I often ask adult investors about their values surrounding money. Almost every time, the values, fears, and habits of adults are rooted in how money was discussed in their childhood homes. Some of the habits I find to be very healthy, but oftentimes, investors need support in adjusting their habits to meet their financial goals.
Frankly, it’s much easier to teach healthy habits from the start than to relearn and readjust down the road. Here’s how to teach young children (ages five to twelve) healthy money habits.
Encourage Curiosity About Money Questions
Usually, children become aware of money sometime between ages five and eight and will ask a question like, “Why do we need money?” or “Where does our money come from?” Instead of telling them not to worry about it or avoiding the question, try to ask them what they think. Once they have tried to figure it out for themselves, you can give your honest answer without judgement.
An approach like this can signal that it is safe to come to you with money questions and that money does not need to be a taboo topic.
Gamify Budgeting and Saving
Once I started to have awareness of money, I received a cash allowance each week for the approximate cost of school lunch. For extra chores, babysitting, or watching the neighbors’ dogs, I received additional cash that I could use for fun purchases or saving for the future. It was my own money that I had final say over. If I wanted a toy or a game, I would need to come up with the funds, which made me understand the value of the time or work I put in.
In the age of digital payments, I’ve noticed many parents have strayed away from cash allowances and chosen to just pay for each thing a child wants or needs. While cash is no longer king, there are other ways to teach some of the same lessons from my youth. You can use an app designed for kids or keep track of their digital money somewhere visible, like on a whiteboard, so they can easily track how much they have without them needing a phone or bank login. Then, you would act in the place of a bank to make purchases.
Lead By Example
If you have poor habits, even if you don’t think your child is listening, you can impact how they think about money. When I come across investors without significant retirement savings, I often find that their parents also did not put much stock in the importance of saving for retirement. They say things like, “I want to work forever,” “I’ll probably die young,” or, “My dad’s still working so I probably will at that age too.”
Instead, model good habits. Show that you think about your own future so that they are encouraged to think about theirs. When asked, talk about how you dedicate a portion of your paycheck to investments, insurance, retirement, taxes, and debt repayment before doing something like a fun purchase.
Talk Through What They See In The World
You are not the only one influencing your young child. They may hear things in the media they consume, from teachers, friends, and other relatives.
Let’s say their friend buys them a treat and mentions their family being rich. This could come with some excitement from receiving the treat but also confusion about what it means to be rich.
Again, start with curiosity. Ask how it made them feel and what they think it means to be rich. If your child believes that being rich simply means having more stuff, it’s an opportunity to broaden their perspective.
Emphasize that amount of money does not make one family better than another and that there are many ways to be rich. You can have a wealth of time, love, happiness, and things you enjoy doing. This can be a way to address comparison gently and guide toward healthy feelings around money.
Don’t place your own judgement or personal bias on the other child. You can simply say that it was nice of their friend to share with them, and the important thing is how we treat people. And if being treated makes your child uncomfortable, this can open a conversation around boundaries.
Finally, wrap with your own family’s values. If generosity is a value, share that. But if saving money and spending wisely are important to you in that moment, share that.
Avoid Bringing Adult Money Problems Home
Some events will come up in your life around money that cause great emotional distress. Aging relatives may need paid round-the-clock care, you may make a large investment that becomes worthless, an inheritance may become contentious between relatives, a divorce may result in what feels like an unfair division of assets or alimony payment.
If something like this comes up, it can be all-consuming. It is essential not to bring these adult money problems home to young children. They will likely not understand, and it could result in fear, resentment, or anger associated with money.
Conclusion
Healthy money habits are shaped through everyday moments, conversations, and examples. By staying open, intentional, and values-driven, you give your child the tools to feel confident, thoughtful, and grounded in their relationship with money for years to come.
This informational and educational article does not offer or constitute, and should not be relied upon as, tax or financial advice. Your unique needs, goals and circumstances require the individualized attention of your own tax and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors, LLC and its associates and affiliates do not provide tax or legal advice or services. Equitable Advisors, LLC (Equitable Financial Advisors in MI and TN) and its affiliates do not endorse, approve or make any representations as to the accuracy, completeness or appropriateness of any part of any content linked to from this article.
Cicely Jones (CA Insurance Lic. #: INSERT NUMBER) offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN) and offers annuity and insurance products through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC). Financial Professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. Any compensation that Ms. Jones may receive for the publication of this article is earned separate from, and entirely outside of her capacities with, Equitable Advisors, LLC and Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC). AGE-8957984.1 (6/26)(exp. 6/30)