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Tips to Talk to Your Kids about Money (age 7-12)

How To Talk to Kids about Money (ages 7-12) | www.TheHeavyPurse.comLast week, I shared with you that kids form their money habits and beliefs by age 7. Our window to influence their relationship with money is small, and we need to start talking to our kids about money much earlier than many parents realize. I’ve already shared some tips on how to talk to kids under age 7 and today I’m going to focus on kids in the 7-12 age group.

4 Important Money Lessons for Kids (ages 7-12)

As adults, we handle money every day and being able to make smart decisions with how use our money is critical to our long-term financial well-being and ability to find money happiness. If we can instill good money habits in our children at a young age, then we have set them up for success as adults, which is the goal of every parent.

Learn How to Differentiate Between a “Want” versus a “Need”

Kids notoriously want everything they see, but they don’t need everything they want. And sometimes, upon further reflection, they even lose interest and no longer want the once highly coveted item. One of the most important lessons you can teach your children is to differentiate between a “want” and a “need”.

I would start by simply asking them if they know the difference between a “want” and a “need”. Their answers may surprise you and can create a lively discussion. One fun way to continue teaching your kids about wants and needs is to take them shopping with you. As you add things to your cart, play a game and have them decide whether it’s a want or a need. With older kids, you can even break it down further. Food is a need. But some things, like organic fruits and vegetables, I am willing to splurge on while other things I’m not. Share with your kids how you decide what you’re willing to spend extra on and why.

Success Tip: Be careful that you don’t make your kids feel bad about wanting things. We are always going to find things we want. The trick is to learn where “wants” fit the into our overall priorities and avoid going into debt for them.

Set Save, Spend and Share Goals

Now that your kids understand the difference between a “want” and a “need” it’s time to have them set goals around their wants. This not only helps give their money purpose but also teaches them how to prioritize. Start by having your kids create a list of things they want then narrow the list down until they create their save, spend and share goals.

Success Tip: When your kids find things they want, ask them if the item is more important to them than their goals. Explain how buying it now means it will take longer for them to achieve their goals. In most instances, when confronted with a choice, the girls chose to honor their goals instead of whatever just caught their eye.

Budget so You can Truly Get What Matters Most to You

Budgets have a bad reputation among many. Some say they are restrictive, but I believe they give us freedom. The freedom to choose how we use the money we have. Most kids leave home without any real experience with budgeting—this is a mistake.

The girls started managing their back-to-school budgets last year. It was a great experience for all of us. It really helped them learn how to flex their decision making muscles, which is exactly what I wanted them to do. Lauren also managed her birthday party budget last year. She saw firsthand the costs that go into hosting parties, learned how to make compromises and most importantly saw that she could have a fabulous birthday party even on a budget.

Success Tip: Help your kids develop a pro-budget mindset and see that it can give them freedom. Have them own a budget, such as their birthday party, and allow them to list all the things they want at their dream birthday party. Most likely they will be over budget, which is good. Now help them figure out what is the one thing that they truly want and then start eliminating the things that really don’t matter to them.

Money is Earned, Not Just Given

I’m not a big fan of traditional allowance. In our home, I do not pay the girls for making their beds and cleaning up after themselves as that is part of their normal responsibilities as family members. However, I do believe children need a way to earn money.

In our home, I post a weekly job list and the girls pick which jobs they want to do. They can earn a little or a lot depending how hard they are willing to work. We have weekly paydays where we take out their save, spend and share jars and discuss their goals while I pay them. If they do a poor job, they may not get paid and if they go above and beyond, they could earn a bonus.

Success Tip: Help your kids develop an entrepreneurial mindset. You don’t need to be the only “employer” your children have. From a lemonade stand to babysitting or mowing lawns to creating a product or service, encourage them to find other ways to earn money.

Next Monday, I’ll share some important money lessons for kids ages 12-18.

Shannon

The Heavy Purse Store is now open! My new downloadable Money Club Workbooks—based on age or level of expertise—are now on sale. Each workbook provides five targeted lessons to help you grow Money Smart Kids. Please check them out in The Heavy Purse Store.

September 9, 2013  •  53 Comments  •  Tips

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  1. Monday, September 9th, 2013
    We have "earned" income or allowance as well, Shannon. It works really well for us in teaching the kids that some responsibilities are just part of life (as in cleaning up after yourselves) and some are for earning money to live. Great post - thanks!
    • Monday, September 9th, 2013
      Thanks, Laurie! It's worked really well for us too. Nobody pays me for making the bed! :) The best part is the girls are always looks for opportunities to earn money, and I'm glad they understand that you have to do good work to earn money for the things you need and want.
  2. Monday, September 9th, 2013
    Great post!
    Our kids are only 2 and 4, so we're not quite to this level yet, but we're still teaching them money lessons. Or trying, at least. Both of my kids know that they have a college fund and they seem really proud of it!
    • Monday, September 9th, 2013
      I love that your girls already know that Mom and Dad are putting away money for college for them! Although you're not actively teaching them about budgeting yet, the fact that they see you do it and talk over purchases with Greg is such a big influence at that age, even if they don't fully understand it. They know you are thoughtful with your money.
  3. Monday, September 9th, 2013
    I like the picking from the job list to earn money, brilliant idea. I think that is a great idea for other parents to get their children learning about how hard it is to earn money. We have a friend who has a daughter who could learn this way as she is very spoiled.
    • Monday, September 9th, 2013
      I believe that our girls have a wonderful life, but I also don't want them to feel entitled. I want them to feel grateful, appreciative and value hard work. The job list has been incredibly successful for us and give the girl some control over how much money they have. They can choose how many jobs to take; how well they do the job, etc. They can also choose to do nothing and earn nothing too.
  4. Monday, September 9th, 2013
    As soon as I read the want versus need I could hear a kid in the grocery store screaming at his mom, "But I need it !" and looking at a candy bar. Funny how they can twist their words in the hopes that parents will cave.

    I love the idea of having kids manage their own birthday party budgets. Again an easy to understand money lesson that they can relate to while still having fun with it. I think having fun reinforces what is being learned and makes any person, young or old, want to do it again.

    Have a great week Shannon! :-)
    • Monday, September 9th, 2013
      So true, Sicorra! Kids are often life or death with their needs - which is almost everything they want! :) It's why I stress goals so much. Now I have something the girls can compare this "need" against. It didn't always work when they were very young but the interesting thing is they often came to regret not honoring their goal. The excitement over the new toy rarely lasted long and now they had delayed their goal achievement. A good lesson to learn, even though it was hard for Mom to let them make the mistake. :) I think because money is topic that bores a lot of people (not you or I, of course!) parents think money talks will bore their kids to tears. It could, but it shouldn't. I try to make it fun and the girl remain interested.
  5. Monday, September 9th, 2013
    I volunteer from time to time with Junior Achievement and one of the grade levels - I think 1st or 2nd grade - focus on wants vs. needs. It's definitely something that can't be stressed enough.
    • Monday, September 9th, 2013
      Junior Achievement is great. I'm a big supporter too. Differentiating betweens "wants" and "needs" is so important and sooner you can teach the kids the difference and show them how to handle their wants - the better.
  6. Monday, September 9th, 2013
    Great tips, Shannon! I think even as adults, we still have to differentiate between "wants" and "needs". I think it's an ongoing lesson ;)
    • Monday, September 9th, 2013
      Thanks, Mackenzie. Oh yeah, "wants" versus "needs" is something adults battle too! It's always easy to justify a want and turn it into a need. :)
  7. Monday, September 9th, 2013
    I think that's great that Lauren managed her party budget - it really is eye opening how much things add up, so I'm sure that was a great experience for her. If it's not too personal, I'm curious to know what goes into your weekly job lists. B and I were discussing this and agree that daily chores shouldn't be compensated since it teaches kids responsibility and cleanliness, but perhaps "premium" chores could be comped (ha, I think we're putting the cart way before the horse, but it's nice to see where our mindsets are in regard to child rearing :)).
    • Monday, September 9th, 2013
      No problem, Anna. Some of the things on the job list are: cleaning out the litter box every day, sweeping the backyard patio, helping me fold laundry and put it away. Things we consider above and beyond their normal responsibilities and appropriate for their age and skill level. If the task is new to them, they have to observe it be doing first to ensure they can do the job. I think it's great that you and B are already thinking about the future and how you want to raise your kids. It's what will make you two such great parents!
  8. Monday, September 9th, 2013
    Great post. We do a similar thing with a job list - they can pick and choose and earn privileges accordingly. It really resonates with my 11-year old son and he has become quite the earner!
    • Monday, September 9th, 2013
      Fantastic, Kyle! It resonates with my girls too. I think because it empowers them. They can earn a lot or a little and then choose how to use that money. I'm glad your 11-year old is embracing hard work and understands how it correlates with earning money. Great lessons to learn!
  9. Monday, September 9th, 2013
    Very solid post Shannon! I love your last tip! Our oldest is turning six in two weeks (my where HAS the time gone? :) ) and plan on starting her with something like this in the next few months as we want to help get her started thinking more seriously along these lines and thus more entrepreneurially. Kids, especially when younger, are such concrete thinkers that I think something like that could be huge in the learning process.
    • Monday, September 9th, 2013
      Thanks, John! Your oldest is at the perfect age to start earning money. I agree kids are such concrete thinkers and helping them correlate hard work with earning money is such an important lesson. It can be a hard wake-up call for kids who are always handed money when they have to start earning money. Some kids can handle the transition but others really struggle.
  10. Monday, September 9th, 2013
    "...upon further reflection, they even lose interest and no longer want the once highly coveted item." This really rings true with me Shannon! Seems like we experience this at every birthday and Christmas, especially with the younger ones. Kids want stuff...you get it for them...they play with it for a couple of hours...then it sits on the shelf or takes up space in the bedroom, never to be played with again. Would have been better to have never purchased it in the first place.
    • Monday, September 9th, 2013
      We've experienced that too, Brian. It's one of the reasons I always tell the girls to slow down and really think through whether they want something. I have noticed the girls are more particular on how they spend their own money.
  11. Monday, September 9th, 2013
    I'm pretty sure they title should be re-named Tips to Talk to Your Kids about Money (age 7-100). I think I need that lecture from time to time. :)
    • Monday, September 9th, 2013
      LOL! We never stop needing money lessons - no matter how old we are!
  12. Monday, September 9th, 2013
    Want versus need identification is essential. It is so easy for a want to drift over into the need column and eventually get you in trouble financially. Making sure kids at this age grasp this is a great thing. Thanks for sharing.
    • Monday, September 9th, 2013
      You're very welcome! I agree. Understanding the difference between "want" and "need" is a great lesson for kids to learn. It is very easy to justify a want and being able avoid doing this is key.
    • Wednesday, September 11th, 2013
      "Justification of a want" NOT EQUAL "Need". For those who are better at math than the logic of life. ;-)
    • Wednesday, September 11th, 2013
      Agreed! And we have to be honest with ourselves when we are trying to justifying a "want". :)
  13. Monday, September 9th, 2013
    Such great ideas! I too encourage my kids to set aside spending, saving, and charity. I think it's important for them to always think of every dollar as being divided by these 3 important things. I LOVE your idea of the job list! I sometimes get my kids to help with some of my "work work" - like filing. They love being able to earn. But I need more jobs to put on the list. What kind of things do you put on your list where they can earn money (I agree, I'm not paying for bed making or helping out in general)?
    • Monday, September 9th, 2013
      Thanks, Leah! Things we put on our job list include cleaning the litter box, help make dinner and set the table, clean dishes after a meal. We were also clear with the girls what we expect them to normally do - make beds, clean room - as members of our household. The chores on the job list go above and beyond but are appropriate for their age and skill level. They really love earning money and I don't mind paying them for their hard work. :)
  14. Corina Ramos
    Monday, September 9th, 2013
    My kids are teens now but I still have to remind them about needs versus wants every now and then, especially with my daughter and her shopping habits.

    I don't believe in allowances either. They should be cleaning their room and helping out because they are a part of the family.

    I like the idea of giving them a budget to plan their own party, that's a great idea. Thank for sharing these tips Shannon!

    Happy Monday and have a great week!
    • Monday, September 9th, 2013
      I think "wants" and "needs" are always going to be something that we need to stay on top of. :) It's easy to make everything a need, especially when you're a teenager! When kids have fun using a budget then it becomes something fun to do and they are less resistant to budgeting overall, which is a good thing!
    • Corina Ramos
      Friday, September 13th, 2013
      On our way home from school I noticed the message board advertising birthday shout outs and I thought that was the perfect time to bring up birthday parties and a budget.

      My boys are 20 and 19 and doing their own thing as they say but Marisa is the one that is still into all this and at 16 I think she's only just beginning, lol.

      I should have recorded our conversation and how short it lasted. As soon as I said the word "budget" she asked how much and let me tell you she had big money on her mind!

      We had a good laugh because I told her where I was going with it and when she finally got it she cracked up because she said in her head she had gone all out...am I in trouble or what, LOL!

      Happy Friday Shannon!
    • Friday, September 13th, 2013
      I'm so glad you brought up a birthday party budget to Marissa. It's no surprise that she had big plans and the key will be able to help her see that she still throw a fabulous party on a budget. Lauren's original "dream" birthday party plans exceeded her budget too. The fun part was helping her figure out what was the one or two must-haves and then finding great deals for them. You have a great weekend too!
  15. Tuesday, September 10th, 2013
    Great stuff Shannon. I think hands-on experience is really the best tool. Let them earn money and then let them make choices with it, of course with some guidance so they can understand what their choices really are. But there's not much of a better teacher than making your own decisions and facing the consequences.
    • Wednesday, September 11th, 2013
      Thanks, Matt! It's hard to truly understand until you do it yourself, including making mistakes. It isn't always easy to watch them make a bad choice but it's part of the learning process. There needs to be a good balance of leeway and structure.
  16. Wednesday, September 11th, 2013
    This is indeed a great age to start them on budgeting and saving. Plus keeping track of their expenses, which will be VERY valuable as they grow up (most adults who are into financial mess fail to be consistent with their 'spending journal', even if this is one of the best tools for them to really manage the money and understand their problems).

    I can only imagine how the girls managed their budgets and how exciting it was for them to make decisions and also see the results.
    • Wednesday, September 11th, 2013
      Budgeting is so important. Not following a budget definitely gets a lot of people in trouble as adults, but they often fear them or find them restrictive. But if you can show them a different side when they are children and instill the habit, then budgeting is just a way of life for them. The girls really enjoyed budgeting and saw it as a challenge, which I really loved.
  17. Wednesday, September 11th, 2013
    Love this post! Such great tips. I especially appreciate your recommendations to have children earn money. It is so important for our little ones to understand that things are not free and we all have to work to have a great house, car, and other things.

    Karla Twomey
    karla@nomorecreditcards.com
    • Wednesday, September 11th, 2013
      Thanks, Karla! The girls have really embraced earning money and it warms this Mom's heart when the girls ask me for more ways to earn money rather than ask me to buy something they want. They have really begun to understand that you have to work hard to earn money for the things you want.
  18. Wednesday, September 11th, 2013
    These are great suggestions. Growing up, money was always feast or famine. Mostly famine. When I finally started working, I treated money like a scarce resource that would "go bad" if I left it sitting there. I figured that if I didn't "seize the opportunity" to buy what I wanted or needed, I wouldn't be able to in the future. There was no thought process or weighing or pros and cons.

    It sounds like you're giving your daughters a chance to learn how to make decisions and become comfortable with limits. Nicely done.
    • Wednesday, September 11th, 2013
      I think that happens a lot, Lindsey. People remember feeling deprived or fearful of not having enough so now that they do, they spend money without necessarily taking the time to make sure they are using it on what truly matters. I definitely want the girls to feel comfortable handling money and making decisions that honor their goals and values.
  19. Friday, September 13th, 2013
    Excellent advice! I love that you don't put a guilt trip on the kids for wanting something. Planning is an important skill to learn and learning to work for what you want is so important.

    We always gave our kids opportunities to earn money. Like your method, they could choose which jobs to do and how hard they wanted to work. It's an important life lesson!
    • Friday, September 13th, 2013
      Thanks, Maggie! The truth is it's not "wanting" something that gets ourselves into trouble, it's forming the habit or belief that we need to instantly gratifying our "wants". I don't want the girls to feel bad for "wanting" something but to understand where it fits into their lives. I think earning money is so important and is an incredibly valuable life lesson.
  20. Friday, September 13th, 2013
    I think that if children are brought up with a sense of responsibility about money that they will take care of saving as well as feel proud to earn it. I like your ideas a lot!
    • Friday, September 13th, 2013
      Thanks! I think if kids learn to respect money and how to handle it properly as children, it will make a huge difference as adults. You have a great weekend!
  21. Saturday, September 14th, 2013
    Great tips! We've been talking with our kids about money since they were pretty young, going over the difference between needs and wants, the price of instant gratification when you don't have the money at hand. I've even let them buy something that I knew was a waste of money to teach a lesson of making purchases that are worthwhile. One thing I've impressed up them is the "wait a day" approach. If they see something they really think they want, I have them wait a day instead of buying on impulse. If the next day they really still want that item - and have the money for it - then they can get it. They can earn money by doing extra jobs around the house, to learn the value of working to get what they want. My oldest, a teen, has totally gotten on board with it - he's saving up to buy a new gaming system and he's almost there. No need for a yard service in this house when you have a "hungry" teen! My youngest, a work in progress but he is only nine! :)
    • Saturday, September 14th, 2013
      That's wonderful, Carol! It isn't always easy watching them make a "mistake" with how they use their money but it's an important lesson to learn and it's far to better to learn it now when the monetary amounts are relatively small. I think once kids realize they have the power to earn money, which can they be used to be things they truly want, they really start to seek out opportunities to earn more and feel comfortable making smart money decisions. Your son's gaming system will mean so much more knowing all the hard work that went into earning the money for it.
  22. Saturday, September 14th, 2013
    It is great that you motivate them to become entrepreneurs. You also know them better than anyone so you know what they can be good ad and thrive and what would make them miserable. I hated selling lottery tickets for the school and to this day I am still the worst salesperson but I loved baby sitting and was encouraged to find similar jobs.
    • Sunday, September 15th, 2013
      Thanks, Pauline! Absolutely, there are plenty of ways for the girls to earn money. It's just taking the time to figure out, as you said, what they really love to do and do well. I also think once kids start to see the possibilities and earning potential - they get pretty excited to be entrepreneurial. :)
  23. Sunday, September 15th, 2013
    I love all those tips. Age seven is coming up next year, so it's never too early to prepare. I like giving kids some ownership in choosing how to spend money on needs and wants. Hopefully, this next stage will be a smooth transition.
    • Sunday, September 15th, 2013
      Thanks, Kim! I have found the girls really respond well to having more ownership in how they use their money. They are more thoughtful and take their time making decisions. And I love it when they ask "how can we earn more money" instead of wanting me to buy them everything.
  24. Friday, January 2nd, 2015
    For me, I really find it important to start them young. Teaching them great lessons at a young age will only prove to be very beneficial when they grow up with the real world.
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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