The Easy First Step to Teaching Kids About Money
Not sure where to start?
Feel like it’s overwhelming?
Do you think: “Hey, I’m no financial expert. How do I begin to teach my kids to be money-savvy when I’m not myself?”
The good news is…
The first step is actually EASY. To start with they just need to learn the very basics.
Talk to them about money as you use it in your daily lives.
Adjust the level of detail to be age appropriate.
For young children (ages 3-8):
- Explain how you go to a job and get paid money for it. Your “paycheck” gets deposited into your bank account to keep it safe.
- When you are out at a store, talk through what you are doing.
- Show them how to find the price of items you are looking at. Get them involved. Compare different options and prices. Are you buying the cheaper or more expensive version? Why?
- Describe what you are doing when you go to cash register. Discuss how you are paying. Is it with cash or debit card/credit card? Tell them how each works. The debit card is taking money out of your bank account.
- Young kids generally don’t understand debit/credit cards. All they see is that you hand over a card and then you get stuff. Or when you go to the ATM, you put in your card, and it gives you money. Don’t we wish it was that easy.
- At this age keep it simple. Don’t get into debit card vs credit card. They won’t get it. Explain that you have money stored in a bank to keep it safe. The card allows you to tell the bank to pay the bill with your money. That way you don’t have to carry all your money with you everywhere.
For older children (ages 9-15)
Get a bit more detailed.
- Show them how you pay the bills each month. If you hand write checks, explain the different parts of the check and what they mean.
- Describe the bank process to them: When you give someone a check they take it to their bank and “deposit” it. Their bank then talks to your bank. Your bank takes the money from your account and gives it to the other person’s bank to put into their bank account.
- If you pay bills online then show them how that works.
- Go over your home budget with them. Show them how you plan and track what you earn and spend. If this is something you need to work on yourself then let them be part of the process of improving your system.
- This is where you should also begin discussing the benefits and risks of credit cards. They’re a helpful tool to buy stuff. However, point out that it’s a loan and one can get themselves in debt if they don’t use them wisely.
- Develop the understanding early that they should not buy anything with a credit card that they can’t pay for when they receive the bill.
These are the first building blocks on the road to developing money smart kids. The earlier they learn this, the earlier they will be ready for more advanced topics.
Check out my recent post about Common Money Mistakes Parents Make With Their Kids.