Start ’em early.
How early is too early to familiarize your kids with core money concepts like earning, spending, saving, debt, credit, and investing? Money can seem like an inappropriate or simply overwhelming topic to bring up to your kids, but it doesn’t need to be—in fact, it absolutely shouldn’t be.
“Would you ever let your child climb behind the wheel of a car and drive away without instruction, practice, or tips on how the car works? Of course not, because doing so could have a devastating outcome,” says Gregg Murset, a certified financial planner and the founder of chore and personal finance app BusyKid. “The result of a child growing up without a clue of how to earn or manage money can be just as problematic to the entire family.”
The earlier kids are introduced to the basic life skills of money management, the more comfortable and self-sufficient they’ll be out in the real world as adults (which might be crazy to think about if you have really young kids, but it’ll happen one way or another).
From the basics to the complex, here’s how to start instilling important financial skills in your kids in a way that sticks with them for life.
Know That There’s No “Right” Time to Broach the Subject
“All kids learn differently, so there probably isn’t one right way to tackle the topic of money,” Murset says. “However, it’s critical to address it. A recent study showed that people who learned about money as a child were three times more likely to have a personal annual income of $75k or higher than those who didn’t. Now if that doesn’t motivate you as a parent to sit your kids down, nothing will.”
Should you try to lecture your 6-year-old about taxes or compound interest? Probably not. But should you talk about many times they’ll need to help take out the trash and mow the lawn before they can afford that new bike? Absolutely.
Don’t Make Money an Off-Limits Topic
If and when it comes up, it’s OK to be transparent about money and how much day-to-day things cost, like groceries, clothes, and household upkeep. “For example, parents should share more about household expenses so their kids can already be making mental notes on what it costs to leave lights on or waste food.” You don’t want to burden your kids, make them feel responsible, or start them worrying about money—but giving them a real-world sense will help them grasp bigger concepts about smart spending, wants vs. needs, and not taking possessions for granted.
Always Start With the Basics
Murset encourages parents to start broadly, at the beginning. “[Teach your kids] the importance of earning, saving, sharing, investing, and spending money wisely,” he says, emphasizing the significance of first introducing the idea of earning one’s own money. “Without earning money, why even discuss the rest? This is the foundation everything else is built upon. Then, without an understanding of managing money wisely, they’ll always struggle to earn enough to support bad habits.”
Establish Good Habits
Start by implementing a routine. “Money is the ultimate motivator (whether people want to admit it or not), so use this motivation to help your kids grasp the basic concepts by having them earn their money through weekly allowance, and then share, save, and even invest a small portion each week,” Murset suggests.
“Once someone has the basics of earning in order to save, share, invest, and spend wisely, it comes down to doing it over and over,” Murset says. “It’s no different than someone learning to play piano or training in a sport. Practice makes perfect.”
Teach Them the Difference Between Wants and Needs
The most underrated skills, according to Murset? Common sense and responsibility. “When it comes to successfully managing finances, kids should understand wants versus needs,” he says. Being able to differentiate between these two motivators will help them develop responsible spending habits. “By understanding these concepts, there’s a greater chance your child won’t max out a credit card, drain a savings account, or bounce a check."
Let Them Learn by Doing
“Kids need real world experiences, to buy stuff with a card or purchase some stock with their own money,” Murset explains. “All the learning takes place when they’re actually doing things with their money—not just reading about it.”
Once you’ve covered the wants vs. needs topic, leave them to their own devices. “After having a conversation about spending wisely, let your child go spend at will. No matter what happens, there’s a life lesson waiting to be shared.”
Change Their Perspective
“When your child wants something, it’s a perfect time to turn the tables on them,” Murset says. “Instead of letting them look to you as the delivery system of their wants, turn it around and let them deliver their own.” Are they dying for a new pair of sneakers? Tell them they have their own money, and to knock themselves out if they want to buy some. This will teach them to stop and really think about how to value the money they have.
You can lecture them about earning, spending, and saving, but in the end, experience is what’ll make them internalize these concepts. That’s why it’s key to let them experience money management for themselves at a young age, when the stakes are low.
“You either have the money talk early or you have it later—it’s inevitable,” Murset says. “But if you wait too long it might just be in your basement when they’re 29 and you’re trying to evict them!”