How to Talk to Your Kids About Money—A Parent’s Guide to Financial Literacy

Money is a part of our everyday lives, yet talking about it with our kids can feel awkward. But here’s the truth—teaching kids about money early on is one of the best gifts we can give them. It’s not about raising future millionaires (though that’s a nice thought); it’s about giving them the confidence and skills to handle money without stress, making choices that align with their values. Let’s dive into How to Talk to Your Kids About Moneyto get started!

Why Financial Literacy Matters for Kids

Financial literacy isn’t just about crunching numbers. It’s about making informed decisions, understanding the value of patience, and learning how to balance enjoyment with responsibility. Kids who grow up with a healthy attitude towards money tend to feel more in control and prepared as adults—they understand how to save, how to spend wisely, and how to plan for the future. Ultimately, financial literacy is a key ingredient in lifelong well-being.

Tailoring the Conversation by Age Group

Every age group has a different level of understanding when it comes to money. Here’s how you can shape your conversations:

Young Children (Ages 4-7): Basics of Money

At this stage, the key is to keep things simple. Introduce them to the concept of money by talking about coins, notes, and their purpose—like how we use money to buy groceries or toys.

Fun Activities: Play “shop” with them. Use real or play money, and let them be the cashier. It’s a fun way to teach counting and the idea of exchange.

Introducing Investing: At this age, you can introduce the idea of “growing money” in a very basic way. Talk about how plants grow from seeds, and compare it to how money can grow if we take care of it.

School-Age Kids (Ages 8-12): Earning, Saving, Budgeting, and Investing

Once kids are a bit older, you can start talking about how people earn money and the idea of saving towards a goal. You could even give them an allowance or let them earn pocket money by doing chores.

Tip: Introduce the concept of “spend, save, and give” jars or envelopes. It’s a simple way to teach them about budgeting and generosity, encouraging them to think about how to use their money responsibly.

Introducing Investing: At this stage, kids can start to understand the concept of investing. You can explain it as putting money somewhere safe so it can “grow” over time—like how saving allows us to buy bigger things later. You could even set up a simple “investment jar” and add a small amount each month to show them how it grows.

Teens (Ages 13+): Income, Budgeting, Long-Term Goals, and Investing

Teens are ready for more sophisticated conversations. This is the time to discuss part-time jobs, the basics of budgeting, and even an introduction to saving for bigger goals, like their first car.

Tip: Help them open a bank account and encourage them to start tracking their spending. Talk about the idea of “wants vs. needs” to help them prioritise their money.

Introducing Investing: Teens can handle more detailed discussions about investing. Talk to them about how investing is different from saving—it involves putting money into things like stocks or funds with the goal of making it grow over the long term. You could even help them set up a mock investment portfolio or introduce them to simple investing platforms designed for young people. Explain the concept of risk and reward, and how starting early can benefit them in the long run.

Everyday Teachable Moments

There are countless opportunities to teach kids about money in daily life—you just need to keep an eye out for them.

• At the Supermarket: Talk about comparing prices or why you choose one product over another. This helps kids understand value.
• Online Shopping: Show them how online shopping works, including looking out for deals, understanding shipping costs, and staying within a budget.
• Household Bills: Explain how things like electricity or Wi-Fi are paid for. It’s a great way to introduce the concept of bills and regular expenses.

Tools and Techniques for Engaging Kids

Sometimes, a little tech can help make these lessons stick.

• Apps and Games: There are some fantastic apps designed to teach kids about money. Apps like GoHenry or RoosterMoney ( some of these have a subscription charge) make it interactive so kids can learn about saving and spending.
• Challenges: Set up fun challenges. For example, let them save towards a family outing or their favourite toy. It teaches patience and the value of setting and achieving a goal.

Values-Based Discussions About Money

It’s important for kids to understand that money isn’t just about what they can get—it’s also about reflecting their values.

• Giving Back: Teach them that money can also be used to help others. This could be setting aside a portion of their allowance for charity or helping someone in need.
• Goals and Fulfilment: Talk to them about why saving is important, not just for “boring” stuff like bills, but also for exciting things—like holidays, hobbies, or even starting a small business one day.

Allowance: To Give or Not to Give?

Allowance is a common tool to teach kids about money, but it’s important to use it intentionally.

• The Pros: Allowance can teach kids about managing money—earning it, saving it, and spending it responsibly. It’s like giving them a mini income to practise with.
• The Cons: If the allowance isn’t tied to anything—like chores or responsibilities—kids may not connect it with effort or value. A good approach might be a mix: some pocket money simply for practice, and extra opportunities to earn more by helping around the house. On the flip side of this, some might say that they should do the chores around the house without expecting payment – you can choose what seems to work best for you.

Avoiding Common Mistakes

We all want to do our best, but there are a few common pitfalls when talking to kids about money:

• Avoid Scarcity Language: Saying, “We can’t afford that” might make kids worry. Instead, try saying, “We’re choosing not to spend our money on that right now.” It frames money as a choice, not a source of fear.
• Let Them Learn from Mistakes: If your child spends all their pocket money quickly, resist the urge to bail them out. It’s a great opportunity for them to learn about budgeting—and why saving is important. At the early stages, a few mistakes can help them figure out how money needs to be managed, or else it will just disappear without much to show for it.

I do mind my older child making mistakes with money, but I prefer it if he makes it with his own money rather than mine!

Encouraging a Growth Mindset Around Money

Lastly, it’s crucial to teach kids that money management is a skill they can learn and improve. Mistakes aren’t failures—they’re just steps along the way.

• Patience and Delayed Gratification: Help them understand the value of waiting. Maybe they save up for a special toy and buy it later. That sense of achievement is invaluable.
• Normalising Money Talks: Make talking about money a regular part of family life, not a secretive or tense topic. It normalises learning, asking questions, and sharing goals.

Books to Help with Financial Literacy for Parents and Kids

Books are a fantastic way to support financial literacy, both for parents wanting to teach and kids wanting to learn. Here are some great reads to consider:

• Grandpa’s Fortune Fables by Will Rainey: This book tells the story of a young girl named Gail and the lessons she learns from her grandpa about money. It’s engaging and easy for children to understand, introducing concepts like saving, investing, and being wise with money.
• The Richest Man in Babylon by George S. Clason: A timeless classic that uses parables set in ancient Babylon to teach fundamental principles of wealth building, saving, and investing. It’s simple enough for older kids and teens to understand and a great resource for parents. (although the old language can be a bit tricky to get used to)
• The Opposite of Spoiled by Ron Lieber: A great guide for parents on how to use everyday opportunities to teach kids about money, covering topics from allowance to charity.
• Rich Dad Poor Dad by Robert T. Kiyosaki: While this book is more suitable for older teens and adults, it provides powerful lessons on how to think differently about money, assets, and investing.
• Save It! by Cinders McLeod: A wonderful picture book for young children that introduces the concept of saving in a fun and accessible way.

These books can be great conversation starters and tools to enhance your children’s understanding of money, while also boosting your own confidence in teaching financial skills – especially if you read it to them.

FAQ: Common Questions About Teaching Kids Money Skills

1. At what age should I start teaching my kids about money?

• You can start as early as age 4-5 by introducing basic concepts like coins and notes. As they grow older, gradually introduce more complex topics such as saving, budgeting, and investing.

2. Should I give my kids an allowance?

• Giving an allowance can be a great tool for teaching money management, but it’s important to use it with intention. Will you tie it to chores as a way to help kids understand the value of effort and responsibility or is it just free money for them to spend, save and invest as they like?

3. How do I teach my child the difference between needs and wants?

• Use everyday situations, like grocery shopping or online browsing, to explain the difference. Needs are things we can’t do without, like food or clothing, while wants are things we’d like but don’t necessarily need, like sweets or the latest gadget.

4. How can I make learning about money fun for my child?

• Use games, apps, or even role-playing activities like “playing shop” to make it engaging. Setting up challenges, like saving towards a family goal, can also add excitement. Monopoly is a classic money game for all ages.

5. When should I introduce my child to investing?

• You can start introducing investing basics around ages 8-12 in simple terms. For teenagers, you can dive deeper into the concept of investing, risk, and reward, and even help them start a mock investment portfolio.

Conclusion: How to Talk to Your Kids About Money

Talking to your kids about money doesn’t have to be daunting. A little conversation here, a teachable moment there, and soon you’ll see your child developing a healthy understanding of money—one that will serve them well for the rest of their life. Remember, small lessons now make a big difference later.

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