It’s never too early to start teaching your child about money. After all, helping your child become financially literate will set the foundation for responsible money management in their adulthood.
And while piggy banks are said to be “an excellent way to teach children about the value of money and the importance of savings”, the art of understanding money goes much deeper. In essence, it’s much more than teaching kids to save money, put them in a piggy bank, or understand how to spend them.
It’s about showing kids how to:
- truly appreciate money;
- make informed money decisions;
- feel comfortable to have money, without seeing it as an intimidating “object”;
- understand what it means to borrow money from someone, but also to lend it others;
- realize how to manage their budget, and then expand on it once they’re more mature and start making their own money, and so on.
That said, understanding money and money-related behavior isn’t an overnight thing. It’s slowly built over time. And if you’re struggling with approaching the money subject with your kid - you’re not alone.
To help you out in this endeavour, we prepared this detailed article about money. So, if you’re keen to further explore the concept of money and how it relates to kids, we invite you to join us on this reading adventure.
Without any further ado, let’s get onto it!
The Importance of Money for Children
We’re all aware of the important status money holds in the adult world. However, many parents don’t realize the importance of teaching money management to their kids. After all, when you’re a kid, you’re supposed to be carefree instead of learning about some more serious things, like money, right?
Money management skills can be taught from a very early age. The earlier you start talking to your child about money, the better. This helps kids understand that their parents don’t just go to the ATM and magically withdraw money. They need to understand that their parents work hard to get that money, which is what they’ll also do one day.
Teaching financial literacy to kids will help them save money, make more responsible decisions when it comes to money, and understand the value of giving (but receiving too!).
How To Instill Money-Saving Skills in Children?
There are many ways to instill money-saving skills in children. First of all, buy them a piggy bank (we didn’t mention it randomly in our introduction). Piggy banks are great for kids at various ages.
Also, make sure you explain the reasons behind saving. Tell them why it’s important for people to save money and not spend all of it. Help your kids make smart purchasing decisions. If they buy smart from a young age, chances are they’ll continue doing so in the future.
Next, show kids the value of growing their money, which is basically done through investing. Explain it to them that while saving money is great, you shouldn't just leave your money “untouched”. You can use it to get more money instead.
Most importantly, you need to be a good role model. It makes no sense for you to tell your kids they need to save money while they see you constantly going on shopping sprees, and spending money on random things you rarely use.
Finally, it’s all about seeing what works for your kid. These suggestions will only work if your child resonates with them - there’s no point in forcing them to do something which doesn’t look appealing or interesting to them.
Examples of Money in Everyday Lives of Children
Money can be expressed in different ways within a school context. For instance, pupils may physically bring money to school (in the form of allowance) to pay for their breakfast, snacks, buy stuff after school, pay for their transport, and so on.
Then, they may be noticeable through a pupil’s clothes (wearing well-known, expensive brands), their electronic devices (such as having an expensive laptop, tablet, or a smartphone), their shoes, and so on.
Next, pupils tend to brag a lot about where they’ve been and where they’re going to go. Some may brag about traveling a lot, others that they went to Disneyland, and so on.
Of course, there are always going to be differences among kids. If it’s not money, it’s going to be about their physical appearance. If it’s not about how they look, it’s going to be about how they behave. If it’s not about their behavior, it’s going to revolve around their grades. In essence, it’s a vicious cycle.
Plus, there have been many methods and ways in which institutions have tried to put pupils on an equal level, such as introducing school uniforms. However, some have interpreted this as an “attack” on diversity, while others believe that parents shouldn’t have to buy additional clothing items.
That said, differences among pupils should be embraced. In other words, pupils should be taught to accept their authenticity and what they have (or don’t have), and this includes money too. And to do so, they need to receive proper financial education.
Not many countries across the world provide financial education for their pupils. However, some of them do. Let’s take England as an example.
In England, financial education is included in the secondary schools’ curriculum (as part of maths and citizenship). Pupils are taught about the various functions and uses of money, managing risks, insurance, saving, pensions, credits, and so on.
How to approach this?
If you’re a parent:
- Do you think your kid should get financial education? Why? Why not? What are the advantages and disadvantages of discussing finances and money within a school setting?
- Your kid comes home and they look sad. You ask them what seems to be the matter and at first they refuse to answer. After a while, they tell you that another classmate teased them about their sneakers telling them they look old and worn out. How do you react? Do you go and buy new sneakers to make your kid happy or do you explain that their value doesn’t depend on the type of sneakers they’re wearing?
- Someone stole your kid’s phone at school. Your child comes home crying. You bought the phone only two weeks ago and it was quite an expensive one, too. Do you:
- call your kid’s teacher first to see what happened and whether something can be done to catch the “thief” and possibly retrieve the phone?
- blame your kid for not looking after their phone and being irresponsible and reckless?
- buy them a new phone immediately, without caring what happens to the old one (that is, you don’t care if it’s found or not)?
- punish your kid and don’t allow them any access to other electronic devices (such as tablets, laptops, and play stations) for the time being?
- Your kid has an important test next week, but they can’t seem to understand the material. They ask for a private tutor, but you’re not sure if you can afford it at this point. Do you:
- try to help them instead?
- decide to pay for a private tutor anyway?
- tell your kid to ask a peer who understands the material quite well to help them?
- tell your kid to try to learn things on their own as most kids do?
- advise your child to talk to their teacher and ask them if they can explain things furter after the class?
- Summer approaches and this year you and your partner have decided that you won’t go on a holiday, as you already have a lot of other expenses. Your kid comes home and tells you they have to prepare a project about their upcoming summer. They need to elaborate on their plans and explain where they are going to spend their summer. How do you let them know they won’t be going on a holiday this year? Do you wonder how their classmates will react? Do you think your kid will feel ashamed of having to present their project at school? How can this situation be remedied?
If you’re a child*:
- Your best friend comes to school with the latest iPhone. You’ve been wanting a new phone for some time now, but still haven’t talked to your parents about it. Your friend gives you theirs to check it out, and you absolutely love it. You go home after school and decide to ask your parents for a new phone. How do you start the conversion? What do you say? What will their reaction be? What if they say “No”?
- A classmate walks in class and tells you they stole money from their mother’s purse before they came to school. They’re planning on buying a Disney toy after school. What’s your initial reaction? Would you bother explaining to your classmate that what they did was wrong? Why? Why not? Would you go to your teacher and talk to them perhaps? Also, would you tell your parents about this incident?
- Have you ever wondered how much money your parents spend yearly for your school supplies? Have you perhaps asked them directly? If you have, what did they say? Were you satisfied with their answer?
- Do you expect to receive education about money from your teachers? Why? Why not?
- Do you think it’s rude to ask your teacher about their salary? Why? Why not? Have you ever asked your parents about theirs? What was their response?
- You’re going for a hot chocolate after school with your classmates, but one peer says they can’t come. You approach them and ask them what the matter is. They reluctantly tell you they don’t have money because their parents are having some financial hardship. You offer to pay for their hot chocolate. Do you think they’ll accept? How does it feel to be able to help another person financially? Would you do it again? Also, do you expect the person to pay you back once they have some money? Why? Why not?
*Yes, we invite your child to take part in reading these questions with you!
Children are exposed to a specific lifestyle from the moment they are born. In essence, they observe what their parents buy them, and what they don’t, but they notice what other kids’ parents buy for them, too.
Plus, they have various social media channels, which means they follow famous celebrities’ lives, certain individuals who they may fancy, and so on. Also, they don’t really need to have anything specific in mind - it’s enough for them to start browsing the Internet and scrolling through their Facebook feed, and it’s easy to think everyone is leading an extravagant life and have everything they could wish for.
And this is what causes trouble for many families. It’s when their kids come home with random wishes and requests because:
- they saw the latest smart watch being released on a Facebook live event, and so they want to have it;
- their friends have electric scooters, and now they want one too, so that they can “belong” to the group;
- their favorite singer released new merchandise and so they wish to purchase a hoodie, a hat, and a backpack;
- their boots are out of fashion, but they saw new ones on Instagram, so they want to go to the nearest shopping mall with you and try to find similar ones;
- their friend bought a new playstation game, but they don’t want to borrow it, so they expect you to buy them the same one;
- their best friend signed up for a photography course, and now they want to attend the same course too (and not only do you need to pay for the course, but you need to purchase a professional camera, too), and so on.
There’s a fine line between kids really wanting or needing something, and saying they want and need it because others have it. Unfortunately, kids can’t always differentiate between the two.
This is why we emphasized the importance of teaching kids about money and why it is significant to instill money-saving skills in kids from an early age.
How to approach this?
If you’re a parent:
- How much have your expenses changed since you’ve started a family? Do you feel money has become a burden or are you able to lead the same lifestyle as you used to? If you can’t, what changes can you make in order to feel more comfortable about how you spend your money?
- Do you talk to your kid about money in the same way your parents used to talk to you when you were growing up?
- Do you mind talking about money during lunch or an important family gathering?
- What’s something your kid asked for, but you can’t afford, so you’re hoping to buy it for them in the future? How do you feel about not being able to afford certain things your child wishes to have? Do you let this affect you or you know you’re always doing the best that you can with what you currently have to offer?
- You’re watching an important interview on TV and don’t wish to be bothered. Your kid comes into the living room saying they found an important offer online about a toy they’ve been eyeing for a while which expires in 15 minutes. You believe the toy is unnecessary and that they already have similar toys. However, you don’t want to discuss things at this point, as you need to watch the interview. What do you do?
- You allow your kid to order the toy so that they leave you to watch the interview.
- You tell them they can’t order it, and you ignore them, while trying to focus on the interview (although they’re screaming/trying to persuade you to say “Yes.”)
- You ignore the interview although it’s very important, and you invite them to sit next to you so that you can have a conversation about this toy, and why you believe it’s an unnecessary item at this point.
- Have you and your partner ever fought about money at home in front of your kid? If you have, what was the fight about? How did your child react afterward? Do you think parents should discuss money matters in front of their kids? Why? Why not?
- How would you assess your kid’s money skills? For instance, are they impatient to buy some of the things they want or do they need more information before they make a purchase? Also, if someone gives them money, do they wish to spend it right away or do they feel comfortable saving it?
- What’s something you regret buying for your kid? Why? Why did that “thing” become so problematic? Does your kid know you have some regrets about buying that? What was their reaction?
- At home, do you talk about loans, debts, taxes, interest rates, banks, and so on? Has your kid ever expressed any interest in learning more about such concepts? If they have, were you willing to explain them?
If you’re a child*:
- Why do we need money?
- What’s the main purpose of money? What does money do?
- Name some things you regularly get with money.
- Do you talk with your parents about money? If you do, what do you usually talk about?
Is money an important subject in your household? If it is, is it perceived as a positive one or a negative one?
- Can you get anything you want with money?
- Have you ever earned any money? What are some ways you as a child can earn money?
- Do your grandparents give you money? What do you do with it? Do your parents ever ask you what you do with the money your grandparents give you? Have you ever lied to them? Why? Why not?
- Do you think money-saving is an important practice? Why? Why not?
- How much money do you hope to make one day?
- Do your parents ever pay you to do some house chores? What is it that you do around the house precisely? Also, how much do they pay you? Have you ever asked for more?
- Let’s say your neighbor comes knocking on your door and asks you if you can look after their daughter on Saturday night because she and her husband need to attend an important dinner. Do you accept the offer? Are you expecting to be paid by default or will you ask for it? Will you reject the offer if you don’t like the “hourly rate”? Why? Why not? Will you do it for free?
- How much do you wish to save in a week? In a month? In a year?
- Observing what your parents buy for the home (things such as groceries, new furniture, flowers, to name a few), would you say it looks as though they need to spend a lot of money for all those things? Why? Why not?
- Have you ever wondered how your parents can afford all the things they buy for home? In other words, are you able to understand whether their salary is more than enough for them to afford these things or perhaps sometimes they need to use their rainy day fund?
*Same as above.
It may be a bit weird to include a separate section about shopping and making purchases because we kind of referred to the act of buying things in the previous sections through various examples.
That said, we do believe it’s useful to deal with the actual act of buying stuff - and not just comment on kids’ shopping wishes, demands, and how they perceive things after they’ve been bought. In essence, we wish to dwell on what goes through kids’ minds when they actually have to buy something (or they witness their parents buying it).
When we refer to shopping, we don’t necessarily think parents should only monitor their kids purchasing clothes, new electronic devices, shoes, and so on.
We also wish to stress the importance of grocery shopping, and showing kids how much it actually costs to support all family members. Put simply, we’re talking about reasonably spending one’s money, as well as learning how to calculate one’s shopping expenses.
And this can only be done through proper experience and adequate preparation. And who can prepare kids better than their parents?
For instance, taking your kid to the supermarket is a chance for you to show them how they can pay with a credit card, how to choose food items for the upcoming week, how to compare prices, when they should wait for discounts and when they shouldn’t, and so on. Of course, this depends on your kid’s age.
That said, you’ll probably need to monitor your teenager’s money spending practice.
On the whole, the process of shopping (whatever it is you and your kid shop for) should serve to familiarize children with the act of spending money, prioritizing items (whether they should buy new shoes or make sure they have food for the rest of the week, for instance), as well as understand money management in a much detailed manner.
How to approach this?
If you’re a parent:
- Do you take your child with you when you go grocery shopping? Why? Why not? Has your kid ever made a scene in front of other people in the store? For instance, they wanted to have several bags of M&Ms, but you didn’t allow them to take that many, and so they started crying. How did you react in that situation (or how would you react if it happened)? Would you allow them to have the M&Ms only to avoid a bigger scene? Why? Why not? What does this experience teach your kid? Also, what does it teach you as a parent?
- What’s the most important money lesson kids have to master when it comes to shopping?
- How can parents teach their kids to behave when they go shopping?
- A lot of kids think parents don’t actually spend money when they use their credit card. How can you explain this to your child so that they understand the card payment process?
- Has your kid ever made shopping decisions you disagree with? If yes, which ones? Have you tried to influence those decisions in any way? How so?
If you’re a child*:
- Do you like going shopping with your parents? Why? Why not?
- When you’re with your parents in the supermarket, do they buy you everything you want? Have they ever denied any request? Why?
- When you want your parents to buy you something but they say “No”, are you able to understand the reason behind the rejection?
- Have you ever made a scene in a shopping mall on purpose (so that your parents buy you the “thing” you want so much?) What happened? How did your parents react?
- Have you ever seen your parents online shopping? If you have, what were they buying?
- If it were up to you, how would you pay when you buy things: cash or card? Why?
- What happens if your parents send you to buy something from the supermarket, they give you money, but you decide to buy something else for yourself instead? How would you feel about it? What would your parents’ reaction be?
- Have your parents ever made any purchasing decisions you disagree with? Which ones?
- Have you ever tried to persuade your parents to buy you something although you knew they struggled with money or it wasn’t a necessary item? Why?
- Do you prefer going shopping with your parents or do you like when your parents give you a certain amount of money and send you on your own instead? Why?
- What has going shopping alone taught you about spending money?
- If you have a sibling, how do you feel about sharing money with them when you go shopping? What are some things that bother you (if any)?
*Same as above.
Frequently Asked Questions
Why should parents talk to their kids about money?
Talking to your kids about money helps build kids’ confidence on the subject and boosts their money management skills. In essence, it helps them navigate their finances better now as well as later in life when they have to make much more important financial decisions.
Encouraging money talks with your kid helps them learn more about financial independence, and what money can (and cannot do) for them and the other people in their lives.
That said, the type of conversation you’ll have with your kid will largely depend on their age. For instance, five and six-year olds require an intuitive and a fun approach to money which is likely going to include more numbers and visuals rather than serious conversations.
Then, nine to twelve-year old kids need to manage their allowance properly. This is more or less their first “financial independence”. In essence, they need to take responsibility and look after their money. They need to become more aware of how they spend and where they spend the money they’re being given.
Also, teenagers are a very sensitive category, so they need a lot of patience. However, they should be approached carefully with the subject of money because their money aspirations are much bigger than those of a six year old or a nine year old. While giving them financial freedom matters, you should still monitor what they do with their money and whether they manage them properly or not. After all, this is when a lot of teengars earn their first wage and money really starts to have a personal meaning for them.
What is the appropriate allowance by age?
No one can tell you exactly how much money you’re supposed to give your kid when they’re 5, 7, 10, or 13.
Yet, it’s good for parents to have some sort of information they can take into account when deciding how much money to give their children. Hence, according to Scholastic,
- age 5-6 is when parents should introduce the concept of allowance (if they believe the kid is ready);
- age 7 and up is when a lot of parents start giving allowance to kids for certain tasks, chores, behaviors, and grades. However, experts advise against it because then kids start associating the concept of money as a disciplinary method rather than a teaching tool (in other words, the kid will always think they need to be paid to clean the house, and won’t perceive it as a normal necessary task).
- Age 10 and 11 is when it’s recommended that you give 50 cents to a dollar for each year of age (on a weekly basis). For example, a 10 year old should receive between $5 to $10 per week.
- Age 13 and up is when children get their first prepaid debit card that they can manage online (it’s useful to deposit the allowance onto the card each week, so that there's a limited amount of money on the card). You can also use this to teach your kid to withdraw money from an ATM, make online purchases, and so on.
Suggestions for Further Reading
We always support parents who wish to study more about their kids’ development and behavior. So when it comes to understanding the relationship children have with money, and how they can have a well-balanced approach toward it, we advise you to read Ron Lieber’s book - The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money.
Apart from supporting parents who invest in their own knowledge and parenting skills, we’re also very much supportive of parents who wish to educate their kids further. In essence, we provide relevant children's literature that parents can purchase for their kids and engage them in it.
If this resonates with who you are as a parent, as well as your parenting style, and you think it’d be useful for your children to learn more about money and other related concepts, then we invite you take a look at the following books:
- One Cent, Two Cents, Old Cent, New Cent, by Bonnie Worth
- Alexander, Who Used To Be Rich Last Sunday, by Judith Viorst
- How to Turn $100 Into $1,000,000: Earn! Save! Invest!, by James McKenna, Jeannine Glista, and Matt Fontaine
- Rock, Brock and the Savings Shock, by Sheila Bair
- The Kids' Money Book: Earning, Saving, Spending, Investing, Donating, by Jamie Kyle McGillian
- Finance 101 for Kids: Money Lessons Children Cannot Afford to Miss, by Walter Andal
- The Everything Kids' Money Book: Earn it, Save It, and Watch It Grow!, by Brette Sember
- Lemonade in Winter: A Book about Two Kids Counting Money, by E. Lockhart
- Make Your Kid A Money Genius (Even If You're Not): A Parents' Guide for Kids 3 to 23, by Beth Kobliner
- Money Ninja: A Children's Book About Saving, Investing, and Donating (Ninja Life Hacks), by Mary Nhin
- Financial Peace Junior Kit: Teaching Kids How to Win With Money, by Dave Ramsey
- A Kid's Activity Book on Money and Finance: Teach Children about Saving, Borrowing, and Planning for the Future—40+ Quizzes, Puzzles, and Activities, by Allan Kunigis
- A Dollar, a Penny, How Much and How Many, by Brian P. Cleary
- Pigs Will Be Pigs: Fun with Math and Money, by Amy Axelrod
A Little Something for You Before You Go….
Apart from providing suggestions for further reading, we’re very much into quotes! Not only do we like reading them, but we also enjoy discussing their meaning and implications in a deeper manner.
Let’s go over the ones we found most thought-provoking.
- “Money does not buy you happiness, but lack of money certainly buys you misery.”
Do you agree with this? Why? Why not? Are people really doomed to be miserable if they don’t have money? Also, are rich people happy by default? How so? What’s the main point behind this quote?
- “The hand that gives is among the hand that takes. Money has no fatherland, financiers are without patriotism and without decency, their sole object is gain.”
What does it mean: “the hand that gives is among the hand that takes”? Also, why does “money [have] no fatherland”? Does Napoleon’s thinking apply to today’s context? Why? Why not?
- “Grateful souls focus on the happiness and abundance present in their lives and this in turn attracts more abundance and joy towards them.”
Is this true? Does gratitude bring more things in your life to be grateful for? Also, how do you understand the concept of abundance? Is it just money and any financial gain or perhaps it encompasses something more?
- “Those who think money can't buy happiness just don't know where to shop … People would be happier and healthier if they took more time off and spent it with their family and friends, yet America has long been heading in the opposite direction. People would be happier if they reduced their commuting time, even if it meant living in smaller houses, yet American trends are toward even larger houses and ever longer commutes. People would be happier and healthier if they took longer vacations even if that meant earning less, yet vacation times are shrinking in the United States, and in Europe as well. People would be happier, and in the long run and wealthier, if they bought basic functional appliances, automobiles, and wristwatches, and invested the money they saved for future consumption; yet, Americans and in particular spend almost everything they have – and sometimes more – on goods for present consumption, often paying a large premium for designer names and superfluous features.”
What does happiness mean to you? Put simply, what makes you truly happy? How much do you attribute your happiness to money? What can you do to lead an even more joyful life? Also, have you ever talked to your kid about happiness? How does your child interpet happiness? Do they connect it with the notion of money or something else?
- “Money is not the only commodity that is fun to give. We can give time, we can give our expertise, we can give our love or simply give a smile. What does that cost? The point is, none of us can ever run out of something worthwhile to give.”
How is money different from the other things “we give”? Also, how can we determine what matters more: the material things we give or the emotional ones?
- “Poets are never unemployed, just unpaid.”
Do you agree with this quote? Why? Why not? Are poets (or other artists for that matter) unpaid? Perhaps they’re underpaid and not unpaid? What about certain artists and successful writers who have made tons of money from their art? Does that count? Also, are there any other ways that people can show appreciation toward a specific artist rather than buying their piece of work (thus contributing to the artist’s income)?
- “It turned out that capitalism alone could make people not only rich and happy but also poor, hungry, miserable, and powerless.”
What does this quote say about the society we live in? Why are some people “poor, hungry, miserable, and powerless” even in this era? How do you feel about your kid growing up in the capitalist era? Can things be better? What should be done in order for things to drastically change?
Before we wrap things up, we want to write a few words about why our money course is a great option for your kid(s) (regardless of what their relationship is with money). The purpose of the course is to take your kid’s understanding of money to the next level, and help them manage their money in a very responsible way in the future.
The course is highly interactive - we provide questions, short sets of reading, case studies, short videos, and so on. In general, we cover:
- where money comes from;
- how to set financial goals and chase them;
- The importance of creating a budget and sticking to it;
- how to have meaningful discussions about money;
- why investments and savings matter so much;
- the difference between good debt vs. bad debt;
- differentiating among saving, investing, and spending money, and so on.
Now the rest is up to you - you might have learned all there is to learn about money, and you may manage your money quite well, but are you going to allow us to help your kid learn how to manage theirs?
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