Raising Saving-Savvy Kids: How to Talk to Your Children About Money (2024)

Who taught you about money and personal finance? If the answer is no one, that you picked up what you needed to know along the way, then you're in the same boat as many other adults. It's not uncommon to feel inadequately prepared to manage your money in the best way possible. If that's the case, how are you going to teach the kids or young people in your life about it?

"Of course people are intimidated by finance because nobody ever taught them!" says Liz Frazier Peck. She's a certified financial planner and executive director of financial literacy at Copper, a banking app for teens. She's also the author of Beyond Piggy Banks and Lemonade Stands: How to Teach Young Kids About Finance. "I mean, really, there's no reason for anybody to know anything about finance," she adds. That shouldn't stop you from making money an everyday topic you can discuss with your family.

"When kids are young," Frazier Peck says, "we talk to them about things that we want them to develop, positive and healthy habits, nutrition, stranger danger, teamwork, kindness and things like that." And money, she says, touches every part of our lives. Parents need to talk about it, too.

(Credit: Photo by Damir Spanic on Unsplash)

Find a Hook

When talking to kids about money, you have to figure out what piques their interest.

Young kids aren't going to be interested in taxes, tax brackets, or diversified portfolios. Even the 50/20/30 rule will be over some of their heads. (Don't worry if you've never heard of it. It's a suggestion to divide your after-tax income to put 50 percent toward needs, 30 percent toward wants, and 20 percent into savings.)

Jed Kim is the host of Million Bazillion, a podcast for kids about money and the economy. He says the show's most popular episode was about negotiation. The reason? Kids of all ages can try it out for themselves right now.

"It's been surprising how quickly they want to use the lessons they learn," Kim says. After the show about negotiation, he says, "people responded that their kids are now negotiating with them on everything. It turned them into little lawyers."

Young kids do have questions about money, but they might not be the earn-spend-save lessons you have in mind to teach them. By figuring out what kids are interested in, parents can find a jumping-off point. Kim says other questions that are on kids' mind are, "How is it that a dollar has value?" and "Why don't stores run out of things to sell?" So you might begin by talking about the supply chain and lead into a conversation about needs versus wants.

Give Kids Hands-On Experience With Money

Learning to negotiate is a hands-on experience for kids, which is part of what makes it compelling and interesting. There are other hands-on experiences that parents can give to kids, although it's important to make them age-appropriate.

Kavita Kamdar is head and general manager of Chase First Banking. It's a new option from Chase Bank that lets parents issue a debit card and app to their kids. It's free for existing Chase customers and intended for kids ages 10 to 15. From the child's point of view, the app shows how much money is in their debit card account and lets them move it into areas designated for spending or saving. They can also create savings goals. Parents can fund the account by offering payment for chores, which they can assign in the app, or by giving a recurring allowance or lump sum deposits. As the child uses the app and debit card, the parent has oversight—and if they want, some control over—the spending. In other words, it gives kids financial "freedoms with limitations," as Kamdar puts it.

After a pilot program with the Chase app, Kamdar was surprised that kids in the 10-to-15 demographic actually started asking questions like, "How much should I put toward savings?"

"Kids are exploring that thought process subconsciously," Kamdar says, because when a kid completes a chore and gets paid for it, they're required to move the funds to either their savings or spending category. "It's not just this idea of spend and save," she adds. "If you start to have conversations around budgeting, it opens up questions like, 'What are my goals?' So, if your kid says, 'I don't have enough money for Minecraft, so mom, can you give me more money?' the answer might be, 'Well, maybe you should have the savings goal around Minecraft.'"

Frazier Peck does something similar with her young children. Before Christmas, she gives them gift catalogs and tells them to circle everything they want. When they're done, she tells them, "OK, now list your top five." It's an easy way to get younger kids thinking about priorities.

While kids are still young, you can also give them hands-on experiences when you go to a store, COVID-19 safety pending. Frazier Peck recommends giving children physical currency when possible to let them pay for a small item, such as a drink. "Have them go up to the register, give the cashier the money, have them count back the change. Just start getting comfortable with it," she says.

Talk About Money Often

The only way to prevent money from becoming a taboo subject is to talk about it openly and often, but in a natural way.

"There are some very simple conversations that kids really enjoy that are the foundations around money management. One of those is needs versus wants," says Frazier Peck. "You can start off really easy saying, 'This is something that we need, something we physically need to live.'" From there you can segue into talking about kids' possessions, and it doesn't have to be cut and dried. For example, you might ask if an iPad is a need or a want and discuss how it's used. If it's necessary for school or work, maybe it's a need. Frazier Peck encourages having these conversations.

Kamdar notes that when a parent and child jointly use a banking app, like the one she heads up, it can bring up conversations that might not otherwise take place. "One parent mentioned that they gave their child $10, and they noticed in the app that they spent it all at the corner store," which seemed strange. It forced the parent to bring it up with her son. "What she uncovered," Kamdar says, "was he was paying for all his friends. She said, 'OK, no problem. But are they going to pay you back? Is this really how you want to spend your money?" Kamdar adds, "What I think parents love is that it gives them a chance to have very natural conversations around control and spending habits that I think otherwise don't come up naturally."

Remember, Kids Are Emotional Sponges

Kids are emotional sponges. They take in not only what you say but also how you say it and what you do when you're not saying anything at all.

"Whether or not you're explicitly sitting down with them and talking about money, kids are absorbing lessons," says Million Bazillion host Jed Kim. "If you're not talking to them, then they run the risk of getting the wrong ideas."

However you act about money, whether it's with anxiety or valorizing money by obsessing over billable hours, kids will pick it up.

"My family didn't talk about money. I just knew that we didn't have very much," Kim says. "I think I stopped asking for things and started making assumptions about my place in society in relation to other kids. Looking back, a lot of that wasn't true. But I think that's a common experience."

Kim says one of his colleagues had a similar experience. "When she was little, her father took everyone out for ice cream, and she didn't get any. The father thought, well, that's weird, OK. Afterward, he asked, 'Why didn't you want ice cream?' And she broke down crying, 'Because you pay too much in taxes!' All she had ever heard were the negatives."

We all feel budget burnout sometimes—and perhaps never more so than during this pandemic, sadly—but it's important to think about how letting it get the better of you may affect your kids. Keep in mind that children pick up emotional information about money based not only on what you say to them directly, but also what they hear you saying to other adults, and what you do, too. So talk about it openly and often.