by Dr. Sandeep Sahasrabudhe
Money and finances are not topics most children are eager to discuss, which presents a challenge to parents. How exactly do you discuss money with kids, and what’s the best way to teach financial literacy to children without going over their heads or boring them?
If you relate to the struggle, no need to worry! We’ve provided several money conversation starters along with some actionable tips to help you introduce financial discussions and questions to your children. Simply print them out, cut them into strips and prompt your child to pull one out during breakfast, lunch, dinner, or any other time you like throughout the day.
Start With the Basics
You should start by explaining the concept of money to your kids, like what it is and what it does. Your child has probably noticed that you give money to a cashier at the store when you buy something. If your child asks questions about the transaction, then it’s a great time to explain to them why you need money to purchase things.
Sample questions include:
1. What does money do?
2. Why do we need money?
3. What are some things you can get with money?
4. Can you get anything you want with money?
Explain How and Why You Make Money
Children understand that their parents provide them with their basic needs, such as food, clothing and shelter, but they may not understand that in order to have these needs met, parents have to earn money. So that they don’t grow up thinking money grows on trees, it’s crucial to teach them how and why you make money.
A great way to convey this concept is to explain to them that you earn money from working. This is also a great opportunity to introduce allowances and chores if you haven’t already. Your child will make the connection that money has to be earned in order to get the things they need and want, but more importantly, they can start making real money themselves.
Sample questions include:
1. What are some ways you can earn money?
2. Why do we need to make money?
3. Do you know how your parents make money?
4. How much money do you want to make one day?
5. How much money do you make from your daily chores?
Teach Your Kids About Budgeting and Saving
Once your child has started making money of their own, they will probably want to spend it. This is a perfect opportunity to teach them about the principles of budgeting and saving. One way you can help them start is by giving them a clear savings jar.
Encourage them to set aside money from their allowance each week in their personal savings jar and instruct them to keep track of how much they’ve accumulated over time. You can do this by giving them a savings worksheet that they update each week or by counting money in the jar with them on a weekly or monthly basis. Let them see the money grow in the jar and congratulate them!
Have them set financial goals so that rather than spending what they have when they get it, they can make bigger and smarter purchases down the road. This will teach them financial responsibility and how to spend their money wisely.
Sample questions include:
1. What is a budget?
2. Why is it important to save money?
3. How much do you want to save in a week? A month? A year?
4. How much do you think a new car costs?
5. What’s something you can’t afford right now, but want in the future?
Teach Your Kids About Spending Money
Your child might want to spend money on unnecessary items, like toys, and who doesn’t?
If they mention that they want to buy something with their own money, you should take advantage of the opportunity to teach them about the practice of spending money. A great way to do this is to let your child use their allowance to purchase whatever it is they are asking about. Go with your child to the store and show them toys that they can and can’t afford with their money. Once they’ve found a toy they can afford, grab it and help them hand the money to the cashier. This simple action will show them how money is spent and will teach them that everything has a cost.
As your child gets older, you can give them more autonomy to spend the money they make and monitor them from a distance to learn more about their spending habits.
Sample questions include:
What’s the difference between a want and a need?
1. What does it mean to “spend within your means?”
2. What’s an example of something you feel was a smart purchase?
3. Would you spend less now to save for a bigger purchase later?
4. What’s one thing you regret spending money on?
Credits: Capital One.
Teach Your Kids About Basic Financial Concepts
Some financial concepts are very complicated, but you can start introducing basic principles like loans, debt, and credit when they reach nine or 10 years of age.
This is when a lot of children start thinking of ways they can earn money to get the things they want. More advanced financial terminology will require some detailed explanations at first.
Once you’ve taught your children what these words mean, you can ask them periodically to explain these concepts in their own words.
Another great method is to let your children participate in big financial decisions. Let them watch as you pay your bills or file your taxes. They will learn a lot from watching you; eventually, you can let them help you!
Sample questions include:
1. What is a loan?
2. Why do people take out loans?
3. What is debt? Is it good or bad?
4. What are taxes?
Handling money responsibly takes a lot of time, trial and error. That’s why it’s important to get your children thinking about financial concepts when they’re young.
Take advantage of the many opportunities throughout your day to discuss basic financial principles. Tell your child why you visit the ATM next time you withdraw money from one, or show them your grocery budget and let them help you make financially smart purchases when shopping.
Lastly, as your children mature, they will take on more responsibilities. As a parent, this is an excellent time to instil sound financial practices, such as setting aside money earned from a summer job in a college fund or starting a savings account. These lessons will stick with them in the future, and the more you discuss money and finances with them, the more financially savvy they will become.
