Money: so easy to spend and so hard to discuss. This is particularly true when it comes to our kids. A 2019 study found parents say they want to talk about finances with their kids, but they often don’t. Fear is the biggest factor.
There’s nothing to be afraid of, experts say, and the time to start the conversation is… well, right now.
“Ideally, these conversations should start when your child is very young,” said Kari Lorz, certified financial education instructor and founder of MoneyfortheMamas. But if that hasn’t happened, don’t be afraid to initiate a discussion with older children or teens.
How to talk to your child about money at every age
Talks about money and finance “establish a critical baseline that money is just a tool,” Lorz said. “It’s not a shame-filled taboo topic, where people get angry or yell, or worse, shut down.”
Here’s how to discuss money with your child at any age.
If your kid is old enough to see a product on TV or online and ask for it, then they’re old enough to start learning about money, said Vince Shorb, CEO of the National Financial Educator’s Council. That doesn’t mean sitting a preschooler down and doing a lesson plan on dollars and cents. “The focus is on action, having them do activities,” Shorb said.
With a two- or three-year-old, you can start to explain that you exchange money for goods, said Jennifer Connolly, president of the western Massachusetts chapter of Junior Achievement, a nonprofit dedicated to teaching young people about workforce readiness, entrepreneurship and financial literacy. This can be as simple as playing “store” with toys and fake money, or showing them when you get food at a drive-through that you are giving the cashier money in exchange for the meal, she said.
“It’s all about bringing them in at different levels they are able to understand,” she said.
A child as young as five can earn money in exchange for chores, said Beverly Harzog, personal finance and credit card expert for U.S. News & World Report. Then, when they’ve saved for what they want, go to the store with them and let them pick it out and pay for it with the money they earned, she said.
You could get even more elaborate and create three containers labeled “Spend,” “Save” and “Give,” said Amy Maliga, a financial educator with Take Charge America, a nonprofit financial counseling agency. Any money the child receives, whether it’s from the tooth fairy, the grandparents or from doing chores, gets divided among the three containers.
“Talk about the benefits of saving up money to buy something special, rather than spending it all right away,” she said. “And it’s a perfect opportunity to teach about the importance of donating money to help those less fortunate or to causes they care about, such as protecting animals or the environment.”
This is also a good time to teach kids how to count money. Credit cards, debit cards, digital wallets—these are all abstract, and children are concrete thinkers. “It can be hard for kids to grasp how money is a tangible thing,” Maliga said. “Explaining the names and denominations of coins and bills will help kids gain a concrete understanding of the concept of money.”
With a slightly older—or just curious—child, it can be helpful to open a savings account in your child’s name and start explaining what happens when you swipe or tap plastic or a phone to pay for goods.
“You have to explain to them where the money is coming from, where the money is going,” Connolly said. “You’re helping the child make the connection that, when you go to a store or a restaurant, you are using some money, whether it’s a debit or credit card or actual cash.”
This is a great time to start introducing your child to the nuts and bolts of family finances. For instance, let them help plan and shop for family meals, suggested Maliga. Then give them a list of items to shop for, along with a spending limit. You can also do this with clothes shopping and purchasing back-to-school supplies.
A discussion of wants versus needs can get more detailed at this age. You can explain the wide range of choices and price points for, say, a new pair of sneakers. “However, if they’ve saved their own money and insist on buying something you don’t agree with, consider letting them do it,” Maliga said. “Experience is the best teacher when it comes to money, and making some mistakes can teach valuable financial lessons.”
If you’re comfortable and it feels appropriate, young teens can start to be included in decisions that affect the whole family, like whether a vacation is affordable. “Hearing money talked about openly encourages dialogue and helps prevent it from becoming a taboo topic,” she said.
An older teen should be capable of managing their own money, saving toward goals and even being responsible for some expenses. Many older teens will have jobs, or some kind of income. If your teenager has their own car, or shares one with you, you could discuss what car ownership costs and who pays for what (gas, insurance, repairs, etc), Maliga said.
This is also a good time to have the college conversation—not how the GPA is going, but how much college costs and what the family can afford. Have regular talks about parental expectations around living arrangements, student loans and working while in school, Maliga said.
Above all, be honest with your kids. “They need to know before they apply for colleges how much you can pay,” Harzog said. “I wouldn’t say shut their dreams down. But money does talk in these situations.”
When to get your child a debit card
There are two types of debit cards for kids: the traditional kind that their parents have, and ones designed specifically for children. A child-oriented debit card, like GoHenry, BusyKid or Greenlight, will have an app for parents that allows them to monitor spending and drop in money (regularly, or as needed) and an app for kids that lets them save as well as spend—and track both.
Traditional banks are getting into the child debit card market as well. Chase, for instance, offers a Chase First Banking account to the children of Chase customers. The kids must be between the ages of six and 17, and the card allows them to take out money at Chase ATMs with no fee.
That said, many experts recommend giving kids their first prepaid debit card at about 12 years old. Children at that age can grasp that “using the card does have actual financial consequences, even if they can’t physically see the money leaving their account,” said Anna Barker, personal finance expert and founder of LogicalDollar.
Remember, the card is the beginning of the conversation, not the end. “It’s important for parents to monitor this and keep it as an open topic of discussion with their children,” Barker said. “This includes looking for any teachable moments or suggesting how a different financial choice made in their spending could have a different outcome for their finances overall.”
Whatever the age, experts caution against giving a child any type of card before you’ve thoroughly discussed the mechanics of plastic—and only when you feel they’re ready. “There is a disconnect when you use plastic,” Harzog said. “It’s so important that kids make that connection (that using a debit card means spending actual money). They need to make that connection before you ever hand them a plastic card.”
When to get your child a credit card
Some parents may be tempted to give older teens their first credit card—and some older teens may be mature enough to handle one. It all depends on the child.
“Giving a teen a credit card is a great learning experience for many, but should be done with great parental control and caution,” said Robert Puharich, founder of Teen Learner, a financial literacy tool for teenagers. “Teens with jobs and employment are well on their way to responsibility and the lessons of a credit card can go very well with a job.”
Kids under 18 years old cannot get a credit card on their own. They are probably old enough, however, be added to a parent’s card as an authorized user. Just under a fifth of parents have added their minor children as authorized users, according to a 2019 survey by T. Rowe Price.
Thinking about it for your family? Here are some points to consider:
- Is your credit up to it? Make sure you have your own finances in good shape before you bring your kid onboard. “Adding teens on a parent’s traditional credit card could also be a great way to build a teen’s credit if the parents have a history of paying the card on time,” said Courtney Hale, founder of Super Money Kids, a Nashville-based company focused on increasing children’s financial literacy. If, however, parents fail to make payments on time, adding a child as an authorized user could hurt their credit, Hale said.
- Is your child up to it? You can have two children, raise them in the same house with the same rules, yet one is ready to responsibly handle a credit card at age 16 and the other isn’t. Can this particular teen be counted on to follow rules you lay down? If the card is for emergencies only, do you both agree on what an emergency is? “They don’t all walk at the same time, they don’t all talk at the same time,” Connolly said. “So why would they all be ready to handle money at the same time?”
- Could this be a good teaching moment? Give a (responsible) teen a credit card and you open the door to discussion about credit limits, the importance of paying balances on time, keeping credit optimization low and not spending more than they can afford. “It’s important for teens to learn that borrowing money—whether using credit cards, student loans, or other types of loans—comes at a price, in the form of interest,” Maliga said. “Learning to use a credit card responsibly now can help them avoid costly mistakes in the future.”
The bottom line
Whatever age your child is, be proud of yourself for opening that door and beginning the conversation about money and finances. “As parents, one of the biggest gifts we can give our children is responsible money habits that last a lifetime,” said Gina Grippo-Martinez, wealth adviser at ALINE Wealth. “Consider a solid financial literacy foundation as one of the legacies you are leaving your kids and grandkids. In doing so, you’ll enforce positive change in your family and in the world.”