Tips for Talking to Your Kids about Money

Tuesday, August 12 is recognized as International Youth Day. This observance offers an opportunity to recognize the importance of children and young adults in society, as well as ways to support their development and growth. Children are naturally curious, and as they get older, they’re sure to have more questions about money.

On the surface, talking about money with your kids may seem like a tough task. However, by breaking the topics down, using analogies that your kids can grasp, and truly listening to their questions, you’ll help them better understand these concepts. Here are some common topics your kids may ask about when it comes to money, and how you can explain and illustrate them.

Exploring Financial Topics with Your Children

Your child’s age determines which topics you should cover when it comes to money. Here’s a general framework you can follow, which can certainly be tweaked depending on your child’s interests and maturity level.

• Children aged 6-8: focus on the purpose and importance of money—how it’s exchanged for goods or services
• Children aged 9-12: focus on savings strategies and needs vs. wants, especially if your child(ren) has chores or an allowance and expresses interest in spending money
• Children aged 13-15: continue to highlight savings strategies, and explore the opening of a savings account (and potentially a checking account)
• Children aged 16-18: as your child most likely has accounts by this point, review responsible spending with them. Also, consider exploring the purpose of credit with them and how to manage it wisely  

Regardless of age, here are some general topics that are helpful for kids to know at any age:

Earning Money

Just like laundry, your kids may credit magic for new gadgets and groceries winding up in the house week after week. But the concept of exchanging goods and/or services has been around forever and is a concept that kids should be able to grasp. Here are some tips on starting a conversation about money, particularly for younger children.

• Start by explaining your career to your child. They won't need an in-depth explanation. If you're a nurse, perhaps this could be simplified to "helping patients when they're sick."
• Show your child physical money (dollar bills and coins) and how explain how you're given these in exchange for your work. It's also a good idea to show your debit and credit cards to your kids, and how money is connected to those.
• Emphasize the importance of money, and how it's used to purchase things like groceries, furniture, and toys.

If your kids are a bit older, this could be a good way to open the conversation on ways they can earn money, especially if they are not yet old enough to hold a part-time job.

Saving vs. Spending

If your child’s eyes become big when describing all the things that money can buy, this may be a good opportunity to explain saving vs. spending! It’s crucial that your child understands the value money plays in everyday life. Fortunately, there are some excellent, tangible ways you can explore these topics with your child.

Whether it’s for a family vacation, a new car, or even a family pet, there are lots of common savings items you can use to illustrate the concept to your child. When discussing savings, stress the importance that the money is put away in a safe place for that item and nothing else. By keeping your child aware and engaged of your savings, they’re likely to also feel the joy that comes from finally making the purchase.

Here are some simple ways to teach your child about saving:

• Have a clear and defined savings goal. If you have something to save toward, it will only make the concept clearer to your child.
• A classic piggy bank (or a jar or container of some kind) is a great savings tool for kids. Most are not only visually appealing, but also reinforce the money being put away for a specified purpose.
• Consider using a tracking app or an illustration to show your child how you’re coming along in your savings goal in a tangible way.

Budgeting

As you stress the importance of savings to your children, budgeting is another related concept that they’ll want to know. While your child surely doesn’t have any bills or other fiscal responsibilities, there are simple ways that you can teach them the value of a dollar and planning out their spending.

Use these tips as starting points to explore budgeting with your kids:

• Take your child on a trip to the store and give them $5. Let them know that this is what they have to spend. In doing this, it will teach them to prioritize what to spend their money on and the value of a budget.
• Create a budget for a family outing, such as a trip to the zoo or the movies. Lay out the cost for tickets, food and drink, and any other extras, and ways in which to stay within budget.
• Make a family dinner for a set amount of money, like $25 to $50. Take your child to the grocery store with you so they can see how you stick within budget and choose certain items over others.

Needs vs. Wants

While discussing these topics with your kids, it’s also a good idea to review needs vs. wants with them. This can be done with younger children, but is especially important for older kids, especially when they start to have their own money to spend. By instilling these values in your kids, they’ll be able to manage their money responsibly and limit unnecessary spending.

Here are some tips to review needs vs. wants with your child:

• Make sure your child understands what a 'need' is and what a 'want' is. Use some objects they could understand, such as fruits and vegetables (needs) vs. ice cream (a want).
• Take your child on a shopping trip with you so they can see firsthand how you prioritize necessary purchases vs. unnecessary ones.

It’s also a good idea to let your children know that it’s ok to treat themselves once in a while. If your child has saved for a toy or a video game, let them know that this was purchasing a ‘want’ responsibly, where they saved and actively put money towards their goal, instead of just outwardly buying it.