Teaching your children about money is one of the most important lessons you’ll ever share with your children. While the best things in life may be free, it takes money to provide for, protect, nurture, and enjoy time with those who matter most. Setting a healthy financial foundation for your kids equips them to enter adulthood with the knowledge necessary to avoid pitfalls, navigate challenges, and confidently pursue their dreams.
The best way to establish this foundation is by starting early and discussing money often. Here’s how to prioritize money conversations every step of the way.
Talking to Young Children about Money
Nurturing financial literacy in children has become more important in our increasingly cashless society. While complex concepts should come in age-appropriate stages, you can cultivate positive money-management habits early on. Simple conversations about how money is earned through work and then used to purchase goods lay the foundation. Engaging kids through stories and real-world shopping examples reinforces these basics, making them less abstract. The goal isn’t to replace bedtime stories with economics textbooks or burden them prematurely, but by weaving relatable financial lessons into daily life, you prime their financial capability from a young age.
Even small steps to demystify money help pave the way for responsible, empowered decisions as children age. It’s important to help them understand dollars and cents, where money comes from, and why everyone has access to a limited amount. No matter your financial status, they should be aware that things cost money, that someone worked to earn it, and that paying attention to how it’s spent matters for now and in the future.
Money and Everyday Life
As your children learn to count and begin to grasp math, you can help them become more comfortable with numbers and tie in money lessons along the way. Start simple. Ask them to look at how much the ice cream costs. Give them a budget for their treat. Is the money in their budget enough to pay for the ice cream? Then, expand from there. Let them know your grocery budget for the week and show them the receipt. Did you stay within the budget?
Set good examples through responsible spending and show them how you did it. Do you want to go shopping for stylish new running shoes, but your existing shoes are perfectly fine — and you need a new garage door opener instead? Show them that the shoes and the garage door opener have a similar price tag; you’re choosing to buy something you need versus something you want. Keep the conversation flowing and find ways to share everyday examples.
Use moments like this to reinforce savvy money management, not anxiety or guilt. Explain that passing on the shoes now allows you to save responsibly to buy them later. Bring a lunch to work, skip the morning latte, and set aside a little from each paycheck. Then, next month, the shoes can be a celebratory reward. Whether funds are tight or ample, highlight sticking to financial plans. Teach intentional spending aligned with goals, not impulsive swiping. Instill pride in practicality and patience. With consistent modeling of sensible prioritization, kids assimilate smart money skills as second nature.
Setting Savings Goals
Goal-setting and delayed gratification are two invaluable skills kids can develop early on. When a child wants something special, like a new toy or game, guide them through a rewards-based system. Have them research the item's cost and contribute through an allowance or extra chores. Then track savings progress week-by-week while skipping small impulse buys that drain the goal fund.
With your encouragement, they will discover the motivation needed to persist toward milestones, whether that’s by earning extra or cutting discretionary spending. Celebrate the moment the purchase becomes a reality after focused effort. More than acquiring the item itself, recognize the personal growth they will feel looking back on the journey. Goal achievement builds pride and self-confidence to channel toward their next ambitious saving target. Make money lessons an exciting quest rather than a chore.
Talking to Teens About Money
The teenage years offer great opportunities to equip teens with money skills to unlock their goals. As interests get more expensive and earning potential grows with age, they can learn to align passions with financial realities. Guide them to map out lifestyle dreams and discover related careers and required savings. The aim isn't to rush adult pressures but to expand their conception of what is possible.
Brainstorm together how they might earn, give, budget, and save for the future lifestyle they envision. By fostering money awareness now, you empower teens with the agency to craft the life they desire. Just ensure lessons inspire more than overwhelm. With wisdom and care, parents can unlock a world of possibilities.
Teaching Teens to Budget Their Goals
An effective budget aligns spending with dreams. Share your household budget openly and help teens form their own as part-time jobs begin. Have them track all income sources, from gifts to online pursuits, and learn to allot appropriately across needs, wants, and wish-list savings.
Though you may cover basic needs, establish parameters within teen discretionary spending. Rather than simply paying for everything they ask for, giving a heftier allowance that’s intended to cover things they need may be helpful. And don’t be surprised if your enterprising teen can earn a notable amount of money on their own. The key is to keep a close watch on what’s flowing in before it flows out. Frame mistakes as learning opportunities to make wiser decisions next time. Discuss emergency and debt concepts you employ so teens understand long-term planning.
With spending independence expanding, having a budget ensures funds aren't draining hastily. Things like DoorDash, Starbucks, and video games can get out of hand quickly if they’re not careful. Exactly how much is going out? They should create a budget with the primary goal of living on less than they have coming in. As a basic rule of thumb, encourage them to allot 50% to needs, 30% to wants, and 20% to savings.
While they may not have a mortgage or bills to pay, needs can include things like gas for their car, cell phone bills, or personal grooming. Even if you’re indirectly paying through an allowance, the point is to help them begin making budgetary decisions. Is an expensive haircut warranted if it sacrifices savings toward a car? Collaborate on aligning present and future priorities. Offer accountability while praising wise financial moves.
The goal is to teach teens to navigate trade-offs, budget their adventures, and not restrict enjoyment. Are tickets for the next big concert going on sale next week? If they don’t have the funds saved, they’ll have to skip it or make an arrangement with you to pay the money back. You don’t want them to miss out on experiences, but you do want them to recognize the value of planning better next time. By modeling budgeting as a tool for achieving passions rather than a boring barrier, parents can empower teens to chart a course toward their dreams.
Saving for the Future
While college and adulthood may seem distant, the teen years are the perfect time to instill smart money habits that reap long-term rewards. Have open conversations about how you save and invest for retirement, modeling forethought for the future. Make sure they understand the importance of starting early, getting into the market young, and how time is on their side right now. Show them charts demonstrating the immense power of compound growth over time. Outline how consistently putting aside even modest monthly amounts adds up substantially down the road.
If you’re unable to pay for their college, use your experience to discuss options transparently rather than as a warning. Talk through the options together and help them make a well-reasoned and informed decision about going into debt or following alternative paths. What matters most is nurturing their financial capability so they can craft the life they envision. With time on their side, patience plus smart strategies put future independence within reach.
Empowering Your Child Now and in the Future
Discussing finances with kids requires an adaptable, nurturing approach that grows alongside their development. An open exchange of ideas, questions, and concerns establishes healthy money mindsets. Committing to ongoing money conversations empowers kids to navigate the complexities of money with confidence throughout their lives.
Just as values are caught more than taught, modeling money behaviors forges behaviors kids assimilate subconsciously. Making discussions a consistent, compassionate presence ensures kids feel equipped to manage finances and achieve dreams on their own terms when the time comes. With patience and care, parents can prepare kids to not only survive but thrive financially as adults.
John J. Diak, CFP® is the Principal & Client Wealth Manager at Oatley & Diak, LLC in Parker, Colorado. He assists clients through many difficult lifestyle changes such as business downturns, retirement planning, divorce, the death of a spouse, and family estate issues among others. Oatley & Diak, LLC is a family-run registered investment advisory (RIA) firm that provides clients with investment management and financial planning services in a hands-on, intimate environment. Learn more about them at oatleydiak.com.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.