Key Money Concepts to Teach Kids

The vast number of books and other resources devoted to helping parents teach their kids about money suggests that when it comes to this topic – as with all things in parenting – there’s more than one sound way to get the job done. What is more certain is precisely what children need to know and understand about money and finance. Here we’ll take a look at some foundational financial children should understand before they head out on their own.


It’s OK to Care About Money

Person taking care of budget and money
A lot of people like to use the phrase “money doesn’t matter”, but perpetuating this idea in your kids is a lot like refusing to admit that there is no Santa Claus. The fact is if kids don’t learn to care enough about money to earn it, save it, invest it and spend it with some care, parents simply aren’t setting them up for success in life. This doesn’t mean that your kids need to be preoccupied with money or becoming rich; they just need to understand that finances are a fundamental aspect of adult life and as such, they deserves thought, care and attention.


Money Is a Tool

While your kids should understand that managing their financial affairs is an important responsibility, anxiety, fear or obsession are not emotions you want them to associate with money. Although it often gets wrapped up in a lot of sticky emotions, money is nothing more than a tool, and it can that can be used to achieve a lot of things, depending on how it’s wielded. Just like an education is important for children, it’s no substitute for their ability to think, reason and generally find a way to make the world work in their favor. Education, like money, is a tool that can help your children make their way in the world, but neither one gets anyone very far without some common sense.

Money Is Finite – For Everyone

Many parents are all-too-familiar with how easy it is to run up against the end of a budget, yet many children have no concept of money’s finite properties. Although nothing has really changed from the days when people kept their fortunes under a mattress or buried in the back yard, banks and credit cards help to perpetuate the idea that when mom and dad run out of money, they can just go and get more. Many people are uncomfortable discussing their earnings with their children, but open and honest discussion in this area can be an important way to get kids thinking about money in more concrete terms – because money is concrete, despite the fact that it is now saved and transferred digitally between banks. Providing a regular allowance and allowing kids to budget and save for the extra things they want is also a great way to reinforce this.

(Almost) Everything Has Monetary Value

My four-year-old nephew recently informed me that the cookies we were eating did not cost money because “mom made them”. I explained that, in fact, the oats, the butter and the sugar in the cookies (not to mention the time it took to bake them) all cost money, but he was, understandably, confused that the magical transformation of ingredients to cookies was not much different than buying them in a bag at the store. Although a four-year-old may not be ready to understand it yet, by elementary school, children should have a sense of the fact that almost everything has monetary value. I say almost everything because, yes, there are some very important , intangible things in life that cannot be monetized. However, any smart, empathetic kid will eventually come to understand this, too, especially if they are able to have this type of discussion with their parents.

Time Is Money

This is a cliché for a reason and it is probably the most important financial concept in terms of helping children grow into adults with a healthy approach to finances. In essence, time and money are interchangeable; if you work more, you’ll have more money, but you are essentially selling time you could spend with family, friends or on personal pursuits. Similarly, if you spend money now rather than saving it, you are trading the interest you could earn on that money for the immediate utility of the object you are buying. So, because both money and time are finite, a big part of the lesson here is understanding that it’s important to find a balance between the two.According to the 2011 Teens & Money Survey conducted by Charles Schwab , 59% of teenagers believe that they will handle their finances better than their parents. Unfortunately, this statistic looks less optimistic when you consider that only about 30% knew how to balance a checkbook or manage a credit card, and only 17% could define a 401(k). While many people are uncomfortable about discussing their finances, it’s crucial that parents take the time to do so with their children – and do it often.

After all, if what parents really want for their kids is a happy, successful life, money will inevitably play a role in achieving that.