15 Things A Personal Finance Expert Suggests Parents Do To Help Their Kids Be Good With Money

Even if you're not a financial pro, that doesn't mean your kids can't be.

I like to imagine I was raised to be financially intelligent (thanks ma and pa) but now that I have a kid of my own, I was curious what an expert had to say about raising kids to be good with money.

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I write about personal finance and money, so you'd hope I have it together — and for the most part, I think I do 😬. I owe my love of saving money and my abhorrence of debt to my parents who set me up with a bank account at birth, had me get a job as soon as it was legal, and made me save up for the dumb plastic toys I thought I just had to have.

So I chatted with Beth Kobliner, the New York Times bestselling author of Make Your Kid a Money Genius (Even If You're Not).

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Sometimes you've gotta pull out the big guns.

Here are her tips:

1. Start talking about money early on.

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There's a lot of shame, stress, and worry surrounding money, so it makes sense that many parents shy away from the topic. But Kobliner says that to raise financially intelligent kids, you'll want to start talking about money early on.

"And not only should it be early, but financial education also needs to be ongoing. Here’s why: A study out of the University of Wisconsin showed that by age 3, children can grasp basic economic concepts such as value and exchange. And a University of Cambridge survey found that by age 7, many of the habits that help kids manage their money are already set."

2. Show them how money works and teach them the difference between wants and needs.

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The act of trading money for goods and services will be completely foreign to them. They may literally think money, and the things it buys, grows on trees.

"It sounds obvious but young kids also need to know that you use money to buy things. So pull out some coins — don’t forget to discuss how they feel, what they look like, and what they’re worth. Then, go over some essential items your family pays for, such as gasoline, clothes, dinner food, and, yes, treats. This is also a great time to talk about wants vs. needs. We want chocolate milk. We need milk," Kobliner says.

3. Explain to your kids what you do to make money.

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To your kids, you're mom and dad. But when teaching them about money, you also need to explain where it comes from. 

"Point out that to earn this money, people work. Does your kid know what you or your partner do at your jobs? Tell them all about it. What can they learn about neighbors’ and relatives’ jobs? Or those of people around town, like an Uber driver, teacher, or firefighter," says Kobliner.

4. Take them to set up a bank account and explain how banking works.

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When I was a kid, I had a little bank balance book where I could see the sum grow or decline with each babysitting dollar I put in and every withdrawal I made. These days, banking is almost all done online so the logistics of managing money are harder to teach (and to see).

To make the ins and outs of banking real to your kids, Kobliner suggests that you "take your kid to a local bank or credit union to open a savings account." Then, explain how it works. "If your kid is worried about leaving their money there, tell them that the bank has insurance so they will get their money back if it ever goes out of business."

5. Teach them how to wait, which will teach them how to save.

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Learning how to wait for what you want is a cornerstone of saving.

Kobliner says, "The key to building a solid foundation for money skills is instilling the ability to wait. ... For example, if your kid wants a $20 Lego set, explain that while they can buy a bag of chips every day for a dollar, they could instead save that dollar a day and put it toward the goal of purchasing the Lego set. Delayed gratification!"

6. Don't use money as the reason why you won't buy them something.

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When your kid is begging for a candy bar, it's all too easy to say you just don't have money. But Kobliner says that by blaming the decision on a lack of cash, you can confuse your kid (who will likely see straight through the excuse). 

"Instead, be straightforward. Say something like, 'No, I don’t think we need to spend money on that now. Besides, the dentist told us to avoid too much sugar and we’re here for the basics today,'" suggests Kobliner.

7. Review the pros and cons of allowances and do what feels right to you.

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The decision to give or not give an allowance can be a tricky one. Kobliner says, "Personally, I think it’s fine to just give kids a small, age-appropriate amount of money on an as-needed basis instead," but warns that an allowance is "not a financial literacy silver bullet, unlocking all that your kid needs to know about money." 

If you go the allowance route, Kobliner says you should stick to a method called the four C's:

Be clear about what it’s for

Be consistent about giving it

Use cash

And don’t tie it to chores

8. But no matter what, don't tie their allowance to chores.

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That last C (see #7 above) is an important one. 

Kobliner says you should "teach your kids that doing household chores is a part of everyday family life. Research has shown that chores are good for kids because they teach responsibility and the importance of chipping in to help others." She says, "If you tie chores to allowance, that money becomes an external motivator for them — and worst of all, paying for chores can backfire. At some point, your kid may not see the value of making their bed or cleaning the dishes for $5. So keep allowance and chores separate." 

9. Encourage them get a job early, explaining that the money they make is theirs to use how they want.

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One of the best things my parents did was encourage me to get a job early on. Not only did it teach me good work ethic (how to interview, show up on time, stay busy at work, and work with others), but I also learned that by working, I could buy myself whatever I wanted (which was usually candy, TBH).

10. When they get their first paycheck, take the time to explain how taxes work and why putting money in a savings account is smart.

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If your kid is earning $12 an hour and they worked 20 hours, they may be surprised when their paycheck is significantly less than the $240 they expected to be paid. Kobliner says this is a great time to explain how taxes work. 

"When your teen gets their first paycheck from a summer job, explain how it may seem smaller than your kid expected because money is taken out for taxes. That can lead to a discussion of what taxes pay for, such as schools, roads, and hospitals (and Grandma and Grandpa’s Social Security!)."

And while part of the appeal of having a job is the ability to buy what you want, you should explain the importance of putting a portion of each paycheck into a savings account. "Introduce them to the concept of compound interest — how their money not only earns interest, but it also earns interest on the interest. Show how it really adds up. For example, if you save just $100 a year from age 10 to 20, then stop, you will have $50,000 at age 65."

11. If college is part of the plan, start college financial talks as early as eighth grade.

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If going to college is part of your plan, Kobliner suggests you "start college conversations in eighth grade — and make sure you have a dedicated college savings account like a 529. Kids whose parents save for college are more likely to go to college, regardless of how much money is in the actual account."

A 529 is a tax-free investment account that must be used to pay for qualified education expenses, like college. If the "qualified education expense" requirement concerns you, you can check out a less restrictive, kid-focused savings account like the Acorns Early account, which allows you to use the money for any expense that benefits the child named on the account. 

12. Do your best to keep money from being associated with guilt or stress — and be open with your kids about your financial situation (to a degree).

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Money may be a stressful topic for you but you can talk about it with your kids in a way that teaches them it isn't a big, scary topic.

For starters, don't fight over money in front of your kids and "avoid negative talk about how expensive something is or how stressed out you are about affording something. Kids could misinterpret your rants and raves, and conclude that something important like college is such an enormous financial burden that they shouldn’t even bother with it," explains Kobliner.

And when it comes to talking about your own financial situation, she says you should "be honest about your own money history — good and bad — but don’t go into any sordid details. ... It’s good to tell it like it is but you also need to offer reassurance that you’ll all be okay."

13. But keep in mind there are a few boundaries that shouldn't be crossed.

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While Kobliner says you should be open with your finances and financial health, there are some things you don’t need to share with your kids. For example, "your salary, who makes more (you or your spouse), how much you have stashed for retirement, and even how much money you spent on a gift or babysitter."

14. Involve your kids when you purchase big-ticket items.

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It can be helpful for your kids to be involved in purchases, especially big-ticket items like a new car. Kobliner says this will allow them to observe your decision-making process and see your family's priorities and values in action. You might talk through what sort of features your family needs in a car, what things you want, and what budget you have to work with.

Kobliner says that "you can say something like, 'We’re choosing the minivan instead of the SUV because it holds more people and gets better gas mileage.' These become powerful messages to your kid about how your choices reflect your family’s priorities and values."

15. Finally, don't let their gender get in the way of how you talk about money.

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Kobliner says research shows that parents tend to talk about money more with their sons than they do with their daughters — particularly when it comes to investing. 

Because of this, she says, "Boys express more confidence about money. What’s even more alarming is that parents think their sons understand the value of a dollar better than their daughters do. Bottom line: Boys and girls should get the same money lessons."

Do you talk with your kids about money? Share your experiences (like what's worked and what hasn't) in the comments!

And for more stories about life and money, check out the rest of our personal finance posts.