How to Teach Your Kids About Money

When it comes to teaching kids about money, it’s essential to have the right conversations early and often. If you’re wondering when to teach kids about money, there isn’t a specific age – the earlier you have money conversations with your kids, the greater the chance they’ll develop smart money habits later in life. In a recent survey on Parents, Kids and Money, 56% of respondents stated that they don’t talk to their kids about money because they are too young to understand. But there are plenty of ways to teach your child financial responsibility, no matter how old they are.

15 Ways to Talk to Your Kids About Money

If you’ve been wondering, “How do I teach my child about money?” then you’ve come to the right place. Instilling the importance of spending on needs vs. wants, saving up for big purchases and demonstrating smart money habits are key to teaching kids about money. But how exactly can you achieve this? Depending on their age, there are plenty of money lessons for kids to learn as the grow up. Take a look at our top tips on teaching your elementary, middle or high school aged kids about money — and don't forget about your college student or young adult.

Elementary School

1. Involve your kids in the shopping process
   You can talk to your elementary school aged kids about money by finding teachable moments and keeping them involved throughout the shopping process.
   
   Before you even get to the store, have your child assist in creating the list. If they see something in the store that's not on the list, you can explain spending priorities or talk about budgeting to get it next week. Making lists also applies to online shopping – simply write down everything you need before opening your browser or app.

2. Show them savings through a piggy bank
   Showing your kids how to save with tangible money is crucial. And what would childhood be without the quintessential piggy bank? Explain the importance of saving by using a piggy bank  bonus points if it’s clear, so they can literally see the savings adding up. Keep the piggy bank in an important place to help reinforce its significance. Each time they add change is an opportunity to verbally reinforce the topic of saving. Explain that they could spend it now, but it would be better to put it in the piggy bank to buy something bigger and better later. Around the 10-year-old mark, you can start taking them to a real bank so they can learn how to deposit into their very own savings account.

3. Explain the concept of working for money
   It's important to teach kids why you work. Explain that you must work to pay your bills, provide a good life for them, and occasionally treat yourself. Then, allow your kids to experience this through chores and allowance. Each time you pay your child for work done, suggest they save some in their piggy bank. You can even elicit the entrepreneurial spirit of your child by encouraging them to start a business, such as a lemonade stand, to further perpetuate the concept of working for money.

4. Invest in a good book
   There are a lot more books to help with teaching kids about money now than when you were a child. A great book for early elementary school aged children is “Lemonade in Winter: A Book About Two Kids Counting Money” by Emily Jenkins, which is a picture book that teaches children some easy-to-understand lessons in counting, spending and earning money. For older elementary school aged children, be sure to check out “Growing Money: A Complete Investing Guide for Kids” by Gail Karlitz & Debbie Honig, which uses kid-friendly terms to break down the basics of savings accounts, bonds, stocks and mutual funds.
   
   

   Middle School

5. Tell them an analgolous story
   Sit your middle schooler down to explain the long-term value of compound interest. Start the conversation with the infamous Grain of Rice fable, and then give them the option between a penny that doubles each day for a month, or $1 million. After hearing about how the rice accumulated, they should see the correlation and choose the penny, but if not, you can show them the math to further reinforce the concept of compound interest. Continue to bring up the topic of money with these other fairy tales and fables that teach financial lessons.

6. Help them create a vision board
   Ask your middle schooler what they see for their future. For many, that may include buying a car and/or going to college. Help them create a vision board by cutting out photos from old magazines and gluing them to a poster board. As you’re creating, talk to them about how they can achieve their vision by saving money, not giving in to over-priced or short-term desires and how compound interest can help achieve a long-term purchasing goal. Then, if they don’t already have something set up, take them to the bank to start a savings account or Certificate of Deposit (CD).

7. Get your kids a debit card
   You can teach your kids about money by getting them a debit card. Middle schoolers should be old enough to handle the responsibilities and it will help them learn how to be financially responsible. There are even special debit cards designed just for kids, like Greenlight, which allows parents to pre-set controls and get real-time notifications on their kids’ purchases. There’s even an option for your kids to start investing!
   
   

   High School

8. Introduce the idea of getting a summer job
   Go over how salaries are determined and have them make note of how many hours they’ll have to work to buy something they want. Help them get set up with both a checking and savings account if you haven’t already. Explain the importance of having a percentage of each of their checks go directly into their savings account. If you’re willing, you could even offer to match their savings, or a percentage of it, at the end of the summer and explain that many employers offer 401k matching to full-time employees to encourage savings.

9. Talk to them about credit, then build it
   Once your high schooler proves that he or she is responsible with their money, explain the concept and importance of credit and credit scores. Be sure to stress the consequences of debt, delinquent payments and a bad credit score. If they’re ready, help them start to build credit by adding them as an authorized user on your account. Once they turn 18, they’ll be ready to manage their very own credit card and continue to build their credit and a strong financial future.

10. Start talking about the future
    Start talking about a future career  does your high schooler plan to attend a training program, trade school or college? If so, be sure to talk about student loan debt as a part of their application process. It’s no secret that going to college is expensive, but factors such as in-state vs. out-of-state schools, on-campus vs. off-campus housing, and transportation can really add up. Explain to them how much college will really cost and go over their future student loan debt in detail. Also discuss career paths — while it might make sense to pay $50,000 a year to eventually become a doctor, that price may not pay off for other careers and the break-even point could be years away. Make sure your teen is aware of the long-term financial ramifications of their college decisions to set them up for prosperity.

11. Use movie money references
    When your kids are at home over the holidays, you can discuss financial lessons from these classic holiday movies.
    
    

    College or Young Adult

12. Work with them to create a budget
    At this stage in life, make sure they’ve learned the importance of money and savings. Work with them to create a budget and explain the importance of an emergency fund. If you made any financial mistakes in your youth, you may want to share them with your child, so they know what not to do. If you didn’t talk to them about credit in high school, be sure to do so now. Reinforce to them that now is the best time to start laying the foundation for financial wellness. You’ll also want to go over saving for their first home.

13. Explain taxable income
    Up until now, your child probably didn’t have to worry much about taxes. But, if your young adult has entered the full-time workforce, it’s important to go into the ins and outs of taxation — deductions, credits, Social Security, record keeping, etc.

14. Show them how to maximize their benefits
    Take the time to go over your young adult’s employer paperwork with them and discuss how they can use their employer benefits to help them save. For example, if there is a gym membership stipend, student loan repayment assistance, or a 410(k) match, those are programs you’ll want your child to maximize. Revisit the concept of compound interest and go over the rule of 72. You may also want to bring up other investment vehicles, such as a Roth IRA, ETFs, mutual funds and stocks.

15. Encourage finance as a personal interest
    Podcasts are extremely popular with young adults. Encourage your adult child to develop a love of finance through listening to some popular financial podcasts for young adults.

A Strong Foundation for Their Financial Future

By teaching your kids about money, you'll give them the skills and discipline they need for a more secure financial future. Whichever way you choose to discuss money with your child, the most important thing is simply starting the conversation.

1. https://www.slideshare.net/TRowePrice/t-rowe-prices-13th-annual-parent-kids-money-survey