Talking to Younger Children about Money

Having conversations about money with young children may seem daunting, but it doesn’t have to be. As a parent, you want them to develop smart habits and be disciplined with money starting at a very young age.  Here are four things to consider. 

Start Simply, When They Are Young

Start with even the littlest ones by including them in everyday activities that involve money, such as grocery shopping. This allows money to become a tangible concept. You can ask them questions such as, "We have three dollars to buy a treat, would you pick ice cream or cookies?".  Be prepared to honor their request, even if you really wanted the ice cream.  These types of conversations help children to understand that there are trade-offs to any decision, and that money is not infinite. 

Explain to them that your family has a budget, and not everything they want—or that you want—fits into that budget.  

The Allowance

A weekly allowance first teaches many kids about money.  I’m a big fan of tying that allowance to getting chores done around the house. I also like breaking down the allowance into “buckets”.  One for spending right away, one for saving for that “big item”, and another for charity. 

Talk About Values 

My favorite subject! Encourage your kids to reflect on what is important to them both for today and for the future. With kids, the future may be an upcoming summer vacation, but that’s okay. Discuss why it makes sense to hold off on immediate gratification for a longer-term reward. That helps them learn how to set goals and stay disciplined.  It causes them to think beyond the moment, which is critical to the concepts of budgeting, saving and investing.

Lead By Example 

Are there financial or economic topics that you are not so knowledgeable about? Take the opportunity to learn with your kids. Showing them that you are interested in growing your understanding of money will heighten their interest as well. 

Financial habits are formed at a young age. Start the conversation today.

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The author does not intend to provide investment, legal or tax advice as these materials are for general educational purposes only.  Please consult your legal, tax or investment professional for advice on your particular situation. This material is derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. It is not intended to be a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any other transaction. Investing involves risk including the possible loss of principal. Past performance does not guarantee future results. Please refer to RRCM’s Form ADV Part 2 for additional disclosures regarding RRCM and its practices.