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My preschooler started begging us to buy him things in every store we went in. When we said we couldn’t afford it, he would throw a tantrum and start grabbing stuff off the shelves. (Thanks, Walmart, for displaying those sugar cookies right at eye level for a small distraught child.)
The thing is, it was never that we didn’t have enough money to buy those things. We just had different ideas about how we wanted to spend that money. Like milk every week or snow boots in winter. Or, you know, daycare.
Teaching kids financial literacy at an early age is important so they can develop good money habits. But money is definitely complicated. We’ve got cash, credit, savings, investments. Needs vs. wants. And underpinning it all is the shame. Shame if we have less than our friends. (Are we not doing something right?) And shame if we have more. (Why aren’t we giving it away?)
Don’t worry. I’ve experienced all this and more. At one point, it was easier to talk about poop than money. Then I found the book The Opposite of Spoiled by Ron Lieber, and everything changed. Now, here’s how I talk about money with my kids.
In this article
How to talk with kids about money
The biggest thing about money is honesty. Many people shroud the family finances in mystery. But that does not help learn money management.
Here’s what happens if we DON’T talk about money.
Younger children may be afraid to ask questions about personal finance.
Older kids may learn spending habits from social media.
Without guidance, kids become easy targets of sophisticated ad marketing.
So having conversations about money with your kids is something you should do, like, now. It’s part of the whole parenting thing.
However you talk about money, you can usually split conversations into three broad categories: spending, saving, and giving.
Spending
You can talk about spending when setting up a bank account, budgeting as a family, and applying for a debit card or credit card. The important thing to incorporate into this conversation is your “why.”
For example, “Mommy and daddy are going to be working late this month so we can afford our family trip next month.” It makes sense to kids when we talk about “why.”
Saving
Saving money can be fun for kids. They already understand collecting matchbox cars, seashells, and sticks. If you can instill a love of saving money in them, you’re setting them up for success in reaching financial goals.
Introduce the idea of a piggy bank early on. Encourage them to save money in a savings account and reward them when they reach their savings goals. When they set aside money for later, tell them you’re proud and give them an extra helping of dessert.
The last piece of the puzzle is about giving money away. It may sound counterintuitive, but think about how many birthday presents we give away each year. It adds up! Giving money can help kids learn generosity.
Young kids like to make people happy. You can help them understand how giving may impact their relationships and their budget. Encourage them to use their own money to buy their friends’ birthday presents. The key here is to make sure they get to pick out the gift.
One of the first lessons in financial education is that we don’t always get what we want. First, lay the groundwork for this conversation. Explain the difference between things we need (house, bed, clothes, food) and things we want (toys, entertainment, candy).
Then when they ask for something you don’t want to buy or can’t afford, tell them no and stick to it. Then explain why honestly and straightforwardly. I like to say things like, “If we bought X, we wouldn’t be able to buy Y.” Or, “We could buy X, but we’re saving up for Y.”
Give an allowance
To learn how to manage money in the real world, kids need their own money. It’s tangible, and it has consequences that they can handle. The upside to the allowance is that they learn patience, counting, and saving and spending skills—all while you oversee and guide.
The downside? They might lose their money or misspend it. But that’s part of the learning process. Plus, it’s better to learn those lessons on a few dollars than as adults when their credit score or mortgage is on the line.
Help them find a job
Beyond an allowance, you should also encourage and enable them to find a job. Jobs teach kids about work ethic and responsibility. And I don’t just mean household chores—they should be doing that, too. But grownups don’t get paid for chores, so try to help them with a more “real” job outside the house.
For example, little kids can collect pop cans. They can turn in pop cans for spare change at scrap yards or even grocery stores in states like Michigan and California. Kids can run a lemonade stand, mow lawns, walk dogs, or babysit as they get older. If they’re really into it, you can help them start their own website or make business cards on Canva.
Save, with interest
You can motivate your kids to save more by giving them a little extra allowance when they save. In doing so, you help them learn about interest. On that topic, check out the children’s book One Cent, Two Cents, Old Cent, New Cent by Bonnie Worth. It explains the interest you earn vs. the interest you pay funnily.
You’ll also need to look for a place to keep their money. A mason jar or recycled plastic container with a lid would work, or a traditional piggy bank. I bought a fanny pack for my kid ($20) to carry with him into stores. Capital One offers a kid’s savings account with 2.50% APY and zero monthly fees if you want to explore an actual bank account.
Being rich or poor is one of the hardest things to talk about. But don’t sidestep the social or economic status conversation. When kids go to school, they figure it out anyway. And it’s better to help them learn now how to talk about it gracefully.
My kid is four, and he’s already saying things like, “I’m jealous. I want that house.” One way to respond to these types of comments is by saying, “We’re lucky because we can afford X.” Or maybe, “Yes, some people have more than us, but some people have less.” It’s about cultivating gratitude.
Donate
One different way to help cultivate gratitude is to make regular donations. You could implement a “one in, one out” rule: you give one away for each piece of clothing or toy you buy. Look for Salvation Army or Goodwill donation centers or drop boxes to donate those items.
Another way to help your kids get into the donation spirit is to box up clothes they’ve outgrown. Then, give them away to younger siblings, cousins, or neighbors. Or you could encourage your kids to take a small percentage of their allowance and donate it to something they care about, like a pet shelter.
Costs and fees
Below are some examples of what you might need to spend to teach your kids about money.
Allowance
$1/week per year of age
Piggybank
$0-20 depending on what you use
Child savings account
$0-$5/month depending on the account
Pros/Cons
Pros
Kids learn generosity, patience, and responsibility.
You instill lifelong financial literacy skills in your children.
As children become more involved in the family finances, you may even save money.
Cons
It’s awkward as heck.
Your kids may be disappointed, especially when you say no or set limits.
Family and friends may think you should “protect” your kids from adult pressures.
The bottom line
Talking with kids about money is super awkward. Especially if you’re doing it in front of grandparents, friends, or cousins. People who have more or less money might not like that you’re talking about it.
But your kids will benefit from the real-life money lessons. They’ll learn how much things cost and how to pay for them. They may even be inspired to save more and spend less. The key is to be as transparent as possible. Because even if you’re not, kids will see right through it anyway.
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A veteran wordsmith and research nerd, Brittany Wren spent a decade working in higher education where she helped people overcome challenges to chart a path forward. These days, she writes about personal finance, careers, parenting and education. Her content has been published by a wide variety of brands including T-Mobile, Intuit, LifeLock, Reliant Fund Administration and CURO Financial Technologies Corp.
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