Kids are notorious for misunderstanding money. To them money is always available and everything they see around them is fair game for mommy to buy! There is a good reason for this. 

The mind of a child in the earliest years is primarily formed through the process of observation. Everything they see and hear helps them to form their understanding of the world. Take a second to think about what this means to most children…

In the majority of cases, little Bobby doesn’t go to work with mom and dad. He doesn’t see the sweat and struggle of earning a paycheck. But Bobby does go to the grocery store with mom and dad. Bobby does see mom shopping on Amazon and hears the doorbell ring as a box arrives on his doorstep.

Our kids see money going out, but they don’t see it coming in. What they see is what they understand. 

As a child Bobby understands things are given to him and he doesn’t have to do much - if anything - to earn it. And, at some point he figured out (probably because he saw someone else do it), if he pouts his lips and twinkles his eyes he can get what he wants without much of a fight. 

Come on parents - it’s time to up our game!

Why It’s Important to Teach Kids Good Money Habits

Seeing as April is financial literacy month, it’s as good a time as ever to start thinking about how we can help our children gain solid financial literacy. If you weren’t sure, let me share some scary financial literacy statistics and debt statistics that might help convince you:

• 83% of parents would like to have learned more about finances when they were young

• 59% of adults still feel uneasy talking about their finances

• 77% of American households carry at least one form of debt

• The average American adult has over $58,000 in debt

Everyone is a money manager. They’re either a good money manager or a bad one. Most of us know we were ill-equipped money managers coming into adulthood and we know the stress it’s caused. 

A recent study commissioned by the APA found that 72% of people reported being recently stressed about money, and 64% of Americans say money is a significant form of stress for them in life.

Why would we let our children suffer these same fates? Let’s help our children avoid the anxieties caused by money mismanagement and instead teach our kids money habits that will set them up for success!

How to Teach Kids About Money - 5 Easy Steps to Take

1. Start Now

Most parents end up putting off the money talk for a few common reasons: 

• They think money is too complicated for kids

• They don’t know where to start with such a big topic

• They don’t feel qualified to teach their kids about money

Regarding the complexity of finance, parents aren’t wrong to think that money can be a complicated topic. But we shouldn’t let this be an excuse for putting off good conversations about how to manage money appropriately with our kids.

Kids are smarter than we give them credit for and can grasp basic money concepts by age 3. Many of their habits with money are set by the time they turn just 7! While money and finance can get complicated, begin with the simple stuff. 

This brings us to the next concern. Parents don’t know where to start when it comes to talking about money with their kids. I’ll tell you the secret… start anywhere!

When you buy something, talk to your child about what it costs. When kids ask where money comes from, talk to them about the importance of a job. When little Suzy wants a new Barbie doll this very instant, talk to her about patience and the idea of delayed gratification. Maybe you can even encourage her to save up for it

Another reason parents put off starting money talks with their children is they feel inadequate.

Maybe you feel inadequate because you have debt of your own. Maybe you’re scared your kid will ask you a question you don’t know the answer to. That’s okay! Get determined to talk about it and you’ll be determined to find an answer. You might learn something yourself along the way!

This brings us to step number two.

2. Practice What You Preach

If you’re going to talk to your kids about their money habits, you’ll need to consider your own. Remember the adage, “actions speak louder than words?” Well, it’s important to remember this when teaching your kids about how to manage their money! 

When your kids hear you say one thing to them about money and see you do the opposite, it can confuse them. Worse, it can lead them to stop listening to you altogether. It’s a simple concept, but vitally important: practice what you preach! Your kids will notice. 

3. Set Them Up For Success 

There are a million and one resources and activities you can use to teach your kids money habits that will help them be financially secure adults. (If you’re looking for some of those ideas, skip to #5). For now, I want to encourage you to help them get off on the right foot. 

Now that you’ve taken steps to teach your kids about money, you need to give them hands-on practice. They need to know what managing money looks like and feels like from a first-hand perspective. My recommendation is to give them a small money task to complete from your to-do list. 

This will look different for every child. For a younger child, this might mean counting out money at a cash register and handing it to the cashier. It might mean earning allowance for doing chores. For an older child, this might mean helping you pay bills online, going through your taxes with you, or getting a job. Use any money moment as an opportunity to teach your kids money habits they’ll remember.

As you teach your child how to make and manage money, make sure they have a place to keep it. If they’re old enough, help them open a bank account where you can help them manage it.  Greenlight.com is one of my top recommended apps and banks to use with your kids. If they’re too young for that, use a piggy bank. This is the bank my son has - I love the give, save, spend banks! They’re a great resource for flexing different money muscles.

Now that you’ve given them some idea of how to manage money and a place to put it, we move on to step number four!

4. Let Kids Manage Their Own Money

Alright, your kids now have a few bucks in their pocket and a method for saving it. The next step is to encourage them to manage their own money. You have given them wings and taught them how to flap. It’s time to push them out of the nest with a nudge!

Encourage your child to save up their money for something they want. Ask them about how good and accomplished they feel when they’ve been able to buy something for themselves. Or ask how they feel earning a paycheck after a hard day’s work. There’s something inherently satisfying about doing a job you can be proud of and having something to show for it. Help your child experience this!

5. Know Your Resources

Lastly, as I mentioned previously, there are a ton of resources available for how to teach kids about money. Don’t get hung up on how to do it or where to start. Just start! Below you’ll find some places you can do just that. 

U.S. Mint

The U.S. Mint website has a bunch of resources for kids to learn about money. From the parts of a coin, to the life of a coin, from videos to games, this website has plenty to teach your kids the basics.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) has amazing resources which lay out money learning a little differently. 

The CFPB website shows you:

• Money milestones for kids at different ages so you know where your kids should be

• Example conversations and activities by topic so you know how to teach your kids about common expenses

• Book recommendations from your local library and handbooks to help you and your child walk through multiple money concepts

Federal Deposit Insurance Corporation (FDIC)

The FDIC is an agency created by Congress to help maintain public confidence in the nation’s financial system. They insure deposits and supervise financial institutions to ensure U.S. financial stability. 

At their website, you can find the Money Smart Catalog which has activities covering topics such as:

• Needs vs. wants

• Spending plans

• Savings goals

• Savings tips

• Growing money

And lastly, one of my personal favorites, check out https://kidsmoneyacademy.com/!

Besides these, there are a million more resources available for you and your kids. Get online or go to your local library and you’ll find something that fits you and your children’s learning and teaching styles. Remember, the key is just to start now!

Teach Kids Money Habits With the Help of a Financial Coach

At Financial Fitness Coaching I help clients understand what matters when it comes to money. Understanding the impact certain changes can have on your financial circumstances makes all the difference in the world. It can make a huge difference in your kid’s world too.

To see how we can help you take steps toward being a beacon of financial success in the life of your kids, email me at kristen@financialfitnesscoaching.com or simply schedule a free 20-minute Discovery Call on my calendar.

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