How To Teach Kids About Money

With Laurel starting high school in the fall, the prospect of college for sure feels more than real! But I wanted to step back a bit today to talk more generally about how to teach kids about money. A lot of parents ask me about money-related topics; for example, whether to pay for chores, how to raise their kids to be financially literate, and how to not spoil kids.

I think about these topics constantly, as someone who grew up with very little (I am one of 7 kids and my parents were immigrants starting from scratch). Although I am now raising my kids in a relative state of comfort, I have a lot of childhood baggage related to money, so I have to work pretty steadily to not let it drag into my parenting!

This topic feels very timely to me as I’m planning on attending the Cambridge Arts River Festival this weekend (Saturday, June 2 from 11am-6pm) where the U.Fund Dreams Tour will have a full interactive tent. I’m looking forward to taking Laurel and Violet to the U.Fund Dreams Tour tent where they can play games while I learn even more about college savings!

With money on the mind, let’s hop into my tips on how to teach kids about money:

1. Talk to your kids about different ways to handle money

Adults get so squirrely talking about money, but it’s time to break that cycle and get comfortable talking to your kids about money! The important thing to keep in mind is that the conversations do not need to be heavy handed or lengthy; instead, shoot for quick, periodic touchpoint conversations. For example, birthdays are an easy touchpoint for us because Koreans love to issue cash gifts! So whenever the girls get that flat envelope from my mom, we talk about what they want to do with it: Is there something on their wish list that they’d like to spend it on? Would they like to put it in their bank account? Or would they like to do a combination and donate part of it to an organization they care about that needs help and spend/save the rest.

Conversations about money can happen with your kids anytime! It doesn’t need to be long or involved – just start.

2. Get your kids in the game with accounts in their name

Similar to the way it feels special for Laurel and Violet to receive mail, I definitely think they feel more in the money game because they have savings accounts and 529 college investing accounts in their name. With no prompting from me, every year around their birthdays or holidays, they include “college money” on their wish lists!

3. Look for teachable moments

As with many things in parenting, one of the best ways to talk to kids about important stuff is to hinge it to other things that they care about or that has caught their attention. For example, Laurel and Violet are both very empathetic and invariably our conversations about social injustice, environmental issues, or endangered animals lead to discussions about how to share money through charitable donations.

Violet’s love of sea animals grew even stronger on a recent Boston Harbor animal adventure so I’m thinking her next donation will be in honor of sea lions!

4. Don’t pay for all the things!

This is one of the easiest and also seemingly hardest things for parents who are financially comfortable. So many parents tell me how it’s hard to say no and set limits, but that’s exactly what you need to do to both teach your kids about money and also prevent your home from becoming overrun with junk! Our basic rule of thumb is that we cover the necessities (e.g., school supplies, basic clothing needs) and we typically knock off some wish list items around the holidays or birthdays, but if there is something they want otherwise, they have to pay for it. Bottom line: kids learn (quickly!) to be more thoughtful about how much they want something if they have to use their own money to pay for it.

5. Give your kids an allowance so they can experiment with money

I do NOT believe in paying kids to do chores because chores are just something kids should learn to do as part of the family system. However, I am a firm believer in basic allowance, so kids can experiment with saving, spending, and sharing.

6. Let your kid experience money fails

There are always lessons in failure and kids will become more resilient and thoughtful about money if you let them fail every now and then, even as it relates to money. For example, your kid may decide to spend $20 on a toy you think looks flimsy and ridiculous. You can gently say, “OK, are you sure? That’s a lot of money.” to give them a point of pause to think about it, but if they decide to go for it, let it happen. If the toy works out great, then they have learned a lesson about how to stick to their instincts; if it breaks, they will be upset but they will for sure learn that they should evaluate an expensive item before diving in.

7. Talk to kids about what things cost

Kids need to know about what things cost, for example, we often discuss everyday purchases as they come up. Laurel has also had some interesting school assignments related to money, such as “budgeting for vacation and general living.” Younger kids could also do something similar with this Be Your Own Boss game that allows children to start their own business and make financial decisions that impact its success. Laurel and I have also talked about college costs. As I shared in this story, Laurel already has an idea of where she wants to go to college and as of last year the price tag for that college was $66,445 per year. This very large number has helped her understand the need to save and also work hard.

8. Send kids out in the world with cash

You can help teach kids about wants vs. needs with pretend money, but as I was thinking about this post I decided to ask Laurel what has been most helpful in teaching her about money. She said that actually going out shopping with her friends where she has a fixed amount of money in her pocket has been the most eye opening. Interestingly, she said that when she’s browsing online, price tags still feel abstract but that there is something more real about seeing prices -- and making decisions about them -- in person.

If you’re not convinced that these simple tactics actually work, here is something that just happened the other week. Over the weekend it got really quiet around our house for a couple of hours. It turns out that Laurel and Violet were building their case (and a poster presentation!) on why we should get a parakeet. Instead of just asking us for a thing, I was so impressed that they researched and broke out the costs involved and they clearly understand that they will need our help to make it happen, but that they are also willing to chip in and do a fundraiser!

Laurel and Violet did their research both on care and finances when proposing their desire for a pet parakeet.

Did I miss anything? What has worked for you to get kids to understand money? Feel free to share in the comments below!

Disclosure: This post reflects a compensated editorial partnership with MEFA and Fidelity. All thoughts about how to teach kids about money -- and why you should not pay for chores! -- are of course my own.