How to talk to kids about money

Money can be a confusing concept for kids. Most of the time they see the adults in their world taking care of business with the swipe of a magical plastic card. Or they hear us say vague things like we’ll “pay that online”. And in this current moment, they'll have likely overheard the endless commentary on the ‘cost of living’ - with its rather unhelpful tag word ‘crisis’.

Talking to our kids about money is an important and ongoing conversation, even if it’s not always easy or comfortable. How do we navigate it? “Money doesn't grow on trees” has traditionally been a starting point, but we can probably do better... right?

Money shouldn’t be a taboo topic. It will really help our kids in the long-term if they know they can come to us with their questions and concerns about money at any time. Ideally, our aim is to keep the conversation light – it doesn’t need to be a long, heavy lecture. Ideally, money is something that is talked about honestly and openly in everyday conversation, rather than the hushed-up and awkward subject some of us may be familiar with from our own childhoods.

Keep things age appropriate. Talk of investment portfolios and the official cash rates will be bewildering to small children (as it is to me, a grown-up!), but even from a young age, kids can benefit from our explanations of things like change, discounts and saving up.

And it’s not just how we talk about money, but what we do with it ourselves that counts. Try to use real, actual money (not cards!) when shopping with small children, so they get the idea of how it works. I.e. you have some in your hand, you spend it, and then it’s gone and you’ll have to earn some more. (Yikes, this is conversation can get heavy pretty quickly!) Have some fun and play shops with empty grocery packages and some homemade money. Open bank accounts for your kids and show them how their savings are growing.

For older kids and teenagers, you could try talking about loans, mortgages and the impact of higher interest rates. In the current climate that could all sound a bit gloomy, so bring some balance by highlighting the power of compound interest over years and years. Share inspiration around how a little babysitting money in a savings account today could look like quite a different amount in years to come.

Kids of all ages can benefit from being taught about delayed gratification. There are valuable life lessons to be found in waiting for something that you really want, anticipating the reward and going without while you save up.

Practically speaking, a great place to start when teaching kids about money is talking to them about three key ‘S’ words – Spend, Save and Share. These concepts are quite easy to understand, and relatable too for any child or teenager with some pocket money or birthday cash burning a hole in their pocket. But simple as they may seem, they help lay a basic foundation for financial management later in life. Thinking about spending, saving and sharing when we’re young is good practice for making wise choices about what we do with our money later in life.

Walk the talk with three jars – one for Spending, one for Saving and one for Sharing. Kids can then use these jars to sort their pocket money, allocating funds to each jar. We then have an regular space to check in with our kids about what they might like to spend some of their money on, what they might like to save up for, and how they might like to share (or give away) some of their money. They might have their eye on something they need or want right now. (There’s another great conversation – the difference between needs and wants!) They might like to save up some for a special project, experience or expensive item. And they might want to give some to a cause that’s close to their heart, or even buy a present for a sibling. Money talks can open up a wonderful opportunity to encourage kids to look out for others.

Many families are finding themselves on a tighter budget with less to spend. That’s a tough place for parents to be, but it’s also uncomfortable for our kids as they easily pick up on money problems.

As the grown-ups, we can protect our kids from undue anxiety in the way we talk about money – especially the lack of it! Aim to avoid saying “We can’t afford it”. Instead use phrases like "That’s not on the list this week” or “That’s not in our budget right now”.

Keep a positive spin on things by acknowledging the loveliness of the shiny sneakers in the shop window, or the deliciousness of the special tub of ice cream at the supermarket, or the fun of the new toy in the catalogue. “Wow, that would be super nice to have, wouldn’t it? We could save up for those/keep that in mind for next time/put it on the Christmas list.”

Hearing “No, no, no – that's too expensive” all the time can really steal one’s joy.

That said, money does not have the final say when it comes to raising happy and healthy kids. Our goal is to raise kids who feel deeply loved, and – excuse the cliches – you can’t put a price on that yet it’s the best investment ever. Keep in mind what children will remember – it won't be the sneakers/ice cream/toys they had, but how they felt. A home that feels calm, warm and loving is what really matters.

Kids are amazing – they can adjust to limitations on what they get in terms of material things. After all, our joy and contentment in life is not solely tied to how much stuff we have. Money can’t buy happiness, but... have you ever seen a sad person on a jet ski? Good question... and a great conversation starter for the next time you’re chatting to your kids about money!