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How to Teach Kids About Money

How to Teach Kids About Money

March 30, 2023

Being financially literate is not something that happens by accident. It is not a skill we are born with nor is it something that most Americans have mastered. I believe the biggest reason for that is because talking about money is taboo. It is frowned upon. Many families are not talking about money and finances at the dinner table. Schools are teaching a lot of things these days, money is not one of the subjects. So for me, the question became - how do we make sure the next generation is taught how to properly manage their finances?


As a parent or grandparent, it can be overwhelming to come up with a plan to start a conversation with your kids or grandkids about how to handle money and general finances, but it doesn’t have to be. As parents and grandparents, it is our job to serve as a positive influence in their lives not only in life and love - but also financially. Here are five things to consider as you embark on helping your children or grandchildren understand the importance of being responsible with their money.


The Value of a Dollar

One of the first things I have tried to teach my daughters is what it takes to earn money. I feel a great way to accomplish this goal is by giving kids some hands-on opportunities to earn money for themselves.  

Think about giving your kids or grandkids tasks to complete throughout the week (e.g., chores, reading books, etc.). with the understanding that if they successfully complete those tasks, they will receive an allowance for the effort they put in. One simple way I have found to track tasks for my daughters is with a sticker chart on the refrigerator – this helps them follow along and see the momentum build. Additionally, everyone knows kids LOVE stickers!

For the kids, think about opportunities where the money doesn’t have to come out of your own pocket. For example, you could help your son or daughter plan a yard sale, get a part time job like babysitting, mowing lawns, or even start an online business. Helping them earn their own money will be incredible for both you and your kids—not only financially but also in terms of your child's self-esteem.

Financial Wellness Starts with The Basics

Start discussing money with even the youngest kids by including them in the conversation every day. Things like putting together your grocery list or setting up the budget. This will allow them to connect money with something tangible. It will not be some abstract concept that they can't see or touch. I always ask my kids questions to make them think and help them understand. A question as simple as "We have 5 dollars to buy a treat, should we pick ice cream or cookies?" and then "why".  These are the conversations that help children to understand that money is finite and that there is a trade-off to every decision we make regarding money. 


Be Honest About Money

I believe in being honest with everyone in my life, especially my kids. This will go a long way to opening the door to personal finance and may even allow them to call for help later on when they need it. At the grocery store, share with them how much is allotted for groceries as a part of the overall budget. And when you get the inevitable question "Can we buy this? or Can I have that?  remind them of the limit and how that item doesn't fit into it. 


Additionally, If you have older kids and there are things in your financial past, such as going into debt, which may be something you are not proud of, share that with your kids. Being honest with them is very valuable and will help build trust. As I mentioned above, the more open and honest you are with your kids, the more open they will be with you, and they may need to call for help one day in the future. Being truthful about your own finances is a great place to start building that trust.


Talk About Values

Kids have an insatiable imagination, something I hope to never dampen in my own kids. But, this giant imagination also tells them that they can do EVERYTHING and although we as parents may want that for them, financially it's not always possible. Encourage your kids to think about what is important to them in the future. Ask leading questions like "Do you want to own a house or rent when you grow up? or "Would you rather go on nice vacations or drive a fancy car?"


It is our job to help them visualize what they want for the future and it’s a crucial component of talking to your kids about money and financial goals. Talking about what THEY value and hope to have in their future allows them to have a long-term view, which is critical for saving, budgeting, and overall financial wellness.


Lead By Example

There may be certain financial topics that you are not as knowledgeable about, and that’s okay! this is an opportunity to learn alongside your kids. Showing your kids that you are interested in learning while growing your understanding of financial topics will heighten their interest in it as well.

Talking to our kids about money may seem like a daunting conversation to have if you don’t know how to approach it properly but I assure you, it is PARAMOUNT to their success later in life. Broaching the subject sooner rather than later will reap many benefits for you and your kids. Ultimately, we want our kids to have the knowledge and skills they need to handle their finances responsibly as they grow up.

As parents, it’s our job to instill this knowledge in them and to open the door to an often-taboo subject so that you can help them get off on the right foot with their finances. All habits, including financial habits, are formed young. It’s critical that you start early and start the conversation today. Make your kids feel comfortable talking about finances with you by using these tips.

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About the Author

James M. Comblo, CFF
is the President & CEO of FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients live the life they want, not the life they are forced to. To learn more about him click here.