Children and Money, Tips

Tips on How To Talk to Your Kids about Money (ages 0-7)

How To Talk to Kids about Money (ages 0-7) | www.TheHeavyPurse.comI have long believed that kids start forming their money beliefs and habits as young as age three. Our kids are always observing us and learn by mimicking our behaviors and actions. So why wouldn’t they pick up our money habits and beliefs? You are only fooling yourself if you believe they don’t.

This is why I started teaching my girls about money when they were toddlers and free of any money bias. I wanted to help them build a healthy, sustainable relationship with money, where they made confident decisions with their money now and in the future. It’s a gift my father gave me and one I am passing to my children.

Having experienced the positive impact my money conversations have had on my own daughters, it has become one of my life’s passions to help other parents raise financially confident kids. Many are receptive to talking to their kids about money, but sometimes I am meet with fierce resistance.

This resistance generally stems from three concerns:

  1. I have made a lot of money mistakes and teaching my kids about money means confronting my own mistakes and changing behaviors, which I am not ready to do.
  2. I have made a lot of money mistakes in the past, so how can I teach my kids to manage money properly?
  3. Money is a grown-up concern, so let kids be kids. I’ll talk to them when they go to college.

I understand your concerns, but I also know delaying these conversations comes at price—one your kids will have to pay. In a recent article on MSN Money, they shared how many money habits are set by age 7. After reviewing previous studies, behavior experts David Whitebread and Sue Bingham of the University of Cambridge concluded that money habits are typically formed early in childhood.

“The window is zero to 7,” said Guy Shone, research director for the British government’s Money Advice Service, which published the study. “It’s very hard to reverse those habits later in life.”

We need to start talking to our kids about money today.

How to Talk to Your Kids about Money

Money has been a taboo topic in homes for too long and it’s time to break this cycle. Today, I am going to focus on very young kids that fall into the 0-7 age group.

Give Money a Purpose through Goal-Setting

I taught my girls every time they earned or received money they had three choices to make:

  1. You can save it for something special later.
  2. You can spend it on something right now.
  3. You can share it with someone you love.

These form our save, spend and share goals, which is how we give our money purpose. When the girls turned six, they began setting their own personal goals, but we started first with family goals. My husband and I shared with the girls how we planned to save, spend and share our family money. We wanted them to feel highly motivated to help us achieve our goals. Now they understand why we can’t buy them everything they want because it impacts our ability to achieve our goals, which is our top priority. We avoid saying, “No, we can’t afford it” when they get a case of the “I wants” and instead help them understand we’re actually saying “Yes” to our family goals, thus eliminating any feelings of deprivation.

Money Is Earned and Does Not Grow on Trees

These days it can be very common for kids to never see money exchanged for the things we purchase. They see us slide a plastic card and a store clerk hand us a bag full of merchandise. It’s no surprise so many kids think credit cards are free money and wonder why we just can’t slide that plastic card and buy them whatever they want.

For many years, I used to receive strange looks from cashiers when I’d go shopping with Lauren and Taylor. Whenever I’d slide my credit card, I would ask the girls, “Who pays for this when Mommy slides this plastic card?” They would respond, “You do!” I would then ask them, “How do we get the money to buy these things?” They would answer, “You work real hard!”

The girls didn’t automatically realize this on their own. I told them. And then I asked them again and again until the answers were drilled into them. They know there is no credit card fairy. They know that even though there is no exchange of money that Mom and Dad still pay for everything we buy and that we work hard to earn the money to buy those things. They know we choose to use credit cards for our purchases (for reward points) and as they grew older we explained how we use them to our advantage without creating any consumer debt.

Be a Good Financial Role Model

Be aware that your kids are observing and learning from you regardless of whether you are consciously teaching them. So watch how you talk about money. Do you speak about it in a positive manner? Or grumble about not having enough or someone having too much? What are your actions teaching your kids? Do you tell your kids to not tell Mom or Dad about a purchase you just made? Or tell them credit cards are bad then pay for all your purchases with a credit card?

Your words and actions matter and carry a lot of weight. So be mindful of your behavior and help your kids develop a positive relationship with money. It will be one of the greatest gifts you give them. In The Penny Club E-Workbook, I go into more detail on setting goals, handling “I want” and being a good financial role model.

Next Monday, I will share how to talk to kids, ages 7-12 about money and ways to reframe some of their money beliefs and habits.


September 4, 2013  •  55 Comments  •  Children and Money, Tips

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  1. Wednesday, September 4th, 2013
    My kids are learning all of these things! Right now I need to teach my four-year-old that playing a claw game to try to win stuffed animals is not a good investment!
    • Wednesday, September 4th, 2013
      LOL! Good luck! A stuffed animal has to be a good investment, right?! In a seriousness, I know you and Greg are doing a great job teaching your girls about money so by the time they are 7 - they will be pros.
  2. Wednesday, September 4th, 2013
    Following these tips has done SO much for our kids. Now, instead of saying "Can I have....?" they say, as our 7 year old son said last night, "I need to earn some cash - I'm clean out of it except for my tithe and my savings!" Halleluah - success! :-)
    • Wednesday, September 4th, 2013
      I love it, Laurie! My girls are the same way. Now instead of asking me to buy things they see in the store, they ask for ways they can earn more money. It feels so good and I'm glad you're kids get it - thanks to a little help from Mom and Dad!
  3. Wednesday, September 4th, 2013
    Great stuff Shannon. Kids are at their most impressionable, for both better and worse, when they're young. They're building the foundation for who they will eventually become and it's so important to start these important lessons early. Just talking about money and allowing them to make decisions are critical to helping them understand its importance and how to use it.
    • Wednesday, September 4th, 2013
      Absolutely, Matt. Kids are so impressionable and we are not always mindful of our words and actions around them, assuming they are too small to pick-up on the things we say and do. Just seeing their parents have a good relationship with money and make smart choices goes a long way.
  4. Wednesday, September 4th, 2013
    Some great information here that cannot be stressed enough. Good money habits start young. I really like the last point made as a lot of the best lessons are driven home if the parents are good financial role models. A good source for teaching kids about money that I have found is which looks at 20 lessons/concepts over five age groups.
    • Wednesday, September 4th, 2013
      Thanks for the link, James. I will definitely check it out. Most parents don't think about being financial role models but we are. Kids get their introduction to money through us and we need to set a good example. Thanks for stopping by and commenting. I appreciate it.
  5. Wednesday, September 4th, 2013
    That's really interesting about the 0-7 year time span, but it makes sense when you think about it - I think that's why some encourage learning two languages (or maybe more) when kids are young, so it make sense to have them learn financial literacy early on, as well! I caught a "Wife Swap" episode in passing where there was a really financially put-together family and one swimming in debt, and the latter had the same mentality as #3 (that kids are too young). That family learned from the financially literate family, though it was interesting how they kind of portrayed/edited the financially literate family in a somewhat negative tone, as well (that, essentially, they're no fun). I do think editing had a lot to do with it, plus they were strict with their kids in general (i.e., they weren't allowed to have friends in the house), but they kind of made it seem that financially secure = boring when really it's not.
    • Wednesday, September 4th, 2013
      I wish I had seen that episode. I agree editing probably played a huge role in how the financially literate family was portrayed. Plus there is a stereotype that being financially responsible means boring. So not true! We're proof of that - right?!?! But I see that all the time. People thinking budgeting and taking charge of their finances means the end of fun. In my opinion, it's the exact opposite. Now the true fun begins because you take the time to figure out what you truly want and do it without creating debt. Fun and freedom is a win-win in my book!
  6. Wednesday, September 4th, 2013
    We are trying to teach my daughter (2 yrs old) about money, but she doesn't understand a lot about it yet. I think talking about it now will help us discuss it more easily in the future though.
    • Wednesday, September 4th, 2013
      That's great, Nick! At her age, she don't understand much but she is definitely picking up your emotions around money. Plus, by making money a comfortable, normal conversation now means it will be even easier as she grows older and can more fully understand what you are teaching her. The girls constantly surprise me with the offhand things they remember me saying and doing from when they were younger and I'm sure your daughter will be no different.
  7. Wednesday, September 4th, 2013
    Great post Shannon! I know it can be easy to give into those concerns, but the key is to focus on what that decision will do for your children and not allow it to hold you back. The not being able to afford is a big one as well, and can be easy to fall into, thus why establishing those goals is huge.
    • Wednesday, September 4th, 2013
      It is easy to give in to those concerns but our kids are worth overcoming our fears and concerns. You don't need to be a finance expert to talk to your kids about money. One of the reasons I start with goals is because it's an easy place to start and something everyone can got motivated around.
  8. Wednesday, September 4th, 2013
    Money talk 0-2 yo: "do NOT put the coins in your mouth!" haha.
    Joking aside, very true that most habits come from an early age so better start talking about good financial habits as soon as possible.
    • Wednesday, September 4th, 2013
      LOL! That is an important lesson, Pauline! :) And after you teach them not to put the coins in their mouth, then you can move on to how to use those coins instead.
  9. Wednesday, September 4th, 2013
    Great tips here, Shannon! I have yet to broach the topic with my 3 year old, but I will :)
    • Wednesday, September 4th, 2013
      She's at the perfect age to really start having these conversations and understanding them at a very basic level. Keep them simple and upbeat and you'll both have fun learning about money together. :)
  10. Wednesday, September 4th, 2013
    “The window is zero to 7..." And this is true for so many more things than just money. At these ages kids learn about love, security, respect, obedience, authority...I could go on and on. If we as parents buckle down and do the hard work in these years, I have to believe the teen years will be less difficult to manage. That's what I'm trusting in.
    • Wednesday, September 4th, 2013
      I agree wholeheartedly, Brian. It's such a young age but they are like sponges and it is our best time to influence them ... on basically everything! It all ties together and puts them on the path to becoming loving, compassionate, and successful adults. And my fingers are crossed too that by doing all of this now - the teens years will be a bit easier! :)
  11. Wednesday, September 4th, 2013
    Such good advice! We started watching a great TV show a few years ago about money and debt (and how bad it can get) when my oldest was 12 and youngest was 5! It made for some really interesting discussions. A lot went over their heads, but they saw some key things: that money does not grow on trees, you have to earn it and it may mean sacrificing some things; and that being in debt is SO not something you want to experience as it causes a lot of stress and family problems (The show is a Canadian one called "Til Debt do us Part")
    • Wednesday, September 4th, 2013
      That sounds like a wonderful program. It's true some concepts go over their head, but they pick up a lot too. It's great the talked about it afterwards too so you can really drive home some of the key messages and answer any questions they had. I find kids are really eager to learn about money because they recognize at a very young age the power money has. So let's show them how to utilize that power properly! :)
  12. Wednesday, September 4th, 2013
    I try to talk about everything from money, to body parts, to boys so that it becomes familiar to talk about things rather than having any taboo topic. Our daughter turns 7 next year, and I think she already understands saving up for a big expense, even if a big expense to here is a trip to the Disney Store. She also asks lots of questions, sometimes not at the most appropriate time, but I guess that comes with the territory.
    • Thursday, September 5th, 2013
      That's a great idea, Kim. The more we talk about topics that are traditionally uncomfortable for parents and kids, the easier it becomes. :) It sounds like your daughter is getting the hang of money, which is great to see in someone so young.
  13. Thursday, September 5th, 2013
    I think keeping the lessons simple is key. At age six your kid is not going to understand exactly how the stock market, mortgages, and interest work. But they can definitely start to understand the value of a dollar and how money works in it's simplest form. I seriously can't wait to revisit all these blog posts when I have my first kid!
    • Thursday, September 5th, 2013
      Exactly, DC. Keep it simple and consistent and as they grow older, then you can start adding the more complex topics. You'll be a great dad and I bet your mother and mother-in-law are just as anxious for you to become a dad too. :)
  14. Thursday, September 5th, 2013
    I have 2 kids in this age bracket and I plan on using your great tips Shannon! I especially like the credit card idea and talking about how that whole dealio works - I think as of right now, they definitely think I have fairy in my back pocket.
    • Thursday, September 5th, 2013
      Thanks, Kyle! We sometimes laugh at the cute things kids say about credit cards but the problem is when we allow them to continue believing that credit cards are free money until adulthood. Let me know how it goes!
  15. Friday, September 6th, 2013
    You are absolutely right! We have to let kids have hands on experience with things. It's understandable that we need to "let kids be kids" but the truth is... they usually want to know what we're up to. They want to be included. We have to start early while they think mom and dad are still "cool."
  16. Friday, September 6th, 2013
    I love your save, spend and share lessons you teach. Those are lessons that all kids can relate to and it is an easier way for them to learn about money at an early age. I think when parents first hear "teach you kids about money" they think about their income, bills and investments. But that is not what you kids need to learn. When they are young they simply need to learn, as you mentioned, that money doesn't grow on trees, and that when they begin to have their own money, saving, spending and sharing are good ways for them to manage it.
    • Friday, September 6th, 2013
      Exactly, Sicorra! For whatever reason, we automatically think of more complex money topics that are inappropriate for very young kids. THe girls have responded well to the lessons and sets a great foundation for more complicated financial topics.
  17. Friday, September 6th, 2013
    These are easy to use tips that make sense! Thank you! The modeling behavior is so easily overlooked. If kids see you go on shopping sprees for entertainment they are taking it in big time. If they see you shopping online for entertainment, they will follow that example as soon as they are able. If they see you researching a purchase a lot before buying something, they will learn that too!
    • Friday, September 6th, 2013
      Thanks, Maggie! We are modeling behavior whether that was our intention. And just a simple explanation helps kids understand what we are doing. Otherwise it does look like we buy everything we want, etc.
  18. Corina Ramos
    Friday, September 6th, 2013
    I have to admit Shannon I was one of the parents who believed teaching young children about money as young as three wouldn't sink in their tiny, beautiful minds. But the more I read your posts, I'm starting to see where you're coming from.

    My kids are older now but I have talked to my daughter about teaching my grandson about money. He's only 21 months but pretty soon the time will come and I'd like her to teach him at an early age.

    Thanks for the tips! Hope you had a great Friday! Have an awesome weekend!
    • Friday, September 6th, 2013
      I think it's a common belief, Corina. One I thought as well until I realize how many of my client's beliefs started in their childhood. I'm glad you're talked to your daughter about teaching your grandson about money. It will definitely beneficial and it's fun - really!! :) You have a great weekend too!
  19. Friday, September 6th, 2013
    Love this! We just started a reward chart for my 5-yr-old. It's helping her keep up with her chores, and understand money a little. After she makes a dollar, we talk about if she wants to buy something small, or save up for something bigger. She's slowly learning that A) everything she asks for costs money and B) that saving her money can yield her something that costs more.
    • Friday, September 6th, 2013
      That's fantastic, Corinne! Those are exactly the lessons she needs to learn and it's great you've already started helping to think about how she wants to use her money.
  20. Saturday, September 7th, 2013
    There are so many life lessons to be noted from here. I'm a believer of early learning. The earlier you start them with valuable lessons the better! Thanks for sharing.
    • Monday, September 9th, 2013
      Thanks, Marissa! I agree - the earlier we can instill good money habits in our children - the better. There are a lot of emotions around money and unfortunately many kids adopt and carry forward the more negative beliefs.
  21. Saturday, September 7th, 2013
    I totally agree with this, and it surprises me that people would admit they have money problems that they aren't willing to work on for their own sake and their children's sake. Blows my mind. Luckily they have you to offer rock solid evidence of the importance of teaching kiddos about money early on. I think if I was at the cash register when you did your spiel with your girls about where the money comes from when you pay with a credit card I'd start clapping and cheering! So funny and spot on!
    • Monday, September 9th, 2013
      I think children are an excellent motivator to get your financial house in order. The hard part is many people are simply unaware that carry unnecessary and sometimes significant consumer debt is dangerous. Debt beyond a mortgage and maybe a car loan used to be quite rare. Now days it's commonplace. I'd cheer too if I someone making sure their kids knew credit cards didn't equal free money! :)
  22. Saturday, September 7th, 2013
    I learned the lesson of saving money at an early age as well. When I had to save up to buy malibu barbie. There wasn't a chore or job too big and I cherished the doll because I knew how hard I had to work for it.

    Thanks for sharing,

    • Monday, September 9th, 2013
      That's great, Nicole! It does feel great when you can use your hard-earned money to buy something you really want. I noticed with my own girls they take more time figuring out how they want to use their money and appreciate the toys so much more.
  23. Sunday, September 8th, 2013
    Great tips for kids. We started pretty early with age-appropriate money discussions, how to shop wisely, why saving is important and not going in debt even more important. My husband even began talking with them at a young age about how to invest money. Now that they are older, I am starting to see the results. I took my teen boy clothes shopping recently at Kohls - he headed straight to the sales racks first! Found a few items, even showed me the prices of some great deals he found. My youngest, a pre-teen boy, is always on the look-out for a sale for the stuff he wants. So it can work!
    • Monday, September 9th, 2013
      It absolutely can! And it's so much fun when you see that hard work pay off and your kids making good money decisions.
  24. Wednesday, September 11th, 2013
    Wonderful post and so true.

    I know it's seen as 'bad' to talk about money with your kids and, as you said, it's wrong keeping them into dark, especially now, when it all seems so easy with the credit cards. When I was younger at least I'd see my folks come back home with a small stack of money and was able to see how it gets smaller as we'd pay for all the utilities, food etc. Now, the 'credit card fairy' (love the expression) can really prevent kids from understanding that we don't make money in sleep and that the 'plastic money' is actually hard worked money.

    We're not yet parents (will be in 5 months), but we do plan to discuss openly with your child about this. Even if she'll be too small to understand too much, at least she'll hear us talk about saving, about prioritizing our expenses, about budgeting and keeping off debt. As she'll grow we'll be able to help her understand more and also teach her how to handle her own money.

    I'd rather have a teen who's making some mistakes with the money and not an adult child who drove herself into bankruptcy, just because mom and dad didn't want to 'upset' her with grownup talk :D
    • Wednesday, September 11th, 2013
      Thanks for stopping by and commenting; I truly appreciate it! Money conversations are so important and I'm glad you plan to on talking to your future child (congrats!) about money. Seeing you make smart choices and have a positive relationship with money has a significant impact on their beliefs and habits. It isn't always easy watching the girls make a mistake but I'm with you - I'd rather deal with a money mistake now than when they are an adult and dealing with far larger sums of money.
  25. Wednesday, September 18th, 2013
    Thanks for such a great post! I already talk to my 3 year old about money. I tell her that mummy has to work and I earn money by working. When we go to the shop, I let her handle change and pay for small items. Sometimes she'll ask for a new toy and I have to explain that mummy can't afford it right now and the fact that they cost money. I need to watch the sort of things I say about money though!
    • Wednesday, September 18th, 2013
      Thanks! It's great that you are already talking to your daughter about money and helping her understand that money isn't "free" but you work hard for your money. Yes, we do need to be careful of our language around children because they can be very literal. When you say "we can't afford it" they may start to worry about whether you have money for food, etc. We've all been guilty to falling back on that phrase, but I try to make a conscious effort to avoid it.
  26. Carter Langley
    Wednesday, October 16th, 2013
    I support teaching children early on about money. I do not think our formal educational system does enough and as you indicated, children do form their ideas and understanding early based on what they are exposed to so building a good foundation on money and money management is so important and will only benefit your child as they grow up.

    I especially like that you include "sharing" and not just saving and spending. Instilling the concept of giving to others is very important for our young ones to learn.
    • Shannon
      Wednesday, October 16th, 2013
      Thanks, Carter! It is so important to talk to kids about money and young kids understand more than we often think they do. Learning how to handle money properly from a young age sets them up to make good money decisions as adults. Sharing is very important in our family and it makes me very proud how well my girls have embraced sharing their money, clothes and toys with others.
  • 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