It's natural to wonder if our financial behaviors are hardwired at birth or if they are skills we pick up along the way. The good news is that when it comes to money, nurture wins over nature. You have the incredible power to help your children develop healthy habits at any age, and it's never too early to start that journey.
When should you start talking to your kids about money?
The simple answer is that you should start as early as possible. Most of our healthy (and unhealthy) habits around money are formed when we are only a few years old.
By the age of 3, kids can grasp basic money-related concepts like counting and delayed gratification. That means understanding the difference between saving for later versus spending right now.
By the age of 7, the subconscious thought patterns that drive our financial decisions have already been established. At this young age, it's not really about the math. It's about the behaviors, the decision-making process, and the emotions we associate with money.
While adults can always change their habits with a little extra TLC, it's much easier to help kids shape a healthy mindset from the start. Including your kids in regular money conversations sets them off on the right foot.
The buck stops (and starts) with you
Kids are observant. They learn from how you spend, how you behave when making financial choices, and even how you talk about money. This means the most important thing you can do is be a good role model.
Avoid the mistake of ignoring money conversations entirely. The absence of a conversation doesn't lead to healthy habits. Instead, be intentional about what you teach and when you introduce it.
Try scheduling family time once a month to talk about the household finances. This doesn't need to feel like a strict accounting class. You can keep it high-level, such as discussing how much was earned this month compared to expenses like rent, the mortgage, or an upcoming vacation.
Remember that perfection isn't the goal here. The goal is open communication.
Age-appropriate money lessons you can use
To make these lessons stick, you need to tailor the experience to your child's development. A great framework involves five simple concepts: earn, spend, save, give, and invest.
For children under 10 years of age
At this stage, introduce the concepts of spend and save.
Kids under 10 can understand counting and basic commerce. This is a perfect opportunity to provide a small allowance and let them make buying decisions at the store. For example, let them choose a toy or three pieces of candy.
Later on, you can let them choose between saving for a future purchase or spending that money today. This empowers them to practice counting and teaches the vital lesson that money has a limit.
Ages 10-14 (Middle School)
Once they've practiced spending and saving, it's time to add earn and give.
You can provide monetary incentives for chores or work, such as cutting the grass, shoveling snow, walking the dog, or taking out the trash. This introduces the concept of earning money for a job well done.
Don't just pay them and walk away. Talk to them about saving for a specific purchase and explain how spending now reduces what they can save. This is also the right time to discuss giving money to important causes. You might even include them in broader family conversations about volunteering and giving back.
Ages 15-18 (High School)
Now you can introduce investing to round out their financial toolkit.
With real jobs and earned income, teenagers are eligible to invest some of their money. Assuming they are mature enough and you can provide oversight, this sets them on the path to good investing practices.
Try having them invest in companies they know, such as Apple, Nike, or Lululemon (these are examples, not recommendations). They can learn valuable lessons by following these companies and watching how the stock market performs.
You can also look at investing in an index fund, like the S&P 500, to teach the concept of diversifying, which simply means owning many companies rather than just one or two.
A fantastic way to get started is to help them establish a Roth IRA. This teaches the importance of saving for a future that seems very far away. It also gives them the benefit of time. Starting early allows their money to grow for longer, helping them build a nest egg well into adulthood.
3 easy tips to stay on track
Teaching these habits can feel overwhelming, but it doesn't have to be. Here are three tips to make it less stressful.
1. Make it easy
If your system is too complicated, you won't stick to it. Find a simple solution for allowances or incentives that works for your family. You can always make changes over time, but simplicity ensures consistency.
2. Make it part of your everyday life
Include your kids in the regular money decisions you are already making. Since you have to make these choices anyway, use them as teaching moments. Just be sure to give context: explain what the decision is, why it matters, and how you arrived at a smart choice.
3. Let them fail
This might sound counterintuitive, but we learn a lot from our mistakes. It's better to let them make small financial mistakes now while the stakes are low. Coach them through what they learned so they can make a more informed decision next time.
The Facet difference
At Facet, we believe that financial health is about more than just investment returns; it's about your entire life. Our membership-based model provides you with a dedicated team, including a CFP® professional, to help you navigate every aspect of your financial journey.
We don't just hand you a static document. We build a dynamic roadmap that adapts as your life changes - whether that's planning for retirement, managing taxes, or setting your kids up for success. By charging a flat membership fee, our advice stays objective and focused on what matters most to you.
