Talking About Finances With Your Children

by Kelly · 26 comments

in A Frugal Family

My three kids are pretty young: almost six, four and a half and just over a year old. But it’s high time that I start thinking of how to really talk to them about money, finances and frugality.

I have to admit, I don’t have a clue as to what we should say.

Here’s what we have been saying and doing. My husband will often tell our kids that we need more money. They have the classic kids response of ‘Well, go to the bank and buy more money.’ We also might tell them that we can’t buy something because it costs too much, or maybe that we are saving up for it. We talk about going to work to earn money, so that we can buy things or live in our house.

What we don’t do is give our kids an allowance. I wonder if we should. I would like to have them start to save money, and buy things of their own. I would also like to save money for them, which we never have done so far.

I’m not sure about how much we should tell them. Should parents talk to kids about being in debt and not having enough money to pay for things? Should they talk about their financial goals for the future? About frugality and the current recession? Or should the kids stay blissfully unaware of any financial turmoil?

What’s your opinion? How much do you talk to your children about money, frugality and your finances? What did your parents say to you?


1 roxie December 17, 2008

I’m in the allowance camp. I think it demystifies money for children. Also, I would talk about choices as parents, as in we choose to spend our money this way, or we choose to spend our money that way. The only thing I would suggest is not to frighten children about money or make them anxious or nervous that somehow they will not be able to live in their house if they don’t have enough money. I understand what you are saying, but I don’t know if children can make the abstract connection.

I love your website, writing and your lifestyle choices. Keep up the good work. BTW, my daughter is 25 and I feel has a good financial head on her shoulders.

roxie´s last blog post..Smile, Breathe, Go Slowly at 163.5

2 Jason December 17, 2008

I think you should definately introduce them to looking after their own money by giving them an allowance. My parents made the (IMHO) good move of giving me an allowance early on, but the one mistake they made was allowing me to go into debt to them to buy the odd big item 🙂 I think you need to teach them how debt is something they should avoid if they can.

Jason´s last blog post..Another Look At The Debt Snowball

3 neimanmarxist December 17, 2008

you know, i wish my parents had talked to us about money. I mean, we could tell by the way things felt (i.e. everyone’s mood, whether they were fighting or not ) if there was plenty or if things were lean. but the principles of it- that saving is important, that you don’t need things just because others have them , that frugality can be as chic as the best new bag, if not better -these were not things we discussed. i never knew how much money my parents have, and i don’t think that was necessary. but to have some kind of ethos instilled in me at an early age- now that would have been helpful. i had to make my own mistakes to learn what i wanted my relationship with money to be like. but I’m not certain my mistakes needed to be quite so grave. if there’s some way you want your kids to relate to their financial lives, talk talk talk about budgeting, wants vs. needs, and the beauty of saving young.

neimanmarxist´s last blog post..A History of Our Budget, Part II: Going For Broke

4 Lucie @ Unconventional Origins December 17, 2008

We haven’t crossed this bridge yet with our youngest son (our oldest two don’t live with us so things like allowance are not an option with them). I honestly don’t know what I am going to do with him yet, but I know it will be something, because it definitely hurt me (financially) not being taught anything about money growing up. I want to teach my son about saving and giving, first and foremost.

Lucie @ Unconventional Origins´s last blog post..Unconventional Origin’s Guide to Your Baby’s First Birthday.

5 Fabulously Broke December 17, 2008

Your children are adorable!

And I couldn’t agree more with talking about finances with your kids, even though they’re at very young ages.

I wish my parents had done that for me, or at least shown me that if you saved money, you could earn interest, but if you spent it right away you didn’t get anything and/or could incur bank fees etc..

I had no clue about that stuff until I turned 20-ish

Allowances are a good way to teach them how to handle money (with completing chores aka work) and then giving them a percentage chart of 10% saved and 20% for something else will teach them how to budget at an early age.

Fabulously Broke´s last blog post..Interview: One Snarky Chica with Issues

6 Sheila December 17, 2008

I feel very strongly that we should talk to our kids about money. We share our goals with our kids and discuss openly hardships that others are experiencing in the economy. The best way I know to help them in their future as they make decisions is to show them the results of both good and bad decisions. My older daughter is now 12 and I have even at times pointed out situations to her that have occurred because of bad decisions. I don’t do this in a critical way (because let’s face it, we ALL make bad decisions), but just to show her how easy it is to make a decision that has a long impact. I also discuss with my kids that we have a certain amount of money for ‘fun’ things, and once that is gone, we just have to do fun things that are free until next payday. One day fairly recently we were going to be out and my daughter really, really wanted to eat out. However, we had already spent our money on other things and I packed a lunch for us. It worked out really well, because I was able to talk to her at a level that she could really understand about having a finite amount of money. Yes, I would have far preferred to go out also, and I told her that. On the flip side of this, we have also gone to great lengths to make our kids feel secure. I don’t want them to worry about money or being taken care of. As they have gotten older (12 & 8), I share more and more information about our finances. I dont’ think there is a set age when you share information, but you just have to look at their maturity level. My younger daughter has asked me things like how much did our house cost, how much do we have in the bank, etc., and I don’t feel that she is ready to have that information. Honestly, some things may always feel that they are private to just my husband and I, but I’m going to do my best to be as open and honest with my kids as possible.

I’m sorry to write so long! This is something that I feel very strongly about.

7 Kate December 17, 2008

My kids are 10, 9, 7 and 6. We’ve always talked about money based upon our values: “We don’t choose to spend our money on McDonalds.” They do get an allowance, each week they get $.25 cents for each year. (The ten year old gets $2.50 a week.) I’m embarrassed to admit that they mostly misplace it around the house, but gradually I am seeing the older two learn how to hold on to their money. We have tried to institute the “save some, give some, spend some” rule but I haven’t enforced it as well as I should. From their allowance, they may purchase anything they want, including things from the dollar store and candy from the snowball man. I’ve noticed that their desire to buy dollar store junk has decreased since they have to spend their own money.

You’re a pretty smart Mama, I’m sure that you will figure out a good plan. I do encourage you to make a point of showing that spending money is a choice – it seems to work for my kids. Good luck!

8 Jessie December 17, 2008

My parents had a haphazard approach to teaching me about money. Paring it down and coming to my own conclusions the lessons I learned (from them and myself) and want to pass on are:

• Money comes from work. But work doesn’t always = money. I only got my allowance if I did my chores, and each chore had an amount attached to it. If I did the chore, I got the money. But I only got paid for those chores, if I volunteered I might get some extra money but I might not. Sometimes I got hugs and thanks instead and that was good too.

• Money is a responsibility. To explain it to me my parents laid out my My Little Ponies and laid out money next to them, pointing out that this much money equals this many ponies. I should take care of money like I take care of my toys, and if I want to trade money for more toys I need to collect (save) the money first until I have that much (on the table).

• Money is good for buying treats. Sometimes we need to spend a little to make ourselves happy. A pack of orange bubblegum can go a long way to brighten a bad day. An unnecessary shopping spree is overkill.

• Money isn’t everything. The thing that my parents really got right was their attitude. They never discussed money problems in front of me, and they also never acted overjoyed in front of me when they got a windfall. Money talks were always very even-keeled, so I never put much emotional investment into money since they never showed me you should. I grew up realizing that it’s a thing, a tool (a very handy tool), to be used and/or abused depending on what you do with it.

9 Christa December 17, 2008

I think you should talk finances with children. Our parents did not talk to us. While we didn’t have the money as kids, we didn’t learn about it until adulthood. This has hampered all 5 of us.

I really like what Dave Ramsey has to say about budgets and children. He doesn’t believe in allowances, but in commission. Check him out.

10 Kelly December 17, 2008

Oh my goodness, I knew you all would have good ideas and comments! The collective mind is a wonderful thing.

I think we’re going to start giving an allowance in January, with the new year. I like the idea of giving money weekly, but I think that Kate’s .25 per year of age per week would maybe be too much. On the other hand, maybe not- it’s only $1 or $1.25 per week, which isn’t a lot after all.

I also like how Jessie’s parents put money next to toys to show the correlation- kind of like adults figuring out the real hourly wage and how many hours we need to work to pay for something.

Sheila’s point about making children feel secure resonates very strongly with me- I feel it’s incredibly important. I try hard to strike this balance, and I feel it’s a fine line between too much information and not enough!

Thanks again, everyone, for all your wise words.

11 Chelo Marroquin December 17, 2008

I think it’s really important to talk to kids about money. Telling them that you don’t have enough money to pay for big things i.e. mortgage; car ; school ; maybe TMI. I’m sure you don’t want your kids to be stressed out about you paying the mortgage. But I think it’s important for kids to know that it does cost money to have a house; car; food; clothes etc. More importantly is timing…My daughter is just about 10 and I began telling her more about money than I thought I ever would and it has truly helped when she wants the new gizmo that the “other” kids have. The question I always pose to her is do you NEED it or WANT it. There is a big difference. As for the allowance she does get an allowance however it’s for extra work completed. There are things that she is responsible for around the house that are not paid for. The extras is what she gets paid for or given an allowance for. And I don’t over pay so that she appreciates the money more.
I also try to remind my daughter that while sometimes we may have to make sacrifices we should always be thankful for the things that we do have. I try to stress that our glass is always half full vs half empty.

Chelo Marroquin´s last blog post..Week in Review: 12/8/2008

12 Sheila December 17, 2008

Another comment after reading Kate’s comment about not ‘choosing to spend’ on certain things. That’s an excellent point. I have tried recently to be much more careful about my wording. It is important also for kids to understand that it isn’t always that we can’t do something – sometimes we have just decided it’s better to not do it.

I’ve enjoyed this post and the comments. Thanks!

13 TStrump December 17, 2008

Unfortunately, my parents never spoke to us about money.

Thankfully, I learned about the cost of things from an early age, because I was expected to contribute to the household expenses as early as 12 years old – we were poor and I always had part-time jobs.

So, I think an allowance is alright until children are old enough to hold a part-time job. After that, the allowance should stop.

TStrump´s last blog post..Eating Out Frugally and the Folly of the Chain Restaurant

14 Nancy December 17, 2008

My parents didn’t discuss money with me, although it was evident if we were in a time of lean or plenty by the mood of the home. The only thing my dad made me do was put 50% of every paycheck in my savings account from my after school job. Who knew that that would amount to enough to put myself through college with minimal student loans? Surprise — compounding interest in a wonderful thing.
Now that I’m the parent, I have chosen to do things a bit differently than my dad like letting our girls know that we SAVE to buy big ticket items rather than putting it on plastic; that we can eat for 2 or 3 days at home on what we would spend at a fast-food restaurant for 1 meal; that with money comes choices and you must prioritize what is most important, etc.
Our oldest daughter, now 15, has a part-time job and also does baby-sitting. She puts 50% of her money in her savings account. Last year we let her make a withdrawal from her savings account to go on a trip with our youth group. It was a feeling of accomplishment for her to know that she paid for that trip all by herself. (note: withdrawals from her savings are not something she does regularly) Now that our 12 year old has started baby-sitting, she too must now put money in her savings account. I take them to the bank and make a big deal out of them putting their money in their account. They like watching the balance grow.
I still think they’re in the dark about how much money it takes to provide for a family. We are considering allowing them to write the checks for our household expenses (mortgage, utilities, etc) when they are seniors in high school. This would allow them a ‘real world’ experience before they leave the safety of our home and venture out on their own. I know another family that did this with all 4 of their kids (now in their 20’s) and they said it was a very worthwhile activity; spurred a lot of needed discussion/lessions.

Nancy´s last blog post..I Love a Good Book

15 Melissa December 17, 2008

My parents taught and spoke about money extensively when I was growing up. Nancy’s idea about letting her kids help write out checks for household utilities and such is an idea my Mom used. I started helping her write out checks as soon as I was mature enough not to talk about it to everyone else (about 13 or so.) I rather enjoyed helping Mom look at bills and writing out the checks. Mom’s favorite were the utilities, as she would point out the direct correlation between turning off lights and a smaller check. (Christmas time is a great time to show this, as the extra holiday lights will usually cause a small jump in the electric bill.)

My parents are involved in agriculture, so listening to the daily commodities markets taught me a lot about investing. They also initially funded a Roth IRA for my college education and once I had a part time job, they let me invest some of my money in my Roth and the rest in savings. I had incredible amounts of fun talking to the financial advisor and choosing my mutual funds.

I am very appreciative that my parents taught me about money. I was able to pay cash for my college tuition and now at the age of 21, I purchased my first home (and put 20% down to boot.)

16 frugalscholar December 17, 2008

Honestly, I don’t think you need to plan what to say to your kids. That is because they pick up a lot more than you think from what you do and say. So what you say to them should be in alignment with what they see you do. Does that make sense????

See my recent blog post on how and why I said NO to school Disney trips:

frugalscholar´s last blog post..Disney : Japan :: Not Worth It : Worth It

17 gic December 18, 2008

Dear Kelly, thanks for sharing this with us..

I believe children imitate what they see from their parents.. so I think, a child who grows up in a house where mom&dad periodically discuss -not fight about- money, about which bank has higher interests, about how much they saved this month…etc, he/she will pick this up very naturally and apply the same attitude as he/she grows up.

I do not think we need to sit down with our kids at this age and tell them we do not have enough money for this and that, or that we may not be able to live in our house anymore if we buy the more expensive pair of boots..
In my opinion, your kids are way too young for this..they may not clearly understand what is going on and panic. You never know what kind of sacrifices a child will make when he panics 🙂

I believe budget and savings talks are for older kids.

18 Teri December 18, 2008

Kids need to know about money–on an age appropriate level, of course. The sooner you begin these discussions the better financial understanding they will have. Growing up, I never had an allowance as my father always said he didn’t believe in it; however, if there were extra chores like washing the car, picking up walnuts in the back yard, etc. outside of the “make your bed, wash the dishes” type of stuff, we would receive compensation for that. And when I was old enough to babysit and later with my first job, my parents expected me to save 10% of whatever I earned, so when I moved out of the house into my first apartment I had a nice safety cushion.

19 niki December 18, 2008

I wish I knew the answers to your questions. Unfortunately I don't.

So I am arranging for a local financial planner to come to our MOMS Club so we can hear about her informative plan for "How Money Really Works", which details how to explain money to kids.


<abbr>niki´s last blog post..WFMW…My Christmas To NOT Do List</abbr>

20 Kelly December 18, 2008


Come back and tell us what you learned!

21 Christine December 18, 2008

I belong to the “give them an allowance” camp — not from experience as a parent, but from lack of experience as a child. My parents tried to give us allowances, but would invariably forget or have incorrect change, or would buy us what we wanted anyway. They weren’t consistent with allowances, which meant we didn’t have to be consistent about saving or choosing what to spend our money on. That was one of the hardest lessons I learned when I was finally on my own in college. Good luck!

22 Carol December 18, 2008

I think that most parents should talk about money to their childen more often. Most parents don’t because 1. It’s an unpleasant subject; 2. They don’t want to worry the kids; and 3. After all, they REALLY want to give their kids the world, whether they can afford it or not.

I wish my parents had done a better job of this, and oddly enough, I think the parents I know who do it best are single parents of single children. Single parents have fewer people to confide in, so they keep their children more in the loop about such matters. I am continually amazed about how realistic about money my seventeen-year-old niece is. It will serve her well as she departs for college in the fall. She’s the daughter of a single mother, and the two are very close. She knows when meeting ends meet has been a struggle.

It’s always better for a child to have two parents, as well as brothers and sisters, but I think there is something to be learned here. Parents should level with their kids, and confide in them as friends. The minute I say this, I realize there are limitations, but I think it’s a valid point, all the same.

23 Gidget December 19, 2008

A friend of mine had a great idea– because they feel their family has been blessed (with income in one way or another) they share that with their kids- a small, weekly allowance, that is set by mom & dad and not based on chores. I love this idea, it’s so sweet! Then they have weekly chores (which I think can be to earn money) which I think teaches a good work ethic. I didn’t like doing chores as a kid, but I think it taught be a good lesson, in earning the money I make by being a hard-worker.

Gidget´s last blog post..Weekly Surf Spots~ Monday Edition

24 CC December 19, 2008

We probably talk about money too much…. but we try to emphasize that we have no more money for that. When the envelope is empty, there is no money left.

My son has a monthly allowance. As soon as we give it to him, he breaks it into save, spend, and give. So far it’s been working out well (but it’s only been about 5 months now).

CC´s last blog post..Language Disorders in Children Adopted Internationally

25 andy December 21, 2008

Kids should learn about stocks and investing from an early age. They should also be allowed to make “mistakes”, because that is where you learn the most from.

26 Alissa December 23, 2008

Our kids are 7 and 4 and, in my opinion, don't need to receive money for doing nothing in return. We just worked out a pay-for chores system where we keep track of what gets done during the week on a dry erase board and payday is on Sunday. Only the 7yo is eligible for this as the 4yo takes too much supervision. He whines about it but cannot wait until he is in 2nd grade and do chores too. The average weekly take is around $1.75. I should add that none of the $$chores are things they have to do simply to exist in the house, such as make beds, clean up toys, and brush teeth.

<abbr>Alissa´s last blog post..It’s A Jungle In Here</abbr>

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