How and When to Talk to Kids About Money

Deciding how and when to teach your child about good money habits can be tricky. It’s best to start the conversation early and meet children at an age-appropriate level.

One way to think about such a big topic is by breaking these habits into four main categories—earning, borrowing, spending and saving, and financial decision making. From there, you can find opportunities in your daily life to speak openly about money and create “teachable moments.”

Earning

Whether as a parent, partner, or caregiver, understanding how money is earned in a household is key to many family conversations.

• Age 3–5: Explain how and when they can earn money (i.e., allowance, from gifts).
• Age 6–12: Identify jobs or tasks that children can do to earn money and learn the difference between a wage and a salary (in relation to allowance).
• Age 13–21: Calculate the future income needed to maintain a desired standard of living and the impact of working a part- or full-time job.

Borrowing

While unmanageable debt is something we would all like to avoid, borrowing money can be a recurring financial event throughout life. Whether it’s borrowing money from parents for a small purchase as a child or applying for a car loan for the first time, understanding borrowing is an important contributor to financial health.

• Age 3–5: Describe the difference between borrowing and owning and explain why it is important to return borrowed items.
• Age 6–12: Identify situations when people pay for certain items in small amounts over time and summarize the benefits and disadvantages of using credit.
• Age 13–21: Describe various ways to borrow money, the importance of building a credit history, and college financing options such as student loans.

Spending and Saving

One of the keys to financial health is understanding the concept of putting aside the income needed to make purchases related to both needs and wants. Talking about both spending and saving as one topic can be helpful so family members understand that in order to spend, you need to save.

• Age 3–5: Set a savings goal for a specific purchase.
• Age 6–12: Create a weekly savings plan, explain how savings is important to meeting long-term goals, and consider opening a savings account.
• Age 13–21: Explain concepts such as investing, compound interest, and inflation. Create a plan to prioritize expenses, manage spending, and meet goals.

Financial Decision-making

In addition to talking to your family about big financial decisions, such as making a large purchase or contributing to a savings account, this is a skill that can be developed through modeling positive financial behavior. As a member of any family, doing your part to make responsible choices can have a profound impact on others.

• Age 3–5: Help a parent/caretaker make a decision about when (and when not) to spend money on a purchase.
• Age 6–12: Consider the consequences of spending decisions.
• Age 13–21: Discuss how individual responsibility for financial well-being will change as life circumstances change.

Opportunities for Family Financial Conversations

There tend to be lots of opportunities built into life lessons and big events that happen naturally in life. Just as it is important to discuss certain financial topics with your family, it is also a great idea to use these natural opportunities to foster positive financial habits in kids.

Here are some ideas for age-appropriate opportunities to work on building financial skills.

Age 3–5:

• Identifying and learning the value of coins and bills
• Sorting money (for spending and saving)
• Depositing and withdrawing money from the bank
• Learning rules and expectations regarding shopping (paying for purchases)
• Comparing costs to determine if something costs more or less

Age 6–12:

• Opening a savings account (depositing money and monitoring interest)
• Earning and spending an allowance
• Creating a budget for a purchase that requires saving

Age 13–21:

• Saving for college
• Saving to live on your own
• Applying for and paying student loans
• Buying a car
• Building credit history

There’s never a wrong time to start teaching children good financial habits. Don’t be afraid to speak frankly with your kids about money and plan your conversations with children to be timely and appropriate.

Opening a savings account is a great way to build experience with saving. With First Interstate’s Youth Savings program, young savers can open a Regular Savings account with a lower account opening amount and no minimum balance until age 24.

Open a Youth Savings account online.

The youth program will be applied automatically based on age; clients under the age of 18 must have an of-age owner/signer on the account.