7 Ways to Teach Your Kids About Money
Think your kids are too young to learn about money? Trust us—it’s never too early.
Studies have shown that by age seven kids have their money habits set—good OR bad. Kids pick up money cues from watching their parents, celebrities, movies and their friends. So why not start talking to your kids now and set their habits straight? If you’re already talking to your kids about money (awesome!) or you need a little nudge, these tips will help to teach your kids how to be smart about money.
- Begin Early
It’s said that children as young as three are capable of understanding the exchange of money for goods. Practice this by letting them physically exchange cash when buying a toy or food from the store—but don’t use your debit card. It’s hard explaining to young kids how a debit card is “money.” Tangible is better.
- Use Cash
Young kids equate electronics with fun—a tablet, your phone, the computer—and they make the assumption that the money is imaginary if you are paying with your phone, debit card, or on a website. Begin teaching them the names of coins and their values. A child will assume that a bigger coin (a nickel) is more valuable than a smaller one (a dime), so it’s important to communicate the worth of each early on.
- Needs vs Wants
Try this: call out a few things to your kids—water, candy, a bed, video games—and have them answer “need” or “want.” You can also do this at the grocery store or whenever doing errands together. It’s a great opportunity to explain why “needs” should be met before “wants” and how they’ll have to make these decisions when they’re grown up, too.
- Money is Earned
Kids often think that money just flows from the bank or the ATM. They don’t know that there’s a finite amount in the family budget. Show them that money is earned by giving them an allowance for chores completed around the house. With younger kids, it’s not about the quality of the chore, but the follow through. But with the older kids, stick to your guns. If a chore is not completed, they don’t earn money.
- Spend Smart
Introduce your kids to smart spending by talking about discount codes and coupons, generic brands vs name-brands, and holiday sales. Maybe that super amazing new toy they want to spend their allowance on will be drastically less expensive during a post-holiday sale. Explain that by waiting and purchasing for less money, they’re saving money and being smart consumers.
- Setting Goals
Kids are notorious impulse buyers. Introduce the concepts of saving money and setting goals. Help them make their goal realistic and attainable. Goals shouldn’t discourage them from saving but inspire them to think about their money and desired purchases. Try breaking it down by how many chores need to be completed per week in order to reach the goal. This solidifies that money is given only when earned and earning is way sweeter.
Parents have said that their kids take better care of the things they buy with their own money, than received as gifts from someone else.
- Give Back
Encourage your children to give back to the community in the form of money, time or donations. By giving back, kids begin to think of others and learn not to expect anything in return for being generous. Let them choose where to give based on their passions—animals, books, food—and call that agency to see what is most needed. Donating canned goods to a food pantry is great, but maybe they need more help organizing their shelves.
When it comes to implementing these tips, start slow with age-appropriate opportunities and tackle only one concept at a time. Show them your interactions with money rather than lecture—you know they’re always watching! If they have questions (which, let’s be real, they always do), answer them as honestly as you can.