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Experts agree: The sooner you start talking to your kids about finances, the better. “According to studies, children form financial habits as early as 7 years old,” says Mary Suiter, economic education officer at the Federal Reserve Bank of St. Louis.
The easiest way to broach the topic is by starting with consistent communication. “The biggest mistake you can make as a parent is not talking about finances. You don’t have to be sophisticated or know market terms,” says Jordan Janes, partner at Moneta Group, an independent wealth management firm. “It’s never too soon to start talking about money.” Janes recommends giving kids a clear piggy bank beginning in kindergarten, so they can see their money grow. Being able to see the money tangibly accumulate shows that “the more they save, the more the money builds up,” says Janes.
Games like Monopoly and Game of Life and apps such as Rich Dad’s CASHFLOW Classic are great ways to teach finance skills and build kids’ knowledge.
As children get older, both Suiter and Janes recommend giving them a chance to manage money—for example, paying small amounts for chores and talking to them about birthday or gift money. “Having money to manage allows them to make choices and incur the actual cost of those choices,” says Suiter. “If they make a bad choice, then they bear the consequences.” While it can be hard for parents to let their kids feel the consequences of a bad money decision, Janes says that these mistakes are a great way for kids to learn about their spending choices and consequences.
Reading books with your kids is a great way to start a conversation about making financial decisions. Try titles like Uncle Jed’s Barbershop by Margaree King Mitchell for elementary-age kids or Lawn Boy by Gary Paulsen, geared toward third to seventh graders.
When should you go to the bank? As kids reach middle school and high school, Janes says it may be time to open a bank account. “Tell them about interest rates and how a bank account is a place where you save money,” says Janes. “Introduce familiar terms like markets, stocks, and interest, and talk to them about these topics at their level.”
No matter what age level, kids are watching you and how you spend your money. Strive to be open and to set a great example.
