Financial Literacy for Children Starts at Home: How to Talk to Your Child About Money

Most parents dread having “the talk” with their kids. The talk generally refers to the birds and the bees, but there are other subjects parents might shy away from, such as the existence of Santa Claus (yes, Virginia, he’s real) or finances. 

Common Sense Media, a leading source of entertainment and technology recommendations for families and schools, puts it like this:

“One of the toughest jobs of parenting is talking to your kids about difficult subjects. It's hard enough to explain when Mr. Teddy Bear gets eaten by the washing machine. Or how their bike got stolen at school. It feels impossible to put into words the really big issues, such as birth, death, violence, racism, drugs, and other weighty topics.”

With all that’s going on in the world today, there is an abundance of topics you should be talking about. One that’s not often listed, but is equally important, is how to talk to your child about money.

Get the Conversation Started Early

How soon is too soon to talk to your kids or grandkids about money? If they are old enough to ask for a toy or a bike, says the American Banking Association (ABA), they are old enough to start learning financial lessons that will last a lifetime.

David Anderson, PhD, a clinical psychologist at the Child Mind Institute, suggests beginning to talk about money when your child is in second or third grade.

“That’s when most kids’ math skills get to the point where they’re able to understand this kind of arithmetic,” he said.

Talking comfortably about finances is an important part of helping kids develop a healthy relationship with money, notes the Child Mind Institute.

“Talking about money can’t be relegated to a one-time conversation,” money coach Lynne Somerman said. “It needs to be part of the day-in, day-out conversation. As money topics come up and your kids are around, talk about them as openly as you feel comfortable.”

The ABA says the best financial lessons are part of everyday experience. Look for opportunities to talk with your kids about money, read books aloud, and play games that center around spending money wisely. Be open and honest when you discuss your own financial experiences—good and bad.

Where and When to Talk About Money

To help you talk to your child about money, it might be helpful to identify a few places where the conversation would be relevant. Here are some of ABA’s examples of teachable moments to help you get started:

At the Community Bank

When you go to the bank, bring your children with you and show them how transactions work. Request that the manager explains how the bank operates, how money generates interest, and how an ATM works. Ask the manager for a tour, and be sure to ask to see the vault.

On Payday

Discuss how your pay is budgeted to pay for housing, food, and clothing and how a portion is saved for future expenses such as college tuition and retirement.

At the Market 

It’s easy to give clear examples of “needs” and “wants” using different kinds of foods at a grocery store. Milk for strong bones is a need; soft drinks are a want. Explain the benefits of comparison shopping, coupons, and store brands.

After Chores and Allowances

Assign chores and give them a monetary value. Discuss ways to budget and divide allowances. Encourage children to set a financial goal, such as saving for a bike, and figure out how to achieve it.

While Paying Bills

Explain the many ways that bills can be paid: over the phone, cash or check, electronic check, or online. Discuss how each method of bill pay takes money out of your account. Be sure to cover late penalties, emphasizing the importance of paying bills on time.

Using Credit Cards

Explain that credit cards are a loan and need to be repaid. Share how a credit card statement comes in the mail or in email with a bill every month. Go over the features of different types of cards, such as ATM, debit, and credit cards.

Browsing the Internet

While online, explain to your children how valuable their personal information and privacy is to you, to them, and to online predators. Discuss the risks and benefits of sharing certain information. Then, as a family, make a list of rules for keeping personal information safe online.

Planning a Vacation 

Whether you are planning an outing to a local amusement park or a once-in-a-lifetime trip, emphasize the value of saving as a family. Set a family savings goal that involves your children. Figure out the cost and discuss ways everyone can help to reach the goal.

Always encourage your children to ask questions about money. If you don’t know the answer, research it together or ask your banker.

Start Saving at a Community Bank

Creating a savings account is a great way to put financial literacy for children into action. It will teach them about budgeting, saving, impulse control, and delayed gratification.

“We’ll often encourage parents to pay kids a certain amount of their allowance in cash for spending and a certain amount that’s not flexible that goes into their savings,” Dr. Anderson said. 

When a savings goal is reached, he suggests giving children the chance to decide if they would like to use it or keep saving. “Kids can decide when to dip into their savings and when something is meaningful or valuable enough that they want to spend some of the money they’ve saved.”

The Conference of State Bank Supervisors (CSBS) website has a map of the United States listing the statutory requirements for opening bank accounts for minors. Generally speaking, youth checking accounts are only available to children 16 years or older with a parent or legal guardian listed as a cosigner on the account. It’s a good idea to check with your community bank to see how it handles accounts for children under 18. 

Community Banking with Crews

Crews Bank & Trust offers savings accounts for minors. 

Additional Financial Education for Young People

For more information about financial literacy for children, check out the following resources:

• Money Smart for Young People, an FDIC resource
• Family-At-Home Financial Fun Pack from the Council for Economic Education
• Smart About Money from the National Endowment for Financial Education
• The Consumer Financial Protection Bureau describes how you can build your child’s money skills while you read to them. The site also lists more than 20 books, each with a parent reading guide and instructions on how to order the books. 
• My Money Program from the Florida Department of Financial Services, is a comprehensive financial literacy program and resource clearinghouse.

As your children become more sophisticated at handling finances, they may be susceptible to the same kind of scams you face every day. Please keep in mind that the Children's Online Privacy Protection Act (COPPA) gives parents increased control over what information is collected from their children online and how such information is used. This federal law applies to websites and services directed to—and which knowingly collect information from—children under the age of 13.

The Federal Trade Commission, the nation’s consumer protection agency, enforces the COPPA rule. If a site or service is covered by COPPA, it has to get your consent before collecting personal information from your child, and it has to honor your choices about how that information is used.

For example, say your child wants to use features on a company’s site or download an app that collects their personal information. Before any information is shared, you should get a plain language notice about what information the site will collect, how it will use it, and how you can provide your consent.

If you think a site has collected information from your kids or marketed to them in a way that violates the law, report it to the FTC at ftc.gov/complaint.

The Crews Bank & Trust website and online services are not directed to children under the age of 13, nor is information knowingly collected from them.