Teaching Kids about Money

As soon as young adults step foot on a college campus, they’re flooded with credit card offers. Many sign up for them and immediately max them out. Others might sign up for one and barely use it — avoiding spending money they don’t have. 

For many parents, teaching kids about money might seem awkward or complicated, but experts agree that it’s critical for parents to introduce the concepts of wealth, money, credit and debt at a young age.

“We’ve got to talk to our kids about how to know if they can afford something,” Dr. Deborah Gilboa, a parenting and resiliency expert, told Highlights. 

Gilboa said when parents address wealth and money, they don’t have to disclose how much they make or how much their assets are worth to their children. Revealing those details is a personal choice, and many parents do not want to share such information. 

For many parents, teaching kids about money might seem awkward or complicated, but experts agree that it’s critical for parents to introduce the concepts of wealth, money, credit and debt at a young age. 

“I actually don’t know how much money a family has or what their salary is or anything like that is a child’s business,” Gilboa said. “That is a value decision by a parent.”

But parents can make intentional efforts to help their children understand money and wealth. To teach kids more about financial literacy, Gilboa encourages parents to give their children allowances at a level that makes sense with their family’s income and budget. Parents also can use monetary gifts from relatives to help their children to understand money and wealth. Then parents need to guide their children on how to handle that money based on what’s important to their family. 

“You have to show (children) how to divide it up according to your values,” Gilboa explained. “So in my family, 10% goes to donations, a third goes to ‘spend’ — you can spend on whatever you want. (Another third) goes to ‘save’ — you can save up for something you want in the near future. And the rest is ‘invest’ — that is, to invest for your future.” 

Talking about money and wealth gives parents an opportunity to talk about privilege with their children. 

Giving children an allowance and teaching kids about money and how to use it can also teach them the heartbreak of wasting their cash on something they wanted but didn’t need. By learning such lessons early on, they will have a much easier time managing money as adults. 

“If you don’t give them enough allowance to be able to make a stupid purchase they’ll regret when they’re 12, they will make those stupid purchases when they’re 20,” Gilboa said. “And they will be much more impactful.” 

Talking about money and wealth also gives parents an opportunity to talk about privilege with their children. 

“Understanding that there are people who don’t have access to things that you have — that’s to our kids’ good. It’s really valuable for them to know that because it builds empathy,” she said. “Talking to them about dollars and cents, about the actual math of our affluence or lack of it, (is important).” 

Chatting about money and wealth can be as easy as talking about Christmas and birthdays. Some parents ask friends and family members not to give their children very expensive gifts. Their goal is to avoid having children from poorer families hear about those pricey gifts and wonder why they never receive anything similar. 

“Think about the stories our kids tell each other about privilege,” Gilboa said. “It’s really important to talk to kids about that.”