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The Informed Parent

Talking With Kids About Money

by Carolyn Warnemuende, M.S.
Published on Jun. 02, 2008

Each day newspapers and broadcasters bombard us with dire economic news. Every trip a family makes to the grocery store or service station drives home the point that their income doesn’t go as far as it once did. As a result, money may be a big topic of conversation. If that talk includes fears or negative consequences for the family, parents can be sure their children pick up on those anxieties.

Financial expert Suze Orman gave a report in O, THE OPRAH MAGAZINE. When she met with a class of eight-year-olds, the children had concerns about having to care for their parents when they got old or ended up in the poor house if a parent lost his or her job. A fifth grade teacher told me that one student in her class shared that her family didn’t have enough money. Another said that his family couldn’t buy “all the stuff” they needed. During a class discussion it appeared that many children were concerned about their family’s finances. 

These are heavy burdens for children to carry. Without the maturity to understand all the ramifications of what they hear, they create situations in their minds that may be far worse than the actuality.

Many parents find it uncomfortable to talk to their children about money. Janet Bodnar, Executive Editor of  KIPLINGER’S PERSONAL FINANCE magazine, states that regardless of how much information is given, parents should always be honest. Knowing what is appropriate at different developmental stages helps. Each stage builds skills for the next. I have combined some of her ideas with mine in the following sections.


Preschoolers are still learning how they fit into the world. They are learning communication and relationship skills. They think concretely. By two or three they begin asking for the colorful things on store shelves. Parents must be clear in stating what they will and will not buy. This is an important time to begin simple discussions on family values. For example, a parent might say, “Today I do not choose to spend our money on that bag of candy. I’m going to buy milk ad apples instead.” Talking in terms of choice is wiser that saying, “We don’t have enough money for that.” It imparts the lesson that people always have choices. It also alleviates the possibility that children will think that the family does not have enough money.

Late Preschool And Primary Grades

Now that they have started learning about choices in how money is spent children can increase their understanding of using money wisely. By the time a child is four years old receiving an allowance becomes an important tool. Even at this rudimentary stage parents can talk about savings and ways to use the allowance.

Elementary school children are old enough to know if a parent has been laid off work or if unexpected financial obligations have arisen. Giving all the details is not necessary and may cause needless angst. Always assure the children  that these situations might be difficult, but ways will be found to meet them.

Middle School

Middle school children are ready to learn where family income goes. They might sit with their parents as the bills are paid. They can be shown sales receipts for groceries, fuel, and clothing. They can be taught about comparative shopping and budgeting. It is a good time to begin teaching cost effectiveness. For example, when the ads show that an item is less at one store than another but one requires a longer trip, the cost of fuel does not offset the savings in the price of the item.

High School

By high school adolescents are mature enough to see how much money is coming into the family and how much is going for expenses. Parents can show how they prepare the monthly budget. They need to talk to these older youth about the risks of spending on credit and the benefits of saving for unexpected events and retirement. Now is the time to take the skills that have been introduced at the previous stages to a more sophisticated level. Soon these young people will be leaving home for college, marriage or jobs. They must have the ability to handle their finances if they are to succeed.

As daunting as it may seem teaching financial responsibility is one of the jobs of effective parenting. An old adage says, “Actions speak louder than words.” Serving as financially responsible role models is the strongest lesson parents can impart. Financial responsibility means:

  • having a monthly budget
  • only spending within the family’s means.
  • saving for unexpected situations
  • having a retirement plan
  • teaching children developmentally appropriate concepts.
  • allowing children and adolescents to experience the consequences of poor choices in spending their allowance or earned money, then working with them to understand how they might avoid similar mistakes in the future.

Regardless of economic changes in the country or in a family, when parents practice and teach financial responsibility the challenges can be met because a strong foundation is in place. Valuable skills have been learned and integrated.

Having a tool chest of strategies for using money wisely helps with the teaching and allows families to work together. Tune into THE INFORMED PARENT in August to develop this tool chest and discover fun ways for making family incomes go farther.

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