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How to Teach Kids about Finance

Updated: Apr 15

A 5-step plan for teaching your children about money and financial wellness

Little smiling boy

You may be wondering when to talk to your child about money, how to teach your child about saving money, or how to teach your child about budgeting at an early age. As if raising children wasn't hard enough, teaching your child finances can be a daunting task. But it doesn't have to be!

When it comes to talking to your children about money and finances, there are lots of reasons why parents put it off. But, that's why we're here to help.

Below is a five-step plan to teach your children about finances. And, before you (or your child!) get overwhelmed, remember that small doses of money talks are better than none. And, real world experience can be the best teacher of all.

You don't have to "nail it" on the first try.

As parents, it's only normal to want to "nail it" in everything you do for your family. That said, we parents know we're getting things wrong—fingers crossed it's not the big things!—but we're still trying to do things right. Too often we become overly concerned with trying to do the "right thing" or even the "very best thing" that we become paralyzed and end up doing nothing at all.

We see this unfortunate result all too often when parents try to figure out the "best way" to teach their children good financial habits. As it turns out, financial paralysis is a common thing many people experience (see: how to overcome inheritance paralysis). That's why we're here to help you through these hard financial discussions and decisions.

Having financial conversations with your children is more about normalizing finances and financial decisions, rather than making them huge and stressful moments. These conversations don't have to be perfect, but they do have to at least happen.

Small conversations are better than none.

Because there are no hard and fast rules about which financial conversations to have with your children at certain ages, we parents all too often end up skipping the conversations altogether. It's not like parents (or children, for that matter) have homework or worksheets about why you should have a savings account, or why it's important to live within your means. Of course we're skipping these conversations, because we don't have benchmarks to guide us along the way.

But small, deliberate conversations can make a big difference. The "money talk" doesn't have to be a lecture or a worksheet to be effective. Instead, it can be a two minute on the fly conversation as you're paying your utility bills, getting money out of the ATM, choosing which groceries to buy, or handing out allowance money.

After all, these conversations matter. Did you know that most money habits are formed by age 7, according to a 2018 study by Purdue University*? That means that, even if you don't have money conversations with your kids, they will still learn from your behavior or your comments about saving money, paying down debt, racking up credit cards, being worried about bills, and more.

If your child is going to learn financial behaviors from you anyway, we recommend you have thoughtful money conversations with your children. That way, you're more in control of the message and lesson. And, of course, you can help your children learn about money, how to save money, and how to spend money wisely. These conversations will help set up your child for a life of financial wellness. And, they don't have to be long and burdensome for you or your child.

Lead by example.

You know what they say: actions speak louder than words.

We aren't suggesting that you sit down with your children to "have the conversation" as a one-time item to check off your list. Rather, teaching financial habits is best done through leading by example and using real life occurrences as teachable moments as they come up. Sharing these real-life examples with your children will teach them about money and finances in appropriate, kid-size doses.

So, for example, next time you're at the grocery store, explain to your child why you're choosing one brand over another. Perhaps you could explain that the money you're saving from the expensive cereal will pay for an extra dessert. Or, next time you're paying bills, explain to your child that things like electricity, water, and food cost money. Or, take your child to the bank with you (or show them as you use your mobile banking app) when you deposit money into your savings account. That way, your child can learn by your example, and experience firsthand, how to manage money well.

Your 5-step plan to teaching your children about finances

Need a road map and some specific ideas to accompany your commitment to share real world finances with your children? Okay. Here are some of our favorite one-off suggestions on teaching children about money. We've also thrown in an infographic for what's appropriate at each age.

  1. Start slow and ask open ended questions about money. How does your child feel about money? How does she earn money now? How will he earn money as an adult? How does your child think you, his parents, earn money? Let her think as she deliberates her answers. You'll know when it's enough.

  2. Be honest. If you don't know the answer to a question, or if the question isn't something you are willing to share with your child (e.g., "How much money do you make?"), tell him that. But, encourage him to continue to be curious and ask lots of questions.

  3. Consider an allowance. If your child has no means to receive income, she has no means to build wealth (well, relative wealth), make mistakes with money, and learn good financial habits. Some parents tie allowance to daily or weekly chores. We recommend doing what works for you and sticking to it. As all parents know, consistency is really important with kids.

  4. Make it fun. For Pete's sake—remember board games?! Games like Monopoly(R) and LIFE(R) teach children basic financial concepts—and, importantly, that money management is fun!

  5. Real world opportunities. When your child loses a library book, breaks something or wastes something, discuss it. View it a moment to revisit finances, money and values. Let your child sit with you while you pay your utility bills. We're fans of teaching children real numbers to get a sense of how much things cost in the real world.

Looking for more basic age by age guidelines?

*PBS News Hour, "Money habits are set by age 7. Teach your kids the value of a dollar now." (2018)


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