Getting started with money: Four Pitfalls to Avoid with Kids

There are no rules.

That’s important to remember when teaching children about money. Of course, all parents will approach financial education differently, and no one should feel pressure to cover all the “right” lessons.

That said, if the open-ended approach feels like too much freedom, a good way to start is to teach by doing—or not doing.

Here are four money behaviors that can send the wrong money message to kids:

Instant gratification is always okay.

Impulse buys aren’t evil (sometimes that salted caramel latte is needed while out running errands!). But if done in excess, kids might get the wrong idea. Don’t let children think it’s okay to spend their cash on whatever’s in front of them at any moment.

To help kids understand why they can’t have everything they want, explain that money is limited. For example, if they ask for something immediately, tell them that you won’t have enough money for something else later. By making them choose, they’ll learn to prioritize.

Tell them, “We can’t afford it.”

Even if you can’t afford to buy an item, experts caution against using that phrase as a substitute for saying “no.” Be honest with children. Let them know you aren’t buying that new bicycle because they have one at home that’s less than a year old. Saying, “No, we’re saving for a trip to the zoo next month,” is a great way to let them know that planning, budgeting, and saving are important.

No cash? Just charge it

Using a credit card for a purchase is easy—too easy. If children don’t understand the concept of credit, cards may look like magic money. Pay attention to how quickly you whip out the plastic and explain the importance of paying off credit card bills every month.

Talking about money is for adults only.

Omitting young ones from financial conversations forces them to figure out the concepts on their own. Kids as young as two years old can be given cash to hand over to the cashier when grocery shopping. This will help them understand that you can buy goods in exchange for money.

When they get a little older, try including your kids in conversations about budgets and bills. They’ll become more comfortable talking about money, which may help them manage their own when they get older. Also, seeing how money works will help them understand that there’s not an endless supply of it.

Kids learn by observing. They’re always watching—ready to mimic mom and dad. Just like kids pick up language and values at home, they also pick up money habits. The best practice is to lead by example.