How do we teach kids about money?—such a massive subject and skill set! And when is the "right time"? Parents I coach often realize too late that trying to teach teens about money was too little, too late.
Developing a healthy relationship with money is critical. However, with hectic family schedules of work, school, household chores, meals and meal prep, homework, sports, and all the extras, where and how can a parent find the time and bandwidth to arm their children with financial literacy!?
Estimated reading time: 7 minutes
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Einstein once said, “not everything that can be counted counts, and not everything that counts can be counted.”
Money is heavily weighted and its importance often exaggerated in today's world. Money doesn't buy happiness but it makes our adult lives a whole lot easier with way more opportunities.
Of course, happiness is difficult to quantify ... one of those things that counts but can't be counted like Einstein pointed out!
The goal is to prepare your children to create a healthy, happy, and successful future while teaching them to be responsible, empathetic human beings.
Yet, it’s not always easy as a parent to keep long-term values in mind when faced with the demands of everyday life.
Financial literacy intertwined with social responsibility and emotional intelligence (EQ) need to be nurtured early AND all the way through childhood with life lessons with money.
Raising financially literate children begins with developing emotionally intelligent processes with them through everyday interactions in your home.
The relationship with money is complex and set in early childhood by several factors:
1) what values are fostered during childhood, i.e., frugality and generosity
2) parents’ emotional reactions, attitudes, and consistent responses in relationship to money
3) the conclusions children draw about money and how they organize them into money beliefs
Family time and ongoing communication are pivotal to relationship development and understanding as parents what our children are feeling, valuing, and concluding.
The good news is that every parent has the power to assist their children in drawing more accurate and healthy conclusions and forming healthy money habits so they don't get in the double bind of limiting beliefs.
For instance, if you tell them no when they request fashions from TikTok’s clothing haul or the latest PlayStation 5, do you simply say, “we can’t afford that”? Or do you have a meaningful discussion about why the purchase is important to them? And do you give them opportunities to contribute, earn, and save money to buy what they desire?
When our goal is to teach healthy money habits, negative phrases like “I can’t believe you’re asking for that!” are best reframed into more positive discussions around budgeting and the intentions of purchases.
One secret is to keep the conversation open and ongoing through everyday interactions!
Conscious parenting requires a certain level of intention and rapport to teach and involve your children in life learning.
However, don’t feel pressured to begin these aspects of their education at specific ages but be deliberate in your parental responses. Allow daily experiences to guide you to opportunities for imparting little nuggets here and there.
When you’re ready to introduce the money concept to your young children, start by using real-life examples or parallels of money.
Also, allowing your kids to save change or earn family “bucks” toward a certain prize can also help generate a foundational understanding of things like saving, spending, and longer-term investing. Keep in mind the long-term goals for your children’s financial understanding and being wise decision-makers.
One of the ways you can help your children understand saving and budgeting, especially for older children, is through budgeting apps that show the real-time use of money. You Need a Budget not only allows you to budget but you can assign values and goals to plan ahead by reserving money. Check it out. It has been a HUGE help to families and young adults alike!
Related reading: "Positive Parenting: 3 Parenting Strategies for Greater Patience."
Let's face it!
Parents' time and energy are maxed out!
The thought of adding one more thing like teaching kids about money can feel like a mirage, the goal disappearing in the weariness and stress of each chaotic day!
But what if, you could seed necessary ingredients little by little that culminate in a solid understanding of money and a healthy relationship with it?
Everyday actions parents CAN take—that are doable!—to instill a growth mindset and empower kids to manage their thoughts, emotions, and actions for better money management.
After all, self-management is the foundation of managing money.
Let’s dive into some simple practices for stimulating healthy money-to-life relationships with our kids that are also practical.
For young children, saving and counting pennies is simple. Then, add storytelling with subtraction and addition boosts the fun.
Another of my favorites when our kids were young was playing with a kitchen playset, preparing meals and a place setting or pretending to be at restaurants with different cuisines while preparing meals with a chef's set.
Add wooden vegetables for cutting practice for your toddlers, and you will build motor skills simultaneously!
These activities may seem too simple, but they enhance a child's ability to transfer their play to a practical understanding of how the world works, including the purpose of money. They provide an opportunity to emulate transactions through interactive games at home while showing a parallel to real life.
Don't underestimate these fun, learning environments.
They provided hours of fun for my kids and now for my grandchildren! You'll be able to seed basic money concepts naturally as they play!
For elementary children, one of our weekly games was CashFlow that teaches children wise spending habits. They also get to experience just how fast money goes firsthand but in a fun way without consequences. Practicing different ways to prevent overspending or make better decisions helps build impulse control, too.
Any games that also educate are great ways to introduce conversations about money habits, social responsibility, and charity.
A part of raising an emotionally intelligent child is knowing what is appropriate to say to them about money and finances at different developmental stages.
One of the most significant things you can do as a parent is to curtail troublesome discussions in front of children about money, especially those topics that may feel threatening to your family’s well-being. Keeping your concerns and fearful money talk private protects your children from unnecessary stress.
This simple reminder to be cognizant of keeping adult conversations private is often overlooked by parents, especially when stressed.
For instance, you're having a tough day and making the mortgage payment is coming down to the wire. We would not say "I hope we don't lose our house" or "I hope we don't get evicted this month for not paying rent" out loud to our children. These comments may be stress relief for you but can be burdensome to children who don't understand the ins and outs of household finances or that you're just blowing off steam.
When being intentional, instead of saying,"We can't afford that!" mindfully say, "We'll need to plan for that purchase." Rather than saying, "I'm so stressed about our grocery bill," say, "With grocery costs going up, we need to budget more carefully."
These reframed comments model that we have power over our circumstances and teach children not to blame circumstances.
Ensure those grownup conversations about money are private to avoid unnecessary stress or worry for your child. If your children or teens notice and ask about your worry and stress, answer honestly and age-appropriately with confidence that you’ll figure out any financial challenge.
Related video: "Raising an Emotionally Intelligent Child" by Dr. John Gottman."
Teenagers are often savvy with technology and they could help you by assessing and/or setting up healthy grocery delivery programs. They could study different ways to streamline finances.
Or better yet, delegate the grocery budget to them! Planning, shopping, and budgeting for meals is a fantastic way for teens to learn many facets of home and money management.
Be intentional in enlisting and involving your teenagers to help.
If you give them a clothes allowance each year, they could learn to budget accordingly. I remember coaching an older teen who said she would never spend $200 on a pair of shoes, but if her mom wanted to buy them for her, she wasn’t going to stop her. Paying out of their own earnings makes the exchange of money and time more real.
Learning to connect the dots of their choices to outcomes is critical at any time, but particularly for preteens and teens.
If they have a job, what if they contributed a small portion monthly to your grocery bill and began to save for a car? Allowing them to help teaches them skills but also helps your teen belong and feel valued.
An excellent way to increase personal responsibility at the high school age is for them to take over the monthly cost of their smartphone. They can also contribute for school supplies and lunches.
These opportunities to learn are vital in developing emotional intelligence and self-management required for a healthy relationship with money.
While teaching a money-positive mentality, your child’s moral foundations and emotional and mental health and happiness are more important than any quantifiable value.
Money used as a reward or punishment for behavior, feelings, or the fulfillment of basic needs can give the wrong message to children. Their self-worth is independent of money; unconditional love does not depend on children “behaving.”
Therefore, regulating your own emotions, practicing self-care as a parent, and taking responsibility for your outcomes will model the intrinsic value of personal well-being.
As children develop, they are learning how their words and actions influence the world around them. Provide ways to make a difference, such as helping others. By serving and interacting with people who are different from them, they will develop empathy, social skills, and an awareness of what diversity looks like in the world.
A perfect way to encourage social responsibility is to give to charities as a family, getting your children involved in choosing causes that are meaningful to them.
Perhaps set up a rotation of different charities that everyone votes on. Or regularly volunteer together as a family at a local soup kitchen, meals-on-wheels, or help by volunteering to pick up trash. In the YNAB app previously mentioned, you can set up budgeting to include your favorite charities so giving is an everyday practice.
As your children develop and your conversations and applications of money-to-life progress, remember these two things:
Think of life lessons as a funnel, starting from its narrowest point, with instruction growing into the widest part of the funnel as they mature. Explore different perspectives and break purchases down for them. Create a plan about how much their desired item costs and ways to save and pay for it themselves.
Even if they take bookkeeping in school, typically, your 5th grader won't learn how to save for that PlayStation 5. And when your child reaches high school or college, buying a car are often in their sights.
No matter the goal, you can provide earning opportunities through chores, landscaping projects, or help with siblings. Be clear about the amount they'll receive for their time and the task. And if they are old enough, applying for and obtaining a job can be a great option.
Then, they can also set aside money from each paycheck toward their goals, such as a college education or purchasing a car.
Possible questions and details to enhance understanding:
Going through the purchasing process with children helps them clarify whether the purchase is worth the effort and money. It also assists them in taking more responsibility.
Anytime there is thoughtfulness and critical thinking in gear when making decisions or purchases, it improves children’s ability to refrain from impulsiveness and builds delayed gratification.
Introduce information about checking and savings accounts (perhaps have them open and manage their own bank accounts), track their online information, fill out employment paperwork, and learn how debt-to-income ratios apply to their lives.
College-aged kids are in a prime position to build their credit for future investments, loans, housing, and more. Depending on where they’d like to end up, it’s an excellent idea to understand the requirements for establishing credit or affording their own home. When they choose to settle down or get more serious about building financial security as young adults, they can use the knowledge of income, savings, and interest rates for smarter planning and investing that will shape their lives moving forward.
Regardless of what age you start teaching money concepts, remember that emotional intelligence is critical.
Your role as a parent or guardian and how you model healthy behaviors for your children will be the most influential part of their life learning. Small, doable actions while modeling healthy money habits as a parent will help your children build a healthy relationship with money.
Keep the end in mind, and be mindful when you communicate.
Related reading: "Visionary Parenting Is the Key to Capable and Happy Children."