“Can I get that?!” Does that sound familiar? For parents, it’s an all-too common question we get from our kids. They want the latest toy, or they beg for candy at the store. Sometimes it seems like they just think parents are made of money to spend on them! No matter your financial situation, kids need to learn how to understand and manage money in order to eventually be able to live as independent adults. Teaching kids about money happens in both big and small ways, and can start younger than you might think. We talked to Parent Toolkit expert Jennifer Miller, Dr. Michele Borba, Bon Crowder, and Dr. Shari Sevier for advice on having—and starting—those conversations.
Whether your kid is just starting to save their pennies or they are begging you to buy them a toy in the store, your kid is aware that money exists. “If your kid can count to ten, they’re ready to learn about money,” says Dr. Michele Borba, an educational psychologist. Kids are hearing messages about money everywhere, and it’s best to start early when you begin instilling your own lessons about money. Borba suggests starting with baby food jars for kids who are in the Pre-K and early elementary ages. They can start to see their pennies grow over time. Professional school counselor Dr. Shari Sevier says parents should start talking about money as related to earning. “Emphasize that it’s not infinite,” Sevier says. “They need to get out of the entitled mode. It’s really concerning the number of kids who just feel that they should get whatever they want for nothing.”
Explain Money Concepts in Their Terms
While they might not understand complex financial topics yet, there are ways to describe concepts like interest, borrowing and lending, and value. Our kids do understand a lot more about money than we might think. “Generally I find that kids are infinitely smarter than parents give them credit for when it comes to money,” says Bon Crowder, a math professor at Houston Community College. For example, you can explain the idea of borrowing and lending through sharing toys. If they let a friend play with a toy, they are, in fact, lending that toy to them for a period of time. If they want to play with a friend’s game, they have to ask permission to borrow it. Take it a step further by incorporating interest into sharing. If your kid borrows a toy from their friend for a couple of weeks, they have to give it back with an additional toy for their friend to play with for a similar period of time.
Kids can start learning about value when they are pretty young. Crowder says she frames value to her daughter using her favorite toys. “My daughter recently wanted an expensive item, and I said, ‘Well, that’s $100,’ and she was just like, ‘So what? Can we get it?’ But then I said ‘Okay, that’s about 20 beanie babies.’ Then she’s like “Oh! That’s a lot!’” Crowder says. “It’s all about measuring things so they have that ‘A-ha!’ moment.”
Take Kids to the Bank
Going to the physical bank with your kids is a huge step in their understanding of how money and finances work. By simply observing you while you deposit money or write checks, they are soaking up valuable knowledge. Better yet, take them to open their own bank account. This can be as early as elementary school. Education consultant Jennifer Miller said that she took her son to open a savings account when he was just 6 years old. “He was old enough to sign the paper. He filled out the forms; we took extra forms home so he could practice writing checks. We went out to lunch and made it a big deal,” Miller said. When they get to take part in the process of having their own account, depositing money in it, and taking money out, they start to understand that money exists in a real space and is not just a magical, plastic card.
Learning how to save is perhaps the greatest lesson a child can learn about money. It’s a lesson that will last a lifetime. Borba suggests using glass jars instead of traditional piggy banks because kids can see money grow over time, which is a good visual aid to understand how saving works. Encourage your kid to fill the jar before spending their money. This helps with impulse control and also teaches them to save for a longer period of time. As they get a bit older, start teaching them to budget. Borba suggests creating a visual aid to track all of their spending and saving. Use different colors or symbols to distinguish between needs vs. wants so they can see what they are spending most of their money on. Have them add up all their “costs” and subtract it from their total “earnings” (from allowance, gifts, or jobs). What they have left over should be put toward savings!
Whether it’s giving back to others or showing graciousness when receiving a gift, kids need to learn that money comes with both great privilege and responsibility. “Every time you make a purchase with a child or for a child, emphasize gratefulness,” Miller says. With so many consumer messages coming at kids from advertising, it’s important that they hear and see good examples from you. “Don’t assume your child isn’t watching you,” Borba says. “Set a good example by being a good consumer.” Start by simply explaining why certain items mean something to you and how you were able to get them. For example, talk about a valuable piece of jewelry that your mom saved up for to give you for your high school graduation, or express gratitude for the delicious meal you are able to share with your family. “Model gratitude for your kids,” Miller says.
When starting to teach about money management and saving, Borba, Miller and Crowder all suggest having separate jars for “saving,” “spending,” and “giving.” This way, the “giving” aspect is emphasized early and often. Miller says that part of emphasizing gratefulness with money is thinking about those who might not be able to afford going to the store and buying something like a toy, or even groceries. “It’s really important to include questions like, ‘What do you think people do when they don’t have the money to buy what they need?’” Miller says. “Then emphasize how grateful we are for what we have. Make it a habit to express gratitude.”