7 Tips for When and How to Talk to Your Kids About Money
7.4 MIN READ
Talking to kids about money is one of the most important things you can do as a parent. The examples you set now, in their childhood, will set up their foundation for handling money in their lives.
Many people think you should wait until their kids are teens to talk to them about money, but the truth is the sooner you speak with them about it, the better. Kids have 18+ years to learn about money, which gives you ample time to help your child set a positive financial foundation for themselves.
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What Age Should You Talk to Kids About Money?
There is no right or wrong age to talk to kids about money. You’ll know when your child is ready, and as long as you keep the conversations age-appropriate, you can keep building on your lessons as your child’s capabilities change.
Teaching Preschoolers the Basics
Believe it or not, you can start teaching your preschooler about money. As soon as your child can count, you can introduce money. Play games with your child sorting and counting coins. You don’t have to get into how much each coin is worth; just introduce the names of the coins and sort them.
You can also talk to your preschooler about how you are paying when you’re at the store or how you put money in the bank when you visit a bank teller. Making each of these habits natural will help your child incorporate them into their life too.
Let your child help by handing the money to the cashier or grabbing the change. Show your child what you do with the change, whether you put it in a piggy bank or back in your wallet. Show the importance of the value of money and how you should treat it.
Introducing the Value of Money in the Early Elementary Years
Once your child is in 1st or 2nd grade, you can start talking about the value of money. A great way to drive the lesson home is to play store. Play with ‘play money’ but let your child take turns playing cashier and shopper. Change the price of goods or even create a menu, so your child has to decide when to spend the play money. This helps your child see the value of the goods and make spending decisions when they are the shopper.
This could be a good age to start paying an allowance too. Even though your child is only 6 - 8 years old, earning a little money and learning how to save it and even budget for things they want is a critical financial skill. Let your child see now how hard work pays off.
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Talking to Pre-Teens About Needs and Wants
As your child nears the teen years, it’s an excellent time to teach the difference between needs and wants. But, in our instant gratification society, you have your work cut out for you with this lesson.
Rather than letting your child spend their allowance the second it’s received, teach them how to budget the funds. Teach your child to split the money into spend, save, and give categories. They can use the “spend” money to buy what they want, the “save” is to keep for a big financial goal, and the “give” is to support their favorite charity.
At this age, you can also start teaching your kids about the bills you pay, how you pay them, and even how credit cards work. You want your kids to understand that credit cards aren’t an extension of your income. You may use them to protect a large purchase or to earn rewards, but (hopefully) you pay your bills off in full each month and can show that the money comes directly out of your bank account.
Helping Teens Find Their Financial Way
As soon as your child hits the teen years, give them some independence and see how the money lessons you taught to this point worked. Let your teen get small jobs, like shoveling the snow, mowing lawns, or babysitting. Then help them budget the money earned, so they don’t blow the entire amount at once.
As your teen nears 16-years old, consider making them an authorized user on your credit card. Then, you can still supervise their spending and hold them accountable for the charges unless you worked out arrangements beforehand.
Not only does this teach your teen good financial habits, but if your credit card company reports authorized users to the credit bureau, you’ll help your teen build credit.
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Tips for Talking to Kids About Money
Talking to kids about money can feel stressful or even uncomfortable, which is why discussing money early on is the key. You will help your child feel comfortable around money and empowered when making financial decisions.
Here are some tried-and-true tips to help kids learn about money.
1. Start Early
Don’t wait until your child is a teenager. As soon as your child can talk and count, they can learn about money. If you’re already past that point, start today. It’s never too late to start, but the earlier you do it, the better.
2. Do Financial Tasks Together
Young kids can help you find groceries in the sales flyer. By recognizing the foods you usually have in the house, your child will learn to shop sales versus just buying whatever they want.
As your child gets older, include them in decisions at the store. Let them see the questions you ask yourself and your rationale for making buying decisions.
You can even let your child sit with you while you pay bills. Talk your child through each step you take and show them how you deduct the money from your checking account when you write a check or pay a bill online. The more evidence your child sees when you manage the bills, the easier they will learn the lesson.
3. Admit Your Mistakes
Don’t let your child think your money management has always been perfect. Instead, talk about your mistakes and let your child learn from them. Keep the conversation age-appropriate so they not only understand the topic but can comprehend what you’re saying.
It’s okay to tell your child what you would have done differently or how different your financial life would be right now if you knew more about finances at a young age.
4. Have Open Conversations About Money
Don’t make money seem like a ‘taboo’ topic in your house. Have open conversations about money with your kids around, as long as they are old enough to hear and comprehend it.
This makes money seem natural and financial decisions like a group effort versus something you must hide and difficult decisions you must make yourself.
5. Use Visual Aids Whenever Possible
If your child earns an allowance, use glass jars to divide the funds. Make a “save,” “spend,” and “give” jar and help your child divide the funds between each jar. If you opened a bank account for your child, take them to the bank and show your child how to complete the deposit slip. You can even let them give the money to the teller.
6. Have an Abundance Mindset
Talking to kids about money can feel stressful, especially if things aren’t going well for you at the moment. Try keeping any negative talk for behind closed doors. Instead, teach your child how to save and budget for what they want.
For example, if there’s a toy your child wants and it’s not in your budget, don’t say, “sorry, we don’t have the money for it.” That puts a negative spin on finances. Instead, say, “well, it costs $x, and you have $x right now, so how much do we need to save to get it?” Then together, you can create a plan to help your child save for the toy. Then, when they can buy it, the toy will mean much more to them than if you just handed it to them.
7. Show Your Child How You Save for Goals
If you have family goals, such as a family vacation or buying a new car, let your child see how you budget and save for it. This gives your child real-life experiences when you achieve the goal. They’ll see the hard work you put in to reach the goal and the excitement everyone experiences when you’re able to enjoy it.
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Money is a topic not talked about enough in school, so it’s essential for you as a parent to help your child learn this topic. Making money and financial decisions seem like a natural part of life helps kids grow into financially responsible adults.
It’s never too early or too late to start talking to your kids about money. However, keep your conversations age-appropriate, and as hands-on as possible, so your kids get the most out of the lessons.