How Early Should I Start Talking to My Kids About Money?
Do you ever wonder what is the right age to talk to your kids about money? Or what should you be talking to your kids about to help them understand and manage money well?
Talking About Money Is Probably Easier Than You Expect
Most kids are naturally interested in money, or the things that money can buy, at an early age. This may come in the form of the tempting candy in the grocery check-out line or a desire for french fries from the drive-thru. You can use this natural interest to help your children build foundational financial thinking skills that will help them throughout life.
Use Daily Life Events to Teach Your Children Key Financial Principles
Where Does Money Come From?
It’s understandable that children don’t always know where money comes from. To them, our cash or credit card just appears from our purse or wallet. Make the connection for them that the money you spend is earned through work. Maybe you leave the home to go to work, or work from home, or maybe your work is taking care of these precious children. Whatever the case, help them understand the connection.
Another way we receive money is from gifts. If they receive a birthday gift, they learn that money sometimes comes as a gift.
Explain Wise Purchase Decisions
When you are out shopping, explain the choices that you are making when you choose one product over another. You are looking at the price, how much you need, the quality of the item, and how suitable the item is for how you’ll use it. If they’re trying to choose between two items, talk with them about the benefits of each item, and the downsides of the item. Ask them what is most important to them. This helps them flex their decision-making muscles.
Working Toward a Long-Term Goal
Another lesson to share with your children is that it can take time to meet a financial goal. Perhaps you’re building an emergency fund. You can involve your children by telling them about your goal and sharing specific examples of the trade-offs you make to put money aside for those goals. When you reach a milestone toward your goal, celebrate with them. Make some noise and do a happy dance together!
Understanding that many of our goals take time and perseverance, and even that there are setbacks along the way, will help them in many areas of life.
Teach Them about Needs Versus Wants
This can be tough for children. In the moment, a drive-thru french fry may seem like a need. Here you have the opportunity to teach them that food is a need, but the particular type or method of getting food is a want. For example, you could help them see that for the same amount of money you can make many more french fries at home using the bag of frozen fries and even more using a bag of potatoes bought at the grocery store. This small teaching moment will help them see the difference between a need (the priority for your family’s money) versus a want (a treat and nice-to-have after our needs are met).
Here’s the example I might use to talk through with your kids:
French Fry Options
Medium Size (Drive-Thru): ¼ of a pound for $2.99
Frozen Fries (Grocery Store): 2 pounds for $2.96
Bag of Potatoes (Grocery Store): 5 pounds for $2.67
Ask your kids which they would choose and why, and talk to them about the trade-offs of time, convenience, quality, quantity, and money.
Get Some Fun Help from Kid Experts
Sesame Street has a fun website called Finances for Kids. On the site, there are videos of Elmo learning about these financial fundamentals. What will Elmo decide to buy with his dollar? What will Elmo learn about where money comes from? Cookie Monster and kids relate to how it can be tough to wait for things they want. There are also printables for parents and caregivers and other resources to help your little one.
Lifelong Financial Learning
Your money discussions with your children will change and evolve as they grow older. The conversation may change from the candy at the grocery check-out, to the latest fashionable clothing, shoes, or technology, to money decisions related to work, college, or a trade school. However, the key principles are understanding where money comes from, how to make wise purchase decisions, and needs versus wants. These will be constant themes that will serve them well at any age.
Marjorie McLean is a financial counselor and educator whose favorite childhood Saturday morning activity was counting the coins in her piggy bank. As an Accredited Financial Counselor (AFC®), she is a member of the Better Financial Counseling Network and is the owner of FinancialPearl. Marjorie partners with people, providing tools, resources, and information, guiding them to take positive steps to identify and achieve their financial goals.