate, that you hope will become more valuable over time.

• Return: A return on investment is the money you get back when selling an investment. You generally hope it will be much higher than what you initially spent.

All of these features can be explored in Greenlight's investing app for kids, which allows kids and teens to invest in stocks of their own choice–with parental approval.

Financial terms for teens ages 15-18

Finally, as kids get closer to adulthood, student loans, and the working world, it's important to understand more advanced terms that will come up throughout the rest of their lives. These include:

• Credit: An agreement to borrow money to buy goods and services now, in exchange for payment later, most commonly accessed through a credit card. With credit, you can make purchases before you have the money to pay for them. Credit cards offer benefits like rewards, but also have high interest rates and can be very expensive if you manage them improperly.

• Debt: The money you borrow becomes debt, which has to be repaid based on the terms of the loan or credit agreement. Debt typically has a cost, known as an annual percentage rate (APR). An APR includes the interest rate of the debt, plus loan or credit fees.

• Credit score: Your credit score is a 3-digit number that tells lenders how likely you are to repay borrowed money. The higher your score, the safer you are as a borrower, which makes you more likely to be approved for loans with better interest rates and terms and receive a higher credit limit. It's extremely important to always pay debts on time and in full because a low credit score can make it harder to borrow money, or even qualify for an apartment or get a job.

• Taxes: Everyone has to pay taxes. This is a more comprehensive topic than a basic parent's guide to financial literacy, but you can at least introduce topics like payroll tax (Medicare and Social Security), sales tax, and income tax to help kids understand why their paycheck is less than the amount they earned.

• Gross pay vs. net pay: A teen’s first paycheck is a great opportunity to examine the difference between gross pay (the total amount earned) and net pay (the total amount received, after deductions for taxes and other withholdings.)

• Compound interest: Interest earned on your initial deposit plus the accumulated interest from previous periods, creating a snowball effect where your money grows faster over time.

As kids enter the workforce, the Greenlight app is a great way to help them better understand what happens to their money as they earn, spend, and save.

Teach money skills for life

Kids learn by doing — and Greenlight’s all-in-one family app helps you weave money management into daily life. Empower kids to earn and learn. Manage chores, jobs, and allowances. Teach kids to earn, save, and invest with the Greenlight app.