Talking to Your Kids About Money: Age-appropriate ways to discuss finances and savings with children

Talking to your kids about money can feel very intimidating, but it’s one of the most valuable skills you can teach them. 

Age-appropriate discussions about money can help your children understand its importance, develop responsible spending habits, and build a foundation for financial independence as they grow older and become adults.

 Here is a rough guide on how to discuss money with kids at different stages of their development:

General Tips for All Ages:

Be honest: Answer questions honestly, even if they’re tough. Don’t shy away from talking about money, as it’s an essential life skill.

Model good financial habits: Kids learn a lot by watching their parents, so make sure to model smart money management, such as budgeting, saving, and not overspending. Use Everyday Situations: Turn everyday situations, like grocery shopping or paying bills, into teachable moments.

Keep it fun: Make learning about money engaging and relevant to their lives. Games, challenges, and rewards can keep them interested. By tailoring your approach to your child’s age and development, you’ll help set them up for a lifetime of financial literacy and responsibility.

Ages 3-5: Introduction to Basic Concepts

At this age, children are just beginning to grasp the idea that people need money to buy things. Keep things simple, visual, and tangible.

Key concepts: Money is used to buy things, money comes from work, and not all things are free.

Practical tips: 

Use play money, coins, or piggy banks to help them understand the concept of saving and spending. Show them the difference between free items and those that cost money, like toys, snacks, or outings. When you go shopping, explain that you need to pay for the items you want with money.
Introduce simple concepts like "saving" (putting money in a piggy bank) vs. "spending" (using money to buy things).

Activities: 

Play store games where they "buy" and "sell" with toy money. Give them a small allowance in coins and let them decide whether to save or spend.

Ages 6-8: Understanding Earning and Saving

As children grow, they can begin to understand that money is earned through work and that there are different ways to manage it.

Key concepts: Earning money through work, saving for something you want, making choices about what to spend money on.

Practical tips: 

Teach them about allowances, and connect them to chores or tasks. For example, "If you help clean up the toys, you can earn this amount." Introduce the concept of setting goals (e.g., saving for a toy or a special activity) and the idea of budgeting or dividing money into spending, saving, and sharing. Start a savings jar or envelope system for them to divide their money into categories.

Activities: 

Create a simple chart with income (money they earn) and expenses (things they need or want to buy) to help them visualize how money works. Encourage them to save a portion of their allowance for something special, teaching delayed gratification.

Ages 9-12: Budgeting and Wants vs. Needs

At this age, kids can start to grasp more complex financial concepts like budgeting and prioritizing needs versus wants.

Key concepts: Budgeting, distinguishing between needs and wants, delayed gratification, and giving back (charity).

Practical tips: 

Teach them how to budget a small allowance for different purposes: saving, spending, and possibly donating to charity. Discuss needs vs. wants, helping them understand that while it's okay to want things, we must prioritize our needs first. Encourage them to save for bigger items (like electronics or a trip), and help them set up a basic savings plan or their own budget.

Activities: 

Have them plan a small budget for a family trip or outing, deciding how to divide the money for food, souvenirs, and activities. Give them a small project, like saving for a toy or book, and help them track their progress with a goal chart.

Ages 13-15: Advanced Budgeting and Credit

As teens approach high school, they’re ready to understand more advanced financial concepts, such as credit, debt, and more detailed budgeting.

Key concepts: Budgeting for both short-term and long-term goals, understanding credit and debt, and earning money outside the home (part-time jobs, entrepreneurship).

Practical tips: 

Introduce the idea of credit (credit cards, loans) and the importance of managing money responsibly to avoid debt. Help them understand how to budget for larger goals like saving for a car or college. Encourage them to start saving and investing, if they have a part-time job or allowance.
Discuss the importance of tracking spending, distinguishing between essential and discretionary purchases, and comparing prices before buying.

Activities: 

Set up a basic bank account for them, or if they have one, discuss how to manage it, and teach them how to use it for deposits and withdrawals. Have them create a monthly budget to manage their allowance or earnings from part-time work, and track their expenses.

Ages 16-18: Preparing for Financial Independence

As high schoolers near adulthood, they should be prepared for the realities of managing money independently, including understanding taxes, savings, and the basics of investing.

Key concepts: Taxes, managing checking/savings accounts, student loans, credit scores, and long-term financial planning.

Practical tips:

Teach them about income taxes and deductions so they understand their paychecks when they get a job. Discuss the importance of building a good credit history and how it affects things like renting an apartment or taking out a loan. Help them open a checking and savings account if they haven’t already, and explain how to balance a chequebook, track spending, and save for larger goals.
Introduce the concept of investing and explain different options (stocks, bonds, retirement accounts like IRAs). Talk about financial independence and the costs of living on their own (rent, utilities, food, transportation).

Activities: 

Help them set up a budget that includes savings, and encourage them to save for big expenses like a car, college, or travel. If they have a part-time job, help them review their paycheck and set up automatic savings. Discuss credit cards and how to use them responsibly, avoiding debt and paying off balances in full each month.

By using these methods you can create financially stable adults who can manage money and know the importance of money as well.