7 Tips For Talking to Your Kids About Money

Money can be an anxiety-inducing subject for adults, but talking to your kids about it openly from a young age lets them know that it's an important subject they can ask you about. When should you start the conversation? Probably earlier than you think. Even toddlers can understand the basic concept of money: you give money to get things you want or need. And kids around age 5 are old enough to start making decisions about how to spend or save small amounts of money they get for birthdays, holidays, or an allowance.

Explain the difference between necessities (milk, toothpaste, a warm coat) and luxuries (candy, toys, jewelry) and how money must be allocated to needs first. Use real-life examples that kids can understand: "We need a place to live so we have to pay our mortgage, but we only want to go on vacation, so spending money to go to Disney World is a want." Also, teach your kids about delayed gratification. You want a big toy? You wait for your birthday or Christmas, and similarly we have to learn to wait and save for what we want. This is a concept they can put into practice by earning money through chores to save up for a wish-list item.

Talk openly about how your family earns and spends money (i.e. "Mommy has to work to make money for our family" or "we're not going out to dinner this month because we're saving money for our trip next month"). Be sure to present a united front with your coparent and keep money disagreements behind closed doors. Also, avoid expressing major stress or fears about money. Your children are likely to internalize that anxiety and misunderstand what part they play in it.

It's a fairly easy concept for kids to understand that you need money to buy things in life and that you need to work to make the money you need. Share what you do for work with your children; if possible, take them to your workplace so they can picture where Mommy, Daddy, or both go during the day. When work interferes with your time with your kids, be open about that (i.e. "I won't be home when you get off the bus today because I'll be working").

Try to find ways to incorporate lessons about money into your day-to-day life. Since so much of modern shopping and bill paying is done online, it can be harder for kids to see the financial work you're doing. Explain when you're paying bills online, comparison shopping online for items your family needs, or logging into your bank account. They might not totally get it, but they will understand that your family's finances are something that require regular time and attention. Also consider skipping the drive-through ATM and bringing your kids inside your bank to make a deposit or withdrawal with a teller, so they can see how the process works outside of a machine.

Even young kids can pick up on the discrepancies in income among their peers and strangers, and it's good to be honest if your child asks about it. Let your kids know that there are families and individuals who have less money than you and those who have more. Be careful not to use language like "poor" or "needy" that can give a negative connotation to those who have less.

It's good to be honest and up front with your kids about money — even when you're struggling — but keep your messaging at their level, and don't overshare. Similarly, you don't need to tell your kids your exact salary — instead, put it into a context they can understand (i.e. "the average American makes this, and we make a little more than that") — or divulge your family's assets.