How to Talk to Your Kids About Money

As a loving parent, one of the best things you can do for your kids is to teach them about money. If you can give them the gift of financial literacy, you’ll be giving them something they can use their entire lives, and even pass on to their own children. Conversations about money are rarely easy, so here are some tips to help.

Start While They’re Young

As soon as your child is able to verbally communicate with you, you can begin teaching the basic concepts of money. It can be as simple as playing “store” with your child, letting them be the cashier with a toy cash register and toy food or other items around the house. This shows them the give and take that happens with commerce. 

Gift your child a cute piggy bank so they can deposit coins they get from relatives and friends. Help them learn how to count coins, and note how the number of their coins is increasing over time. This helps to teach about saving. 

Little things like this help to bring about an awareness about money and how it works in everyday life.

Consider Giving Your Child an Allowance

Until they turn 16, your child won’t be able to earn a paycheck. But that’s a little late to teach about money, considering that they’ll turn 18 in just two years. Instead, when your child is in elementary school, you could start giving them a small allowance to manage. This allows them to practice making decisions about how to use their money, whether it’s saving for something special or spending on small treats. By the time they reach middle and high school, you can discuss more advanced topics such as earning money, banking, credit and the impact of financial decisions on their future.

Support Their Business Ideas

If your child seems to have a creative knack for coming up with business ideas, be as supportive as possible. If they want you to buy them a shovel so they can go around to neighbors’ houses and shovel driveways, tell them it’s an investment in their business and you expect to get your money back, plus a few dollars of interest. If they want to “invent” a product, sit down with them and help them plan it out, including coming up with a plan for how much it would cost to make it and how much profit there might be. 

Use Everyday Experiences as Teaching Opportunities

Everyday activities present numerous opportunities to teach your kids about money. Grocery shopping, for instance, is a great way to introduce concepts like budgeting, comparison shopping, and the difference between needs and wants.

Involve your children in the shopping process by giving them a budget for a specific item or letting them help you compare prices. You can explain why you choose certain products over others, such as opting for a generic brand to save money,  buying in bulk to reduce costs or paying extra for value, for an item that will last longer. These practical experiences help your children understand the value of money in real life, and how to make informed financial decisions.

Introduce the Basics of Credit and Debt

As your child approaches their teenage years and reaches the legal age to get a job with a paycheck, it’s important to introduce the concepts of credit and debt. Explain how credit cards work, the importance of paying off balances in full, and the potential dangers of accumulating debt. Discuss how interest works and how borrowing money can lead to paying back more than the original amount borrowed. You can also talk about the importance of maintaining a good credit score and how it affects their ability to borrow money in the future, such as for a car loan or mortgage. Teaching these concepts early on can help your children avoid common financial pitfalls and develop a responsible approach to credit and debt management.

Be Honest About Money

It’s understandable if you don’t wish to share the details of your household finances. You also don’t want to burden your kids with financial worries. But it’s helpful to be honest about money, too. If it’s getting near the end of the month and you need to curb spending so you have the mortgage payment, you can share that you can’t afford certain things at this time. Explain about cash flow, and how proper budgeting can ensure there is plenty of money for essentials, but not always money for indulgences. This is also a good opportunity to explain that not every family has the same financial resources, but that’s okay. That’s what capitalism is about, and some people earn more, while some people earn less. 

Discuss Money and Power

Money gives a person the freedom to have more power over their own lives to make choices. But make sure you also explain that just because a person has more money than someone else, that doesn’t make them better or smarter than others. It simply means they have more money. As your child gets older, they’ll form their own opinions about money and power, but you want to ensure that they don’t attach emotional feelings to money. It’s simply a vehicle for commerce, and not something to love or hate. This will help to ensure that your child develops a healthy attitude toward money, using it to reach financial goals.

Talking to your child about money is a crucial part of their education. By starting early, using everyday experiences as teaching moments, and being open and honest about finances, you can help your child to develop the skills they need to manage money wisely their entire life.

by Kate Supino