How to Talk to Your Kids About Money

Simply by incorporating positive financial conversations into your daily interactions, you can help your kids develop a healthy relationship with money from a young age. Most kids will have the requisite math skills to start learning about money by second or third grade, but you can begin introducing the basic concepts to children as young as age three or four.

Not sure where to start? Here are some ideas to begin laying the foundational building blocks for younger kids and reinforce personal finance skills for older kids.

Earning

Understanding the value of earning money is the foundation of financial literacy. Start by explaining that money is earned through work, and different jobs provide income. Use relatable examples from your kids’ everyday life to illustrate this. Talk about your and your partner’s job, their teacher’s job, and other family or close friends’.

From a young age, children can grasp that money doesn’t just appear – it is earned through effort and skill. Whether it’s completing chores, receiving an allowance, or eventually taking on part-time jobs, kids should understand that earning money requires responsibility and effort. Discuss the variety of jobs in the community, emphasising that each role contributes to the economy and that different skills are valued differently.

For Younger Kids: Introduce the concept with stories. In Arthur’s Pet Business by Marc Brown, Arthur earns money by starting a pet-sitting business and highlights the importance of responsibility. Engage them with questions like, “What jobs do we see in our community?” and “What jobs are you most interested in?”

You can also create a chores chart at home, where completing tasks earns small amounts of money or some other token that can be traded in for a reward. This not only helps them understand the connection between work and earnings but also instils a sense of responsibility and accomplishment.

For Older Kids: Discuss more sophisticated concepts such as allowances, part-time jobs, and entrepreneurship. Brainstorm ways they could make extra money like offering to clean up the neighbour’s yard of palm fronds, to learn about earning, managing, and saving money. Discuss different career options and how education and skills relate to earning potential.

Spending & Giving

Spending is an integral part of money management. It’s important for children to learn how to make smart choices with their money to avoid financial pitfalls. Explain that spending wisely means prioritizing needs over wants, planning for purchases, and understanding the influence of advertising to avoid impulse buying. Encourage discussions about budgeting and making trade-offs to highlight the importance of thoughtful spending. Charitable giving can also be introduced when discussing how and where our kids will spend their money.

For Younger Kids: Focus on mastering the concept of needs versus wants. Read Bunny Money by Rosemary Wells, where Max and Ruby must make choices about how to spend their money. Play games like “Need or Want,” where you name household items (food, blanket, video game, clothing, toys, etc.), and your child decides which category they fall into.

During shopping trips, involve your child in making purchasing decisions. Ask questions like, “What are some things on your wish list?” and “If you had $25, what would you buy and why?” You can then guide these discussions to help children understand the importance of prioritizing needs over wants. Kids don’t have to exclusively donate money to introduce the concept of giving. Have your child clean up his/her room to find old clothes and toys that are no longer being used to donate to children in need.

For Older Kids: Starting around middle school, teach your kids about budgeting. Use practical exercises like creating a family shopping list, distinguishing between needs and wants, and prioritizing items. Discuss opportunity cost, explaining that choosing to buy one item often means forgoing another. Young people are swayed by advertisements, so this is also a great time to educate your children about the influence of advertising. Watch some TV, online advertisements, or TikTok influencers, then discuss the tactics used to persuade consumers to buy.

If your teen decides to donate money through the budgeting process, research local charities together and choose one that your teen is interested in helping. Remind your teen that monetary donations are not the only form of giving. We can also give our time, energy and skills to give back to these organizations.

Saving & Investing

The concepts of saving and investing are crucial for building long-term financial security. Teach children that saving money means putting it aside for future use, while investing involves taking calculated risks to potentially grow money over time. Highlight the benefits of saving for specific goals and the power of compound interest in building wealth. Encourage regular saving habits and introduce the basics of investing as they get older.

For Younger Kids: Start with simple saving concepts. Create a piggy bank – or better yet use a clear container so they can see their savings accumulate – and encourage your child to save part of their allowance or earnings from chores. The Berenstain Bears’ Trouble with Money by Stan & Jan Berenstain illustrates the importance of saving, earning and giving. Ask your kids, “What are some things you would like to save for?” and “Why is it important to save money?”

For Older Kids: Introduce the concept of saving accounts and compound interest. Opening a savings account at a bank is the easiest way for kids to start earning ‘unearned income’, through interest on their savings deposit. Use tools like the Compound Interest Calculator to show how savings can grow over time. Discuss their long-term savings goals, such as college or a car, and how to achieve them through regular saving and smart investing.

Engage them in simple investment activities, like picking a stock to follow. Discuss the risks and rewards of investing, and if you’re able, buy a few shares of stock for your child to follow. Check in on it regularly to show how the price can change with market conditions or news from the company. Let your child choose a company that they know and like, so they’ll be more vested in the process.

Borrowing

Borrowing money is a part of modern financial life, but it comes with responsibilities. Teach children that borrowing should be done thoughtfully and only when necessary. Explain the difference between good debt (like student loans or a mortgage) and bad debt (like high-interest credit cards). Discuss the importance of paying back borrowed money on time to maintain good credit, which affects future borrowing power.

For Younger Kids: Explain borrowing through simple, relatable terms. Use examples from their daily life, like borrowing a toy from a friend. Discuss the importance of returning borrowed items in good condition and on time. Ask questions like, “What would you do if you borrowed something, and it got damaged?” to instil a sense of responsibility.

For Older Kids: Introduce the concepts of credit, loans, and interest. Discuss scenarios where borrowing might be necessary, such as for education or a major purchase, and the importance of using credit responsibly. Review a credit card statement together, highlighting key terms like APR and minimum payment. Explain the impact of good and bad credit on their financial future.

Protecting

Financial protection is often an overlooked aspect of money management. Teach children about the various ways to protect their financial resources and personal information. This includes understanding the need for insurance to cover unexpected events, the importance of safeguarding personal information to prevent identity theft and being aware of fraud schemes. Emphasise that protecting your money is just as important as earning and saving it.

For Younger Kids: Teach basic safety principles, such as not sharing personal information with strangers or online. Use simple analogies to explain why certain information should be kept private. Engage in activities like sorting and shredding junk mail together, discussing why it’s important to destroy documents that contain personal information.

For Older Kids: Discuss more advanced topics like online safety, the importance of strong passwords, and recognizing phishing scams. Share any phishing emails you receive, so they know the types of things to be on the lookout for. Explain different types of insurance (health, auto, property) and why they are necessary. Review the concept of an emergency fund and how it can provide financial security in unexpected situations.

 By integrating these tools into your daily conversations and activities, you can equip your children with the knowledge and skills they need to navigate their financial futures confidently.   Even if you struggle with money yourself (we all do!), don’t let that be a roadblock.  Use this opportunity to learn alongside your kids.

Start early, build gradually, and always lead by example – your kids are learning from the financial habits you exhibit as much as from your words.