Becoming a parent means having a ton of conversations with your kids: how to stay safe, how to manage emotions … the list goes on. It can all feel heavy and overwhelming. But one conversation you don’t want to skip? Talking to your kids about money. More important than the specific lessons is simply starting the conversation. Talking about money with your kids can feel really scary (there’s a reason less than one-third of parents currently do), but the earlier you start, the more your kids can learn, and the more comfortable they will be handling money today and in the future.
If you’re looking for a place to get started, here are some essential lessons to teach your kids about money.
What Money Is and How It Works
Start by explaining what money is and how it works in simple terms. You can talk about how people work to earn money and how money is used to pay for things (such as groceries for the week or a new toy).
How To Count Money
It may be super rare to pay in cash these days, but introducing kids to coins and bills can help them learn the value of money. Begin with coins — pennies, nickels, dimes, and quarters — and practice counting them together. Then, move on to bills and explain how each one adds up. You can set up a pretend store where they can “buy” toys or snacks and give them the chance to count their money and hand it over. You can even use a toy cash register or print out fun money sheets to make it feel real.
How Much Things Cost
Most kids struggle to understand exactly how much it costs to buy things — that’s probably why they ask for everything under the sun when you’re at the store. Once they’ve learned to count money, you can show them how much things cost, like clothes or food.
The Difference Between Needs and Wants
Understanding what’s essential (needs) and what’s not (wants), can help kids learn to manage their money responsibly.
Needs are things that are essential for us to live, such as food, a place to call home, clothing, and transportation. Utilities, to heat an apartment or house in the middle of winter, are another example of a need. So is gas so people can drive their car to school or work.
Wants are the things that help us enjoy our lives but aren’t essential. A brand-new phone, tickets to a Sabrina Carpenter concert, a snowboarding trip, or a Netflix subscription are all examples of “wants.”
How To Save for Something They Want
Help your kids understand that even though they can’t have everything they want all at once, they can set savings goals and save for the things they’re most excited about.
When they get excited about a new item or experience, encourage them to save up for it. You can help them figure out the cost of what they want and break down how much they’d have to save per week or month to make it happen.
What Compound Interest Is and How It Works
The earlier kids make saving (and investing!) a habit, the more their money has a chance to grow. Explain what “interest” is and take it one step further to talk about compound interest.
Compound interest happens when the interest you’ve earned starts to earn interest of its own, helping your money grow faster and faster. An easy way to remember it is to think of it as “interest on interest.” It can feel a little bit like magic for your savings and investments!
In order to teach these lessons in a way that is age-appropriate, think about how old your kids are and what they know about money already. A 4-year-old might recognize money but have no idea how it works. A 16-year-old has probably gotten money for their birthday or from a summer job and has some experience spending. Use what they know already to help you decide which lesson to start with. From there, you can keep the following tips in mind to help kids learn in a way they’ll understand.
Try Fun Games and Challenges
More learning happens when kids are having fun! Try introducing money topics in creative ways. Interactive games like Money Bingo can help younger kids learn the basics about money and what it’s worth. You can even use colorful cups or jars to represent different categories (spending, saving, investing) and teach kids to “budget” with marbles or beads.
For older kids and teens, you can:
- Challenge them to reach a savings goal by a certain date.
- Give them a budget to buy groceries for your next family dinner. They’ll learn to compare prices and make smart spending decisions.
- Have them try a “no-spend challenge.” Encourage them to go a week or two without spending on wants and use the money they saved to invest in a stock or ETF.
- Save for a family trip together! Have each family member put aside some money each month for a mini-vacation. (This could be something as simple as a day trip.)
Bring Learning Into the Real World, With Real Examples
One day, your kids will have to pay bills, file taxes, and budget a paycheck. They might even want to buy a house or car. Although you don’t have to pull out your tax documents and show your kids exactly how much you make, it can be helpful to bring them into the money things that happen in your life.
For example, you could show and explain your monthly utility bill, take them along the next time you buy a car, or walk them through how you navigated the financial side of an unexpected event, like a house repair or car troubles.
Point out price differences at the grocery store, explain why you decided to buy one thing over the other, and demonstrate wants vs. needs in person (groceries for the week vs. sweet treats, a winter coat vs. cool sneakers).
Keep It Positive
Money can be a really emotional thing. That’s because your unique background and experiences influence how you feel about it. Maybe you’ve been through times when money was really tight or grew up listening to your parents talk about it in a certain way. And even though it’s important to be honest with your kids about your experiences, helping them create a positive money mindset can go a long way.
Try to be thoughtful about how you introduce certain topics. For example, when teaching kids budgeting, frame it as something that helps people create a plan for their money so they can reach their goals instead of as something restrictive. That way, kids learn it isn’t about keeping yourself from spending at all costs but prioritizing your money for different purposes and spending responsibly.
Rather than responding with “We can’t afford that” when your kids ask for something at the store, you could help them understand the true cost and encourage them to start saving for it. You can even break down how much they’d have to save each week or month to buy it in a certain timeframe. This positive approach helps kids feel like anything is possible, but understand that getting the things they want might take time.
Victor Wang is CEO of Stockpile. With over 25 years as a successful entrepreneur, Victor brings the leadership and passion needed to remove barriers in the financial industry and enable people to own their financial futures.
