Arvest Education Center

Talking to Kids About Money

In many families, talking about money can be uncomfortable, and in some cases, almost taboo. Young children may not have an understanding of the item’s cost relative to the family’s finances. A teenager’s "need" may be viewed as an "extravagance" by the parents. The following ideas can help foster two-way conversation between parents and children, as well as a basic understanding about the value of money.

Young children

It’s never too early to help your child start to develop good financial habits. Providing an allowance can be a good tool if done correctly. If your objective is to teach the basics, consider the following:

  • Set a weekly allowance to match the age of the child; perhaps a five year old receives $5.00 weekly.
  • Tie the allowance to some required chores like setting the table for dinner. If the chores aren't done, withhold allowance for that week.
  • Divide the allowance into three spending categories — 1/3 for immediate spending, 1/3 saved for some specific near-term purchase (a small new toy?) and 1/3 for a longer-term goal (a major new toy or a visit somewhere special).

Teenagers

This is often a difficult time for children to deal with financial issues. Peer pressure, a desire to keep up with what friends have, and the growing realization they can't have everything can add tension to any conversation about finances. However, it’s also the time children begin to understand more complex financial issues, and when financial habits are formed.

The allowance approach gets more complicated in the teenage years as the costs of desirable items increases, and teens are drawn to more activities that cost money. This may be a good opportunity to discuss how a job could help them afford things they want. After-school and summer jobs are an ideal way for teenagers to learn how money is earned, and not something mom or dad always provide. A job also teaches young adults about responsibility because the employer relies on them to be present and punctual. If an outside job is not possible, consider paying your teenager an hourly rate for additional chores, and require them to treat the chores like a job.

Helping teenagers establish a checking account, or even prepare their own tax returns, goes a long way toward helping them understand money is a serious matter, and someday they will need to be self-sufficient. If they get a checking account, be sure to teach them how it works and how to reconcile the account every month.

Keep the conversation going

Be open to discussing finances with your children. Kids are naturally curious about what they see their parents doing and that curiosity can be easily turned into teaching opportunities. While writing checks, stress the importance of paying bills and balancing your budget. Field questions from your older kids, who may be curious about financial news regarding the stock market and banking industry. These discussions may lead to serious discussions about money and setting long-term financial goals. The expense of college can be a great financial lesson about investments and what it means to invest in yourself.

Take advantage of these opportunities. By the time your child is ready to leave home, they will have a foundation to better prepare themselves for their financial future.

This content has been provided by Practical Money Skills and is intended to serve as a general guideline.