Money Doesn’t Grow on Trees: Why It’s Crucial to Talk to Your Kids About It

Money is often left out of parenting conversations, even though it’s crucial to a child’s development and future success. For generations, families have avoided talking to their kids about money—much like the topic of sex. But money is unavoidable and can have an impact on their physical and mental health. Your children’s lives and happiness will be dictated not by how much money they make, but by how well they effectively manage it.

Much like teaching your child to read or learn a new language, it is fine, even beneficial, to start talking to them about money as early as possible, even while they are in the womb. There is plenty of research to suggest that children can hear their parents and learn from them before birth. It’s worth pursuing any low-cost advantage that you can potentially give your child with compounding benefits. Begin reading to your children about money then and through early stages of development, count coins and cash with them, and discuss the difference between needs and wants. If there is something you don’t know, that’s ok. Try to learn together. They will appreciate it. 

By teaching your children the importance of managing money, you will help them gain insight into the world around them. They will begin to understand that their decisions have financial consequences and that money is a tool to build the life they want. In addition, learning about money at an early age has proven to have positive effects on children’s mental health and financial self-efficacy well into adulthood.  

Don’t Believe Me? Believe the Research 

A recent study by Timothy Todd and Hanna Lim, “Financial Socialization and Money Scripts: The Moderating Effect of Gender—A Preliminary Examination”, found that family financial socialization is positively associated with the money vigilance script. Simply put, family financial socialization is the way you interact with and discuss money with your children. How you engage with and teach them about money can increase the likelihood that they will have positive attitudes toward money, increased rates of saving, and controlled or limited debt.  

In another study by Mary Beth Pinto, Diane H. Parente, and Phylis M. Mansfield, “Information Learned From Socialization Agents: Its Relationship to Credit Card Use”, it was discovered that college students that learned about personal finance from their parent(s) were more likely than their peers to have lower credit card balances. Since the parent is the child’s first role model, teacher, and mentor, these significant findings highlight the central role that parents have in mentally, emotionally, and financially guiding their children. Twenty-Nine states have passed legislation mandating that high school students take a personal finance course. This requirement does not replace the important role that parents play in their child’s life. Children’s financial behaviors are guided mostly by their parents, not by what they learn in the media or in school as indicated by the aforementioned studies. Let’s break down when you may want to discuss certain money topics with your children. 

How and When to Begin the Money Conversation 

When discussing money with your child, keep the conversation educational and constructive rather than stressful or negative. Avoid sharing your worries about bills and cash flow. Tailor your approach to your child’s age and understanding. Here’s a timeline to consider following: 

Age: 

0-5  

Read personal finance books together 

Count coins and cash 

Open a child savings account 

6-11  

Continue reading together 

Take them to the bank 

Discuss and review a budget 

Discuss needs vs. wants 

12-15  

Review bank/credit card/mortgage/rent/utility statements 

Review credit reports together 

Discuss values (i.e. freedom, independence, family, and so on) 

16-18  

Add them as an authorized user to your credit card (this can help them build their credit and you don’t have to give them the card) 

Review paystubs 

Have them attend a tax preparer meeting with you 

Discuss planning for education (tuition, books, rent, and so on) 

There are countless ways to teach your child about money. Doing so will help them build a strong foundation for the future. Remember, if you’re unsure about something, that is ok. There are financial educators available to support you. You can find them at your local bank, school, nonprofit, or by reaching out to a financial counselor, advisor, therapist, or educator. As the saying goes, the best time to start saving was yesterday, but the second-best time is today. The sooner you begin teaching your children about money, the sooner they will feel empowered to make smart decisions to set them up for financial success.  

Samuel Molina is an Accredited Financial Counselor® and CEO and Founder of The Academy of Financial Education, a non-profit organization dedicated to narrowing the wealth gap for its community through activities, coaching, education, and instruction. Visit Samuel’s FindAnAFC profile to view his services and connect with him on LinkedIn.