Money makes the world go ‘round, so teaching our kids how to manage money is one of the most important lessons we share. How do we help our children learn to earn, save, and spend wisely? How early do we start? What are the hard lessons they need to know about hard cash? 

It’s important to know that you can, and should, talk about money with your children regularly, clearly, and honestly. 

When your child knows how the family’s finances work, in all its personal detail, they’ll be better at managing it when they’re on their own.

Pay with Purpose

Financial experts say you should start talking to your children about money, in age-appropriate ways, early in your child’s life.

Even toddlers can understand saving and spending, so talk about how much things cost as you go through the grocery store. Talk about why it’s important to pay the electric bill on time. And talk about why you don’t want to buy something from the dollar rack today because you want to buy something nicer at a later date.

Learn More, Do More

As your child gets into kindergarten or first grade and starts to read, give them increasing responsibilities for money. Let them pay at a restaurant or a gas station. Teach them to read a bill, count the money, and talk to a cashier. It helps them understand the full process of paying for something and teaches them to be responsible for details like getting correct change.

Allowance Adjustments

At 5 or 6 years old, a child is also probably ready to get an allowance. Some parents advocate for giving their kids cash and letting their children decide what to do with it. Others say it’s important to teach children to put part of the allowance into their pocket and part into a savings account. 

New York Times financial columnist Richard Lieber advocates for teaching children to give part of their allowance to charity as well, in his book, “The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money.”

Know the Math

Your little ones should learn the math of money before you give it to them. Ask your child how many quarters are in a dollar and how many dimes. If your child can’t answer that question, they likely aren’t ready to manage money. 

Teach the math first, then hand over the cash.

Keep It Together

Give your child a piggy bank, or some other container, to put their allowance in. They won’t yet understand accounts in far away banks, but they will be able to keep track of money when it’s on the nightstand.

Learn Tough Lessons

Once your child heads into that 6- to 10-year-old range, it’s a good time to let them experience things like buyer’s remorse. 

If your child buys a toy with their own money and doesn’t like it after they get home, don’t rush to replace the money spent on it. This is a good time to talk about choosing carefully and how long it’s going to take to save that money up again. 

Financial experts say that when you give your child money to make up for a poor purchase, you aren’t teaching financial wisdom. 

Another important lesson that children can learn in the elementary school years is how a bank works. 

These days, lots of people don’t even have to go into a physical building to do their banking, so banking can seem almost magical to a child. Take your child inside a bank lobby to see that people are there to help and answer questions.

Account-able

While you’re at the bank, if your child is about 10 years old, open a savings account for which your child can take some responsibility. 

This is a good time to talk about long-term saving, for college or a big family trip, and the savings account can help track progress toward that goal. It will help show that long-term saving is a slow process but it also doesn’t require huge amounts of your child’s allowance.

Bigger Kids, Bigger Ideas

As your children enters the teen years and beyond, it’s important to talk about how to pay for college, why you should set aside money for retirement, and how mortgages work. 

Many parents fear telling their children details about things like the family income. Parents don’t want children to brag to friends, or feel scared, so they try to downplay its importance. In fact, financial experts say it’s important to talk about money in real terms so your children can understand all the ways in which decisions about money, budgeting, saving, and spending affect a person’s life.

The Takeaway

As your child grows, consider that financial experts believe opinions about money form at about 7 years old. Don’t wait until that point to start talking about money. Make it a regular part of the family’s conversation before then.