Talking about money as adults can be tricky. When our kids start asking complex questions and we have to break down the complexities into information that kids can digest, it can feel overwhelming. This blog post is dedicated to where I would start with how to teach kids about money. My suggestion is to start with helping them build a value system around money. 

As adults, we are faced with tough decision making, especially when it comes to finances. To make tough decisions, we often come back to our value system. So, if you are struggling with how to teach kids about money, start by focusing on building a value system for them around finances. It’s one of the greatest gifts we can give them. 

I like to focus on positives, so this first section may be a bit of a surprise. I’m going to start by talking about one parenting phrase related to finance that is a pet peeve of mine, and oh so common. I’ve even caught myself a number of times almost using this phrase! Then, I will turn this article on how to teach kids about money into my Top 10 financial values to talk with your children, or other kids in your life, about! 

The One Phrase to Leave Out of Conversations About Money with Kids! 

We’ve all heard this phrase. We’ve used it. Our parents have used it. We’ve heard our extended family, friends, and neighbors use this phrase (or some version of it): 

“We can’t afford it.” 

There are a few reasons that I don’t like it. First, by using the word “can’t” it gives a feeling that the conversation is over. By simply opening our response up and using less concrete terms (such as may, possibly, etc.), we give space for a discussion to happen. When kids are young the best thing we can do for them is have conversations when the time is right! 

Second, oftentimes we can technically pay for what the child is asking for, so we are using the phrase out of ease. Because we go the easy route, we are instead missing out on the opportunity to use a phrase that underscores our financial value system much more clearly than “We can’t afford it.” 

We’ve all been in the grocery store or toy area of a store and our kids ask for ten things in a row. We are burnt out, and are holding strong on not giving into their desire to buy something. They start melting down. Instead of quipping, “We can’t afford that”  to stop the spiral that is beginning, perhaps we could reset to acknowledge our kids. The Gottman Institute recommends that before we correct our children, we give an opportunity for connection. 

Start by making a statement that recognizes their bids for buying something unplanned, and then using a phrase such as “let’s try to focus on being content with the amount of toys we have at home” or “if we buy x, then we may have to pass on y, because we can’t have it all at once.”

Using statements that reinforce our value system creates a way to make our decision making process more concrete for our children. Using phrases that are more open ended can help kids understand more clearly why we aren’t buying the item when they’re thinking but we could afford it.

I wrote about involving your children in financial decision making in more detail in this article, if that topic is of interest to you! But if you’re sticking around here to focus on where to start with how to teach kids about money, here are ten financial values (in no particular order) to perhaps focus on with them!

1. Talking About Money is a Confidential Conversation.

The first place to start with how to teach kids about money is to talk about confidentiality and privacy. For you as an adult to be open with your kids about money matters, it’s important for them to understand this concept and for you to feel confident that what you tell them won’t end up around town! You need to know that what you share isn’t going to go to everyone else outside of the circle you agree upon, and also making sure that they know you are going to protect their thoughts and your conversations is important for them to feel comfortable asking questions. Obviously, your divulging of information is going to be based on your comfort level and your sense of their maturity with respect to actually being private. 

I also want to point out that I used the word “conversation.” I did not use the word “fight.” At times discussions about money can be fueled with a lot of emotion. We have to show emotion to our children, and it’s ok to let them hear your financial discussions. However, we must model that the vast majority of discussions about money are in the same tone as our normal conversations, like making plans for the weekend. Be mindful if financial discussions are becoming heated in front of children. Remind yourself and your partner that you are having a conversation and not a fight if needed. Use good coping strategies in front of children (i.e. don’t place blame, shame, have conversations when you’re overwhelmed with other things, or otherwise undercut the other person) and let them witness how you conclude conversations and move on to other just as important topics. 

2. Find Contentment with Who You Are and What You Have

In positive psychology, we use the phrase “I am enough, I have enough, I do enough.” When we reach a place of contentment, we realize sometimes that extra stuff is simply a burden (financially, junking up our space, and then having to pass it on or dispose of it, can all be a hassle!). We can have goals and strive for what it is we want to be, have, and do most, but being content with our lives is a powerful feeling. Children need opportunities to practice finding contentment. Talking about how we are content and encouraging them to be content with what they have can minimize materialism in the long run.

I used the toy store example above out of experience. We have a five year old, who has grown to love the toy aisles. For the longest time we just avoided those isles, but now she knows they exist. Also, we’ve been to a number of gift shops in her lifetime. There are only so many stuffed animals and toys we need in our home. 

A few months ago Mark took the girls to the local Zoo. He did buy them a stuffed animal just before heading home (I may have given him that look when they arrived home!). Recently, I decided to do a Zoo outing with some friends. I chose to head off the question of shopping in the gift shop before we even arrived at the Zoo (I knew it would come because of the precedent Mark set). I talked with Nora about how when her dad took her she was able to pick out a stuffed animal to remember the day. I also reminded her of the others that she had at home, and how our goal for visiting the Zoo again was to spend time with friends and enjoy the Zoo. I encouraged her to be content with the stuffed animals she had at home and not ask for more during our visit. We had a fantastic time and no meltdown when we exited the Zoo without a stuffed animal.

3. Prioritize Needs and What We Want Most

Along with the thoughts of materialism, an important value to teach children is that we have to prioritize our needs first. After our needs can be met, we can then prioritize what it is we want to be, have, and do most. The goal in life is not to have everything all at once, in fact the goal is not to have everything at all. The goal is to have our needs met and only what we want most. 

Teaching our children to prioritize what it is they want most is a skill their future self will thank you for. This does not mean to teach them how to prioritize what you want them to have most, though. Help them think about why what they want is important to them, how it can make their life better, and how it compares to other items on their list. I especially love using this to talk about gift requests at birthdays or holidays. 

4. Opportunity Costs are Endless

Along with helping kids to prioritize their wants, helping them understand opportunity costs is an important value. In the book Nudge, Thaler, the book’s author, talks about how we do a poor job of understanding opportunity costs as adults. So, helping kids start to learn this concept properly at an early age can set them up to be leaps ahead in the long run.  

Research Thaler presents states that we compare only like items when we think about opportunity costs. We compare the cost of one shirt to another shirt (we often choose the one that’s discounted) and that’s the end of our thought process. Instead, the opportunity cost of buying one of the shirts is having drinks with friends, going to a movie, buying a pair of shoes, etc. There are an infinite number of opportunity costs. So, helping kids see that when they make one choice they are effectively making a number of other choices simultaneously can be a powerful tool. 

We have to remember that they are kids, so overwhelming them with possibilities may create a situation where they have analysis paralysis. Being aware of our typical inability to consider an array of opportunity costs, and using teachable moments to talk about opportunity costs with our children can help them be a more effective decision maker as an adult. 

5. Live Below Your Means

You may have expected me to use the phrase “live within your means.” However, if we truly want to set our children up for financial success, it’s living below your means that can really make all of the difference. 

This is a hard one, because when kids are younger they don’t really understand your means in a holistic way. However, there are lessons you can use, like not bailing them out when they want a toy that costs $9.99 and they have $10 in their pocket. They have to find room to pay for the tax themself. If they want something that costs more than $10, it’s encouraging them to save the $10 and wait to receive additional money rather than settling on buying something they don’t want as much that they can afford now. Encouraging them to put money aside for another day when something comes up they would really like (even if they don’t know what that is today).

6. Maintaining Items of Importance is Financially Savvy

It’s funny, as I’m thinking about this one, this sentiment is changing a bit with respect to certain items. Instead of fixing tvs, we replace them. Instead of replacing ink cartridges, some just replace their printer all together, because the cost of ink is so high. However, I still think this is a critical lesson to teach children. Especially when it comes to big ticket items. 

If we don’t maintain our homes for instance, we risk very expensive issues, like water leaks. We are risking having a reliable car if we don’t do oil changes and tire rotations. The concept that sometimes we have to spend a little to save a lot is not intuitive. While children don’t have a house or other valuable belongings that they own to maintain, as they get older involving them in maintenance projects or talking with them about the importance of what you are doing can help them understand. 

Encourage children to take care of the belongings they do have. Showing respect for their non-valuable items (such as play jewelry) or putting toys away nicely can show that they understand that even these items have value, even if it’s only really sentimental value. 

7. Mistakes Happen

I wish I could remember where I read this, but I can’t. Children see us as being magically capable. To them we can color inside the lines with no issues, we can cut fruits and vegetables in no time flat with precise accuracy. Basically children think we have no faults and can do everything extremely well. When they compare our abilities to theirs,  they feel less. You and I both know that we can do these things because we’ve had a lot of practice and we know there are things we don’t know as well. 

I say this to remind us that we have to be human in front of our children. It’s great to show our kids that there are things even as adults we are still learning. It’s ok to show them we aren’t perfect and mistakes happen. Talking about how we wished we had made a different choice, reminding them that we learned a lot of lessons and telling them stories of our humanity is important to helping them learn. 

We are not going to manage money perfectly 100% of the time. Letting children know that mistakes can happen, and letting them make bad financial decisions (i.e. settling for the toy they don’t really want that much sometimes) can be as powerful as guiding them to making the better decision.  Demonstrate how to rebound by either being a little more frugal for a bit while building savings back up, or returning an item that you have buyers remorse about. These are all fantastic lessons on how to recover when mistakes happen. 

8. Happiness Leads to Success

Mindset can make a world of difference. As adults we often think that when we are more successful we will then be happier. Research shows that it’s the other way around. Our happiness leads to our success. 

We all know the story The Little Engine that Could. The little train goes into that big hill with the right mindset “I think I can, I think I can” and then it does. The train makes it over the hill to deliver the food and toys to the boys and girls on the other side.

Just as we have to encourage our kids to practice because that’s a way to get better, encouraging them to use positivity can be extremely helpful when it comes to having a successful outcome. 

Our daughter has a tendency to pout, hang her head, and say “but I can’t” when she is frustrated. In those moments, I encourage her to stop what she is doing, take a deep breath, and say outloud a positive mantra (just like “I think I can”) before trying again. It may seem basic, but oftentimes with another try or two she usually can overcome her obstacle when she is thinking positively about her abilities. Her face when she’s able to accomplish what was just frustrating her is priceless.  

9. Money is Only One of Our Resources

Money isn’t everything and the journey can be just as important as the outcome are two phrases that I love that emphasize the point that money is only one of our resources. 

It’s important that our children have perspective on the value of money. Working hard can earn us money and that money can buy us experiences and things; however, I think even more important is that money is only one tool in our tool box. We also have time and talents that we can use as resources as well to help ourselves and others. If we as adults fix every issue by throwing money at it or not thinking of other ways to help, we are showing our children that money is the only resource that can help. We must demonstrate that using our time and talents to help others can be just as valuable. Get children involved in volunteering, even if it’s picking up trash around the neighborhood or walking a neighbors dog for them. 

Another way to encourage this is by reusing resources you have on hand instead of always going shopping for things. I think during the pandemic we all learned a bit about the art of repurposing items and reusing what we already have on hand. When are children have something they are searching for, encourage them to walk through the house and use their imagination to see how they can make whatever it is they are wanting (within reason! I’m not advocating for putting a couch up a tree and calling it a treehouse!). 

10. People are More Important than Things

Relationships are the most protective thing we have in our lives. Having good relationships can help us feel more connected and protect our brains as we age. We have to show that the good relationships we have in our lives are the most important thing. Relationships are more important than things, they are more important than our pride. 

Our youngest is a bit of a bruit. She is a physical kid and the exact opposite to our oldest who is thoughtful and cautious. Our youngest has broken a thing or two (or many.. I’ve lost count!) our oldest values, and it hurts her feelings. I always acknowledge her being disappointed and that it’s reasonable to feel that way, but then I remind her that things can be replaced but her sister can’t. I’m not sure our oldest always buys it, but at least she is hearing the message that her relationship with her sister is more important than a broken toy. 

Final Thoughts on How to Teach Kids About Money: Creating a Value System

If you aren’t sure how to teach kids about money, start by having conversations with them. Understand their perspective and talk about your perspective. Tell stories of yourself when you were younger, stories you know about your family. Talk with them about privacy and boastfulness (a word a friend used this past weekend when we were talking about kids and finances – which I loved!). Meet them at their level, but don’t push it under the rug. We teach kids about so many things that are important and teaching them about money has to be on the list! 

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