Talking to your kids about money starts with being transparent about your own financial journey. Help them understand that money is a tool, not the ultimate source of happiness, and give them practical habits to build on, along with honest lessons on what mistakes to avoid.
Reflect on your own money habits before sharing.
Stay open, calm, and listen during money talks with your child.
Teach good habits like saving, spending wisely, and paying off debt.
Be honest about your financial mistakes to help your children avoid them.
Approaching the topic of money, finances, and bills can be tough, but it isn’t impossible. Here’s what to keep in mind when start the money conversation with your kids:
Money conversations can be difficult, especially if you didn’t have them growing up. Depending on how you were raised, you might have been in a home where conversations about money were welcome or where they were taboo and kept private. You might have seen your parents get into debt. You might have been kept in the dark about finances altogether, or you might have grown up in a home where your parents were strict about financial goals and investing. The situation you grow up in can significantly shape the way you see finances today, and it will have an impact on how you teach your kids.
If you don't initiate money talks, your children can't learn from you. Be aware of your feelings about money to help them learn how to handle their own finances in a healthy way.
Be calm and honest about money when sharing your story. While finances can be stressful, avoid letting emotions disrupt the conversation. Leave time for questions so your child can process the information at their own pace. You don’t need to have all the answers!
The choices your child makes about money now and into adulthood will be shaped by one key factor—their mindset.
Use this analogy: money is like a hammer. It can build or harm, depending on how it is used. Learning to use money wisely means you can achieve goals, like buying a home or giving to charity, but misusing it can lead to debt or financial trouble.
It’s up to you to be a good steward of the money you have and use it for the good of others and financial growth.
Just because someone has a bigger house, a nicer car, or a higher cost of living than you doesn’t mean that you aren’t thriving financially. Things on the outside may not accurately reflect what’s going on in that person’s financial situation, so don’t assume that you’re falling behind. Financial health takes sacrifice, and that’s nothing to be ashamed of or embarrassed about. You just need to be confident in knowing you're prioritizing your financial health. Also, others have different financial goals than you. For some people, that means owning a nicer car; for others, it means more travel opportunities.
Knowing that financial wisdom takes sacrifice, hard work, and time could help give your kids a humble perspective on how money works in the real world. You can teach them this example through your own story or someone you know who has dedicated their time to work towards a financial goal. This could be paying off your student loans or mortgage, or saving up for a trip or new car.
Before diving into the financial habits your children should learn, it’s essential they understand basic concepts. Beyond the basics of explaining saving, spending, and giving, here are some key terms to define:
Banking Basics
Now that they know what each of these financial terms means, they’re ready to learn how to take practical steps to implement each one in their financial life.
Most children have a dream for their future, whether it’s to travel to a new place, get a new pair of headphones, save for the newest video game, or buy a new toy. You can encourage your child on their financial journey by helping them set savings goals.
If you have a tween or teen, teach them the S.M.A.R.T. Goal Strategy. S.M.A.R.T. stands for Specific, Measurable, Achievable, Relevant, and Time-Bound. You can also show them how to use a Savings Goal Calculator to see if they’ll hit their goal on time and how much money they need to set aside. These tools could be helpful for your teen as they approach adulthood, since their finances will soon shift towards larger expenses.
For younger children, you can inspire patience when they are saving over a few months, such as for a new toy or game. One way you can have them build their savings muscle is through an allowance or setting aside gifted money, instead of spending it immediately.
Spending habits make a huge impact on your child’s financial health, so it’s important that you teach them key habits they can stick with throughout their lives. For shopping, teach them the benefits of shopping at discount stores or thrifting. They don’t always need to get the most expensive brands for every purchase.
Remember, practice what you preach with your kids! Take the time to go out together, explore, and try new things. This is a creative way to practice strong financial skills together — whether you’re learning for the first time or just need a quick refresher.
Sticking to a budget is an essential habit for your child’s financial future, and you can help them stay on track by teaching them the Zero-Dollar Budgeting Method. The Zero-Dollar Budgeting Method is where they put their dollars into categories in cash into envelopes, and they can use that cash until it’s gone in the envelope, guaranteeing they can’t overspend. This is a great financial lesson that lets them visually see how much money they have and where it is going.
Your child has the opportunity to pour into a cause they care about through giving. You can practice giving as a family by choosing a local organization you care about, such as your church, a charity, or a nonprofit. Have your child learn to set a regular time each month to give to the organization of their choice. Another way they can practice giving is through their time. Set aside special time to volunteer and serve to teach your child another way to give.
To help your child avoid financial mistakes, be honest and draw from your own experiences. Responses like “don’t spend too much money” or “save for what you need, it will really pay off” are great things to say, but not necessarily practical or personal. That’s why it’s so important to share your own story with money.
How you approach the conversation will differ depending on your child’s age, and you can use age-appropriate examples. Meeting your child where they are is key to fostering open conversations where they feel safe enough to ask questions, and you’re able to be genuine and think them through.
Seeing the good and the bad of financial choices can help give your child a practical understanding that you’re able to meet them where they are and that you’ve been there, too. Here are two examples of types of situations you could share if you’ve had a similar experience:
For example, saving money from holidays, birthdays, and rewards points to fund a week-long trip is a great example of patience and the delayed gratification of saving paying off for something fun.
On the other hand, financing a laptop you didn’t really need (instead of saving up for it) is an example of how impulse decisions can cost more in the long run and add unnecessary monthly stress.
Q: How do I initiate a conversation about money with my child?
A: Ask them what they already know about money and be willing to listen. Setting aside assumptions about your child’s perspectives helps you to meet them where they are.
Q: What money concepts should I teach my kids?
A: Key money concepts to teach your kids are how to be intentional with spending, how to set savings goals, how to create a budget, how to avoid or manage debt, and how to give to others.
Q: How can I teach my child to have good financial habits?
A: One of the best ways to teach your kids financial skills is to let them practice now by opening accounts for them that you can monitor, so they can learn what it’s like to use a card, cash, and different financial tools.
Q: I’m nervous about money myself and have made financial mistakes. How can I teach my children not to repeat the same mistakes I made?
A: No one has it all figured out on how to perfectly handle finances, but one of the most beneficial things you can teach your child is to share your own experiences with them.
You aren't alone in providing your children financial education. At Leaders Credit Union, we have a variety of resources to help you navigate your child’s financial journey as well as your own. We provide free financial tools and resources that can help you along the way. For an in-depth conversation, schedule an appointment for Financial Wellness Counseling.
Want more help on how to establish savings? Check out our free Beginner’s Guide to Establishing Savings.
Looking for more financial tips on how to teach your kids about money? Read our blog, “7 Ways Parents Can Encourage Kids to Save Money.”
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