As parents, we all know there are many difficult conversations we will have with our kids throughout their childhood, and money is definitely one of them. For some parents, they feel like they don’t know a lot about money themselves, so they don’t have the confidence they need to teach their kids about it. For others, they reflect on their past money mistakes and decide they are not a good fit to teach their kids. And, for yet others, they simply don’t know when or where to begin.


But, here’s the good news: You do know more than you think, you are the right fit to talk to your kids, and you can start anywhere in the conversation. Here, we will explore some basics tips and concepts to get you started so that you are not only more confident in talking about it with your kids, but able to make the experience a rewarding and engaging one – for both of you.

As both parents and human beings, we tend to be our own worst critic, so let’s first dispel some myths:
  • Myth #1: My kid is a teenager. It’s too late to start.
    Even if you have not had a lot of conversation or started teaching your kids how to manage their own account by the time they are a teenager, it’s better to start now than to put it off.
    The fact is, your kid has been learning from you all along. They watch and they listen, and without realizing it, they are picking up on how you make choices and react to situation. You’ve done a lot of the groundwork, now it’s time to focus on having the important conversations.

  • Myth #2: I’m not money smart, so I can’t teach my kids how to be smart about money.
    Actually, you can teach them to be smart with their money, and you don’t have to be an expert to do it. Helping your kid develop good “money sense” is all about working beside them as they learn by talking through choices, working through mistakes together, helping them to save, and using your resources. (Check out some helpful online resources later in this article.)

  • Myth #3: It’s up to the schools and the teachers to teach my kids what they need to know about money.
    While the US and state governments recognize the importance of financial literacy in the classroom, and many states have instituted curriculum guidelines, this doesn’t replace the value of what our kids can learn from us at home and in the real world. What’s more, what they learn in the classroom does not take the place of helping them make the decisions that you feel are in their best interest.

Getting Started:


Start Now and Start Slow.
You don’t need a long lecture on each topic or to even cover every important point in one conversation. Start by answering their questions at an age-appropriate level. This benefits both of you: it lets your kids know that you are open to these discussions, and it gives you a place to begin.

Introduce concepts over time.
Next, use everyday examples to talk to your kids. Talk in values with your kids and not so much in figures early on. When they are young, focus more on the concept of savings, budgeting, and paying bills and less on how much they should save or how much your bills are.

Early on, kids learn about assets and income through the allowance they earn and the money they save. They learn about credit and lending through making promises and borrowing/loaning their toys. If they borrow money, they learn that they must return it in order to be trusted in the future.

The older they get, the more in depth these lessons become, and the focus will shift from basic concepts to more complex conversation and real life practice. There are five main areas of concept, and knowledge is built over time as your kids go through different ages of development:

 

 Area  Concepts Age 3-5

Age 6-10

Age 11-14

Age 15-18

 Assets
Cash, mutual funds, real estate, bonds, annuities, etc Identifying money;
Money can be saved for future needs          
Money in a savings account protects it; making choices and delayed gratification Set goals to save money; comparison shop before spending; money in a savings account earns interest Know how to write checks, balance an account, use a debit card; invest in a retirement plan as soon as you are eligible
 
 Income Money from work, cash flow, investment income, benefits Money is earned and exchanged for goods or is invested
Learn the value of money through chores and allowance     
Do not spend your money before you earn it Read a paystub; create a budget to manage your income and expenses 
 Credit Your ability to repay money you borrow; your ability to access your capital for loans It’s important to keep promises I make when I borrow things When I keep promises, I am more likely to be trusted with new things I borrow It is important to pay obligations on time to maintain your credibility  Learn what affects your credit score, and how you manage your current obligations affects your creditworthiness
 Debt Money owed to loans and other obligations  
If I borrow something, I need to take care of it and give it back when agreed People borrow money and pay it back with interest  People get loans for items they need that they cannot afford and pay it back with interest  Establish  good habits before acquiring debt, such as saving for down payments
 Insurance 
Protects your assets,  income, and credit       Medical coverage protects you and helps reduce medical costs
 

Find Teaching Moments.
Sometimes, it can seem like herding cats to get the kids together and to get them sitting still. Make learning about money a real-life, interactive experience instead of a lecture by finding opportunities in everyday situations:

  • Did your child just get a birthday check in the mail?
  • Did your child just start earning their allowance?
  • Are you shopping for a new fridge?
  • Are you trading in the car?
  • Is your child getting their driver’s license next year?
Including your kids in some of your own financial decision-making gives them something they can more quickly clasp on to. For example, if you’re looking to buy a new car or appliance, this is a great time to introduce how to comparison shop and make money decisions. Consider taking them with you to experience the process of shopping around, and then discuss it at home by drawing a comparison chart and asking for their input. If your child is ready to begin earning an allowance, this is a great opportunity to discuss options of how to spend and save their earnings each week. As they get older, introduce the concept of earning potential based on job and skill level. You’d be surprised how many natural opportunities present themselves on a regular basis!

Be honest, but don’t overshare.
Your real-life experiences can help your child learn. It’s ok to share past mistakes with your child as they are learning for the first time. It’s important for them to know that they will make mistakes – and that they can learn from and overcome them. Use anecdotes to demonstrate the outcomes and consequences of our decisions:
  • Your own real-life stories or those of others (omitting names)
  • Use negative outcomes to show cause and effect of choices.
  • Use positive outcomes to encourage thoughtful choices.
Be cautious of oversharing, though. Kids don’t necessarily need to know exactly how much you make or every bad decision you have made with money. That line is one that only you can draw based on what you feel is appropriate to share. Ask yourself if sharing it will enhance the learning experience or detract from it, and then decide what to share.

Follow-Through
The best way for our children to believe what we are telling them is to practice what we are preaching.

If a promise is made, keep it.

Avoid invoking the do-as-I-say-not-as-I-do mantra. Children quickly dismiss ideas they are told if those ideas are not shown to be as important to others.
Set realistic expectations – both for you and your child – so that you are setting them up for success.


Get Creative and Use Resources:

There’s a whole world of resources out there.
Government education resource websites are always a great place to start as they are both reputable and provide free, downloadable materials that are both educational and interactive. Other organizations offer financial literacy tools as well as part of their community commitment. We’ve listed some helpful websites below to give you an idea. When doing your own online search, use key words such as “money games for kids” or “lessons to count money for kids” or “fun money learning”.


Go through your kids’ bookshelf.
You’ll find many of the books touch on various money themes such as decision making, comparison shopping, saving, credit, prioritizing, and more. Check out our Suggested Reading List for 3-7 year-olds below for some great examples.

Use household items to create your own activities.
A really inexpensive way to incorporate hands-on interactive learning is to repurpose household items to create games and activities. Try playing “store” using Monopoly money and let your kids earn money by completing small tasks and then shopping in the snack drawer. Use an old mason jar or coffee can to decorate into a savings jar. Build an allowance and chores chart with construction paper and a corkboard. The ideas are endless!



Want more great ideas? Check these out:

Suggested Reading List for 3-7:

  • Berenstain Bears' Dollars and Sense by Stan and Jan Berenstain
  • Berenstain Bears' Think of Those in Need by Stan and Jan Berenstain
  • Berenstain Bears' Trouble with Money by Stan and Jan Berenstain
  • Alexander, Who Used to be Rich Last Sunday by Judith Voist
  • Curious George Save His Pennies by Margret and H.A. Rey
  • Lemonade in Winter by Emily Jenkins
  • The Purse by Kathy Caple

Online Resource Suggestions:

  • Consumerfinance.gov: The Consumer Financial Protection Bureau, where you can find educational resources as well as money topics and guides.
  • Napkinfinance.com: A visual guide to understanding money
  • Practicalmoneyskills.com: Learning and lesson plans for kids of all ages.
  • Bizkids.com: Webisodes, lesson plans, games and more.
  • Mymoney.gov: The federal government's website that serves as the one-stop shop for federal financial literacy and educational programs.