How to discuss money with your kids


Robyn Parets

Robyn Parets

Blog author Robyn Parets

Robyn Parets is a personal finance and business writer based in Boston. A former writer for Investor's Business Daily (IBD) and NerdWallet, Robyn is also the founder and owner of Pretzel Kids, a children's fitness brand and online training course. You can find her on Twitter @RobynParets.

Published June 27, 2016|3 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our

editorial standards

and how we make money.

News article image

Money talks. Talking about money, however, is an entirely different conversation, especially when it involves your kids.If you think you’re the only one squirming in your seat while discussing money with your five to 12-year-old, think again. According to the 2015 7th Annual T. Rowe Price Parents, Kids & Money Survey, 41 percent of those surveyed say they sometimes avoid talking to their kids about money and 72 percent experience at least some reluctance talking to their children about financial matters. The top reasons for this? Parents don’t want to worry their kids about money, they think they’re too young to understand and they’d rather discuss other important topics.At the same time, 69 percent of parents are very or extremely concerned with setting a good financial example for their kids, according to the survey. Indeed, if you want your children to grow up to be financially responsible adults, it’s important to start talking about money while they’re young and impressionable. To help you open up the dialog and hone in on ways to teach your kids about money, here are our top four tips:

1. Kick off the discussion by setting up a three jar system

To get going, you’ll need three jars labeled "Spend," "Save" and "Donate." These simple jars create an engaging way for young kids to learn about money. Simply put, here’s how it works: When your child is given money, he decides which jar to put it in. This, in turn, gives you an opportunity to discuss the pros and cons of that decision. For example, if there’s something he wants to buy immediately, he’ll only be able to do so if he has enough in the "Spend" jar. Otherwise, he’ll have to keeping putting money into the "Save" jar until he has enough saved up for that particular purchase. Likewise, if he wants to donate money to a fundraiser at school, he can put that money into the "Donate" jar – instilling an early lesson in the benefits of giving money to an organization or people in need.

2. Give your kids an allowance

This goes hand-in-hand with tip No. 1 because an allowance gives your child real money and the ability to determine how to make sound spending and saving decisions. It also provides a way for you to discuss money with Junior on an ongoing basis.

3. Discuss the concept of earning and borrowing money

You may have grown up with your own parents pounding in the phrase "money doesn’t grow on trees" every time you asked to buy something. This was probably because your parents never explained to you how money works. This is your opportunity to set the record straight with your own children. Without making things too complicated, you can explain the concept of working to earn money. Giving your kids jobs to do around the house to earn allowance money will help illustrate this in a real life way. It’s also a good idea to explain even deeper concepts like borrowing so they have a better understanding of what it means to take out a loan and pay it back. Junior may be too young to grasp the concept of a mortgage or student loan, but he may understand loaning money to a friend at school who forgot her cash for the book fair. He’ll certainly want that money back and if his friend doesn’t return it, Junior will be hesitant to loan her money in the future. This paves the way to explain that when you borrow money from a bank, it’s likewise not yours and you’ll have to pay it back.

4. Go shopping with your kids

Buying things you need is a ripe opportunity to discuss money and budgeting with your child. For example, you can point out different prices for similar items in a grocery store. This gives you a launching pad to explain why you are spending more or less and how purchasing this item factors into your family’s budget. Chances are Junior will see something else in the store he wants. This marks an opportunity to perhaps loan him money to buy that item so long as he can pay you back with his allowance money.