Not to say I’m bad with money, but like most parents in 2022, I rarely carry actual cash. She watches me make nearly all purchases either in-store with a card or online, and often with my phone. And although Matilda has started to take note of how well I can spend money (and truly, I am gifted in this area), I’m finding it much trickier to explain concepts like financial security or fiscal goal-setting to her.
Like most parents, I want my kid to have a solid sense of financial literacy and good money habits in adulthood. So, with this in mind, I asked two money professionals for their advice on teaching kids the basics around earning, saving, spending and giving. Here are their top six tips.
How to teach kids about money
1. Share your spending strategies
To start, it can be as simple as explaining your day-to-day spending decisions, says Robin Taub, author of The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life. “For instance, if you’re going through the drive-through and using your phone to tap and pay, your kids might think that’s cool and have questions about how it works.”
If you buy groceries online, invite little kids to sit with you as you compare products and clip virtual coupons. When you’re in an actual store, explain how you compare two brands of shampoo by price and volume, for example, to get the best value. Older school-age kids might be interested in why you often shop at the same store, and this could be another savvy-shopping lesson to share, if the decision is tied to a store rewards program or lower prices.
Taking a few minutes to explain your spending strategies is worthwhile because you’ll start to build your kids’ body of knowledge and understanding, says Taub. “All of those moments compound, in a good way.”
2. Offer a good old-fashioned allowance (or hybrid-allowance)
Giving kids a weekly allowance is a classic way to teach good spending habits, and it has another big impact. According to the experts, there’s a big upside to doling out weekly spending money. “Allowances are one of the best ways to introduce conversations about financial literacy, bank accounts, savings and even taxes to your kids,” says Gaurav Kapoor, CEO and co-founder of Mydoh, a new money management app for kids. Many parents start giving allowances when their kids are eight to 12 years old. If you do, consider opening bank accounts for them, too. That way, you have the option to transfer money to their accounts, instead of handing over cash and coins, and they can learn how a bank account works, too.
Some families find that paying kids to pull their weight around the house creates a transactional relationship. And it’s one that can feel disingenuous, since nobody is paying the parents to unload the dishwasher or fold the laundry.
If you are not comfortable with assigning a fee to household chores, consider a hybrid-style allowance system: Each week, kids are given a bit of cash to manage, though it’s not specifically tied to how often they make their bed or vacuum the living room. This is spending money for kids to manage that can be allocated to movie tickets, video game upgrades, Pokémon cards—or that they can choose to save for larger purchases.