How to Teach Your Kids About Money

Even though my daughter is only 6 years old, I’ve already started her money education journey.  It’s something I’ve been conscious of since she was about 2, starting with how my husband and I talk about money, spend money and portray the value or concept of money to her.  

This may seem like “over-think”, but kids are sponges for all new information!  They also notice things that you wouldn’t think was in their realm of focus.  

For example, at about the age of 5 my daughter asked me if we were poor.  When I asked her why, she said that we have such an old car compared to most of her friends.  My car is over 20 years old, and I’ve had it for nearly 20 years, so it is getting a bit “aged”.  But it runs well, is economical and by now I can’t see the point in spending money on a new car when mine works well. We also only have one car in our household, and that is also something she doesn’t see with many of her friends’ families.

There are two main ways kids learn about money – passively (observing what you do and say about money), and actively (how you directly speak with them about money).

Passive Money Learning

Kids are entirely literal learners until they reach the age of 7.  That means, everything you say and do they have no “reality” filter for.  So, when you say, “money doesn’t grow on trees”, they will believe you and don’t understand that it’s meant as a metaphor.

Your child will watch what you say about money, and how you spend your money, and how often you say “we can’t afford that”.

Children will pick up on “lack” very quickly.  Lamenting that you can’t afford something on a regular basis will make them believe that they don’t have everything they need (which I’m sure they most likely do).  Add to this, if they constantly hear you say this, and then see new things being bought (like a new TV, or sofa, or car), then they will begin to devalue money, or even disbelieve you when you say you can’t afford something.

I’m not saying to never talk about money (that part is actually still very important), just to be aware of the way you speak about money, and the emphasis you provide – is it positive or negative?

Kids should grow up understanding the value of things – not just the cost or the lack (or the abundance).

A common one is constantly asking for new toys.  My daughter does this for shows she loves at a given moment.  Rather than buying toys for something my daughter will have lost interest in by the time I’ve finished unwrapping all the packaging, we try and make things if we can – like a Poppy crown (from the Trolls World Tour movie), or a mask that a character she watches wears.  There is also a sense of achievement in creating something, and it’s a fun activity you can do with your kids.  Get out the felt sheets, scissors and hot glue gun!  😊

Actively Teaching Your Kids About Money

Recently, I came across some book recommendations about teaching your children about money.  As part of that, I discovered a wonderful resource – Warren Buffet and colleagues have developed “Warren Buffett’s Secret Millionaires Club” – http://www.smckids.com

The animated series teaches the basics of good financial decision making and some of the basic lessons of starting a business.

Fundamentally, it makes learning about money interesting, and also relevant.  It will help make learning Maths much more fun for kids when they realise that money is maths, and money is what buys them the toys and outings that they love.

It’s important also to instil in children an understanding that not all kids have the things that they need.  I know of people who actually took their 4 year old to Cambodia while the family volunteered at an orphanage, specifically to help their daughter understand that not everyone lives like they do in Australia.

While it’s not necessary to go to those lengths, it is good to explain, and possibly even show (via video or photo) your children how other kids live.  I visited Uganda a number of years ago and my daughter often asks to hear the stories about how the children over there play, and how they live.  One day I will take her there to see for herself.

I also have close family who live in a Developing Country, and as a child we would go and visit semi-regularly.  It was a real eye opener for me.  I didn’t sense lack of any kind – if anything the kids made their own fun, and were so happy when they did play.  However, they lived a lot more simply than we did – 2 generations and 5 people living in a 1 bedroom apartment.  Whereas my family lived in a 3 bedroom house and there were 3 of us!  It certainly left an impression, which shaped how I saw money as a child.

I’d suggest start by being “present” about how you communicate to your children about money.  Sometimes we say and do things that we don’t even realise (because we’re so conditioned from our own childhood), then take a look at some resources for inspiration or new ideas.

Here are some more Australian-centric resources which are also helpful:

•    https://www.moneysmart.gov.au/life-events-and-you/families/teaching-kids-about-money

•    https://www.startsmart.com.au/parent-resources/primary-resources/

Remember to have fun with it.  Kids love learning something when it’s fun!