Why Teach Your Kids about Money
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With everything else that’s on your plate as a parent, why start a conversation with your kids about money—especially if it’s a sensitive topic or you don’t feel very confident about it yourself?
Many of us grew up with our parents and teachers assuming we’d eventually learn about money as money-related issues presented themselves, and that’s true to an extent. Which is to say, while kids may eventually figure out some of the ins and outs of financial fitness on their own, they may not do so in a way that puts them in an optimal position to succeed financially. Kids may figure out the particulars of money too late to prevent them from a run-in with spending more than they make, accruing credit card debt, or simply not saving enough to pay for what they need—and want. But the good news is, you can help.
Think about it like this
Are there things you wish someone had told you about money before you started making decisions that affected your finances? Are there aspects of money you still don’t fully understand? Do you feel like you could have been better equipped to deal with the ups and downs of job earnings, the stock market, and unexpected expenses? If your answer to any of these questions is yes, you already know it’s worthwhile to talk with your kids about money. But what if you feel like you don’t know enough to teach them about it? And anyway, aren’t they learning it somewhere else?
Do kids get a financial education at school?
Are your kids learning about money at school? Possibly, to some degree. In the 2020–2021 school year, seven states—Alabama, Mississippi, Missouri, North Carolina, Tennessee, Virginia, and Utah—required students to take a standalone personal finance course, while just over 20% of high schoolers went to schools where students took at least one semester-long personal finance course. All of this is great, but it usually comes (much) later in kids’ learning than it should, and it’s simply not enough in total to give kids a solid financial foundation—after all, consider how often you deal with money in one way or another. It’s most helpful for kids to get in the habit of addressing money issues frequently and over a longer period of time, since that’s how it will be throughout their lives.
Many teachers agree and take it upon themselves to teach personal finance with experience-based platforms like Stash101, but in other cases, kids don’t get enough exposure to money management at school—and what exposure they do get often comes a little too late, according to experts. Many experts say money habits are set by age seven, and kids can start comprehending basic money concepts by age three. So the sooner you talk to your kids about money, the better—and the more you talk with them, the more opportunities they have to learn about money before they’re tackling personal money challenges on their own.
Use your experience to help your kids
Another key consideration is helping your kids to avoid any financial missteps you may have made yourself. You don’t necessarily need to go into detail with your kids about your own experiences, but keep in mind that those experiences, however unpleasant, likely provided you with some awareness of how money management can affect you in the short- and/or long-term—and that information can be enormously helpful to your kids. Are there specific money issues you may have been able to avoid if you had just learned sooner? For many of us, the answer to that question is a resounding yes. According to one recent survey, more than 2 out of 5 American adults had to teach themselves about personal finance, and 33% feel that their lack of financial knowledge prevents them from making financial progress. It’s not a stretch to say that financial illiteracy is common in the U.S., and yet money plays a major role in our lives. So what do we do—and how do we help our kids?
Starting the conversation
Here are some ideas to get you started (and check out this finance vocabulary for kids). Note that this list is not comprehensive—these are just a few ideas to get the ball rolling.
- Each time your kids get a treat at the store, let them hand the cash to the cashier to pay for it. This familiarizes them with cash and coins and teaches them that money is transactional.
- When kids are old enough to tackle small chores, consider giving them a small allowance when they complete their chores—it’s a great opportunity to teach them how to count and save their money.
- Work with your kids to set up a piggy bank or savings jar, and let kids get creative with how they set it up to personalize the experience.
Have your kids complete chores to earn a small allowance of real or fake cash—consider using Monopoly money or your own system of fake currency. If you opt for pretend currency, consider letting kids use what they earn to buy things at home, such as which movie the family will watch, what’s for dinner, and so on.
Talk to kids about how grown-ups have the same system: when adults go to work, they earn money for the work they do. And when grown-ups go to the store to buy something, or when they buy something online, they use the money they earned at work. Take kids with you to the store and talk through the process of selecting items, budgeting, and paying. Also, have fun by playing money-related games, like Monopoly, and talk to kids about these key terms:
- Spend: use your money to get something in exchange
- Save: set aside your money so you don’t spend it
- Share or donate: give your money to a charity or cause to help people, animals, and situations
- Invest: put your money someplace where it could earn you more money
Talk with kids about the choices people make when it comes to spending, saving, sharing, and investing. Provide examples from your life, and continue practicing all the habits you practice with younger kids. Consider opening a savings account, along with a custodial account for kids through Stash Invest with a Stash subscription plan for $9/month—and encourage kids to help you make choices about how to allot the money.
Encourage kids to take small jobs outside the house: raking lawns, shoveling snow, washing cars, and so on. Talk with them about creating their own budget, and help kids get hands-on money management experience with the banking simulation on Stash101.
Encourage kids to get a part-time job, such as babysitting or working at an ice cream shop. Your kids may be out of the house soon, and they’ll need budgeting skills for groceries, transportation, and more—so talk through their budget with them and let them know that budgeting skills will come in handy when they’re out on their own. Also, have kids read about investing and decide which companies they’d like to hypothetically or realistically invest in, and encourage them to share their findings with you.
At school and at home
At the end of the day, money sense is something that needs to be taught directly—it’s not the sort of thing a person can simply intuit or pick up on the fly. Fortunately, there are many ways for you to teach your kids about money, regardless of their age and interests. The sooner you get started, the better for them—and remember, if your money skills are less than ideal, this is a great opportunity for you and your kids to learn something new together.
This is a UGMA /UTMA account. The money in a custodial account is the property of the minor. This type of account is a Non-discretionary managed account and is only offered through Stash Investments LLC (“Stash RIA”).