How to Talk with Your Kids About Money

Money never used to be the “thing” that so many of us had as our primary concern in life. The main concerns were finding adequate shelter, food and remaining healthy. As the urgency of these needs began to be more easily met, we found other things to be concerned about. Also, the concept of bartering began to fade and money became what we exchanged for the things we really needed – shelter, and food to keep us healthy.

Human Beings, at our most simplest are wired to survive. Our survival instinct has evolved over time and feels like less of a driver or imperative, yet it’s still there. Money in itself has also become more complex with the introduction of easily obtainable credit, plus cheaper and more readily available consumer goods (who remembers the days when it was normal to wait at least 3 months for your new couch to arrive?! And I’m not talking about the post-COVID years) .

What has also made money more complex is that we have begun to attach it to the worth we feel as Human Beings. This is where I really get riled up. The amount you have in your bank account is NOT a measure of your self-worth or your value as a Human.

The “stuff” you have, the car you drive, the clothes you wear. None of these things really (should) mean anything.
What money meant to our parents and the people around us is what we take into adulthood, and then what we often pass on to our children. YOU have the power to stop the cycle, if it isn’t serving your greater good.

How was money referred to in your household growing up?

Was it something that was limited or there was never enough of?

As with many other things, money is something that we learned about. We aren’t naturally good or bad with money. It is something we need to learn, and because we aren’t formally taught it in school, or pick up our understanding of money through what we see and hear from others – namely our parents.

This is where you come in. If you’re a parent and you’re wondering how to talk with your kids about money, here are three fundamentals that I’d like you to consider.

Before I get into it, I want to clarify, that underpinning these is that you absolutely MUST talk with your kids about money.

I’m sure you’ve noticed that in life, when information isn’t clearly or directly provided, the blanks are filled in with assumptions, hearsay and often plain old gossip.

If you aren’t speaking with your kids (not AT them) about money, then they will make assumptions and answer any questions they have with their limited knowledge and life experience so far.

Children want to be involved in your life and understand what is going on (or try to understand, depending on their age). Trust them enough to be open with them, and to ask them if they have any questions about money.

OK, now that is clear 😊, here are the three fundamentals for what to say to your kids when you talk with them about money:

1. Clarify Want versus Need

This is a big one. For children, their entire world revolves around them. That’s understandable as they don’t have any real life experience yet. Not point of reference for things. Plus, they don’t have to go to work or pay the bills, health concerns, ailing parents, understand emotional trauma or any of the things that you have to deal with. Their world revolves around how much they get to play.

So, when they think about the things that are important to them (like play), anything that facilitates play is considered a NEED. That new toy a friend at school has, or the latest video game, or having a birthday party at the indoor play centre that the last kid in their class took everyone to (and would have cost a small fortune!).

These are conversations I have with my 7 year old daughter all the time. I’m clear with her on what she actually needs – like love and attention from her father and I, water, food and fun. Now, the fun doesn’t actually need to cost anything, and quite often the most fun you have with your kids is completely free. My daughter and I go for treasure hunts, bike rides, and build a fort in her bedroom and play make believe. These are also treasured times that I will cherish forever. They don’t need the latest toy or video game or expensive birthday party.

Wants will fade, and true needs will not. It’s important that your children understand that.

Make sure that they realise this isn’t about the money per se. It’s about need versus want – which is an important distinction.

2. Language shift from “lack” to “choice”

The language we use is powerful, and I’m a big believer in making sure that the language I use is congruent with the meaning I want my mind and body to take in. For example, when I want to remember something important, I’m very deliberate about making sure I “remember”, rather that not wanting to “forget”. That way my brain is focused on remembering, not forgetting (which is what I DON’T want it to do, but I’m would then only be able to think about!)

OK, enough of my rant. When it comes to money, it’s important that children understand the difference between what you are CHOOSING to spend your money on. So many times I’ve seen people say they can’t afford something that they said they wanted, but then buy an expensive TV or spend on a hobby – because that’s what was important to them at the time.

There is nearly always money for the things we find important to us. That’s where the power of choice comes in. For example, my daughter loves stuffed toys, and is always asking me for them when we go out (especially those little Ty ones that you see in newsagents and post offices). After pointing out the want versus need concept, I also point out that she already has plenty of these at home and that I’m choosing to not spend more money on something she has plenty of.

That’s where pocket money comes in as well. We use the “jam jar” method for pocket money – Spend, Save and Give (once my daughter is a little older I’ll add an Invest jar as well). So, she is allowed to use her Spend money for things like that. Often she won’t have much in her Spend jar, as she spends it on small stuffed toys! This will be a lesson she needs to learn though.

It’s my job to give her the knowledge, and then also display congruent behaviour that aligns with the knowledge I’m giving her.

As you’re no doubt aware, kids are keen observers and they LOVE to copy you. So, they are watching how you talk about and spend money too. So, the conversations you have with your partner and anyone else needs to be consistent with what you’re also saying to your children. Plus, what your spending habits are is what they will notice too.

There may be a point in time where there is a real “lack” and the purse strings need to be really tightened. Right now, inflation is higher than wage growth, and interest rates are meaning that the cost of housing if you have a mortgage has almost doubled. Talk with your children about that, and help them realise that they can work as a team to get through this time.

3. Encourage financial independence as a goal

What is the end goal that you want for your kids? I believe it should be financial independence. That way you know that they will be OK financially, without having to always rely on the bank of mum and dad. It also will help prevent the idea they can be “saved” financially by a partner who they can rely on financially.

There’s still that lingering old stereotype for women that “a man is a financial plan”, which is absolutely not the case. For girls and women it’s especially important to understand that they can stand on their own feet financially, and this is something that should be aiming for.

The sense of accomplishment when you can look after yourself financially is something you want your children to experience.

As you can tell, this is a topic I’m passionate about. It became particularly relevant for me after having my daughter, and also working with the women that I have.

While we learn about money, we can also make sure our kids understand money as well!