Talking to Kids About Money: 12 Tips for Parents and K–12 Students

Want to raise financially responsible adults with good money habits? Start talking about money when your kids are young.

If you’re like most parents, the idea of talking to kids about money is about as appealing as changing diapers, being the sole soccer carpool driver for an entire season or taking away your teenager’s phone so they’ll study.
They’re all dirty jobs, but sometimes you’ve got to step up.
The good news is that when it comes to talking to kids about money, most of us are muscling through our discomfort. According to a Chase bank survey, more than 70% of US parents are regularly discussing financial topics with their children. They’re even talking about their family’s own financial situation.
Passing on financial information and values to our kids from a young age is critical in helping them develop a healthy relationship with money. A TD Ameritrade study found that the way your parents handled money may be the biggest influence on how you manage your own finances now, proving that our influence is paramount.
It’s important for children to have a familiarity with the concept of money, to understand how it works, and learn how to manage it in a positive way. It’s possible to incorporate frank discussions and create opportunities for your children to become financially literate before they reach adulthood. Here are 12 ways to incorporate money sense into your parenting.

1. Prioritize Day-to-Day Modeling Over Lectures About Money

There’s no “right” time or script for talking about money with your kids. Just like most of your family values, they’re imparted on a daily basis through your choices and actions. While it’s important to have age-appropriate conversations about money with your kids, what you do every day is what they’ll really remember.

2. Talk About Your Buying Decisions

Picking up two boxes of crackers because they’re 2 for $3. Buying the more expensive toilet tissue because it’s made of recycled materials. Choosing to lease your car instead of buying it. Leaving an item in your online shopping cart for a few days while you think about it.
As adults, we’re constantly making personal decisions about the way we spend our money. Even if your young children don’t get the nuances of the choices you make, it’s helpful to share them so they can learn how we make money work for us.

3. Communicate the Difference Between Spending, Saving, and Sharing

The University of Minnesota Extension suggests teaching kids about finances by dividing the way we use our money into three categories:

• Save: We set aside money to buy something in the future or prepare for an emergency
• Spend: We buy something that we want or need right now
• Share: We give to others who may not have enough money for the things they need or to causes we support

Even kindergarteners can be given an allowance that is split into three so they can start making decisions about their “income” from an early age!

4. Be Specific About Why You’re Saying “No” to a Purchase

Whether it’s yet another fidget toy for your 8-year-old or an outrageously expensive pair of sneakers for your 15-year-old, you’re probably well acquainted with saying no to some of their purchasing pleas.
Instead of saying a simple, “No”, “We can’t afford it” or even “It’s too much money”, consider offering insight into your decision. Why are you refusing to buy it for them? “It’s not a good financial decision right now” or “It’s not a wise use of our money” and a basic explanation about why that’s true will go a long way to helping them understand the value of money.

5. Be Open About Your Own Experience with Money

Whether you’re a super saver or you’re constantly struggling with credit card debt, it’s helpful to share with your kids what you’ve learned from experience over the years. Whether you talk about it or not, they will observe the way you spend money.
Being honest about the good and the bad decisions you’ve made will help them follow in your positive footsteps – and avoid the pitfalls. Look for age appropriate ways to have those conversations over time.

6. Provide a Snapshot of Your Household Expenses

Do your kids know what a mortgage is? Or that you have to pay for electricity, food, clothing, and even their precious Wifi? They may have heard you mention these things from time to time, but it’s even more helpful to them to see what that looks like.
Consider listing all of your monthly household expenses, including what you contribute to saving for the future. While the exact numbers may not be meaningful for them, if you put it into a pie chart to represent what you have to spend to live your current lifestyle, they can understand what financial responsibility looks like.

7. Talk About Your Family’s Financial Values

Every family has a unique relationship with money. For some of us, takeout on Friday nights is as necessary as the water bill we pay each month. Others would rather direct that money to an annual vacation fund. Of course, our household income will have a huge impact on what we consider “worth” the money.
Think about having a family meeting in which each member of the family – including young children – weigh in on the things that money can buy that are most important to them and adjust your family budget accordingly. The next time you say no to an impulse purchase, you can refer back to what you all decided was worth investing in.

8. Be Honest About Money’s Place in the World

Even young children quickly grasp that not everyone has the same amount of money. It’s important to talk to your kids about privilege and inequality and some of the many ways that the playing field is not level for everyone.
Money has the power to help someone change their circumstances, e.g. getting an education that leads to a satisfying, stable job. It can also shut people out of opportunities, e.g. not being able to afford that education. It’s complicated and every family will have their own point of view on it.
Encourage your kids, from a young age, to think about money’s role in their life and the world at large.

9. Give Them an Opportunity to Manage Money from a Young Age…

Do your kids have an allowance? For very young kids, a weekly allowance that equals their age is a great way to get the financial literacy ball rolling. Invest in the proverbial piggy bank to help teach kids to find their own financial way in the world.
As they get older, and money becomes more important to them, they’ll have to learn how to manage their desires with limited resources—just like adults.

10. … And Let Them Make Mistakes

It’s interesting to see what individual kids will choose to do with their money and what spending habits they’ll develop over the long term. Some of them may hoard it, others will spend it as fast as they get it. Either way, they’re learning.
You’ll observe many “aha” moments without having to say a word, including when they blow it all on candy or iced coffee and realize they don’t have enough money for a big-ticket item they really want. This is a valuable lesson about the perils of consumption and instant gratification vs. mindful spending.

11. Set Your Kids Up with a Youth Savings Account

It’s never too early to learn about financial products like checking and savings accounts. Most banks and credit unions have a free account where kids can park their money. This gives them an opportunity to learn how to use an ATM and the responsibility to keep track of their debit card. (Even when they inevitably lose it, walking into the bank and getting a replacement is good practice.)
If you give them an allowance, you may choose to pay up in cash or transfer the funds electronically. They need experience managing all forms of money!

12. Incorporate New Financial Literacy Concepts Every Year

Don’t wait until they’re old enough to apply for their own credit card before explaining the concept to your kids. Depending on their interest and maturity, they may be ready to learn about advanced financial concepts and good financial habits when they’re in middle school.
Make it a point to introduce them to everything you know about managing personal finances before they go to college. You may even do some researching and learning together!