Young mother teaching her daughter about savings with a piggy bank and savings jar.

From Pennies to Principles: How to Approach Money Discussions with Children

October 10, 2023 | Modified: October 31, 2023

Money plays a pivotal role in our lives, shaping our choices, opportunities, and overall well-being. Teaching children about money isn’t just about helping them understand the value of different coins and bills; it’s about instilling essential financial principles to serve them throughout their lives. From pennies to principles, this financial education journey is vital for every child’s future.

Why Discussing Money Matters

Many parents feel uneasy about discussing money with their children. They might worry about burdening their kids with financial concerns or believe they are too young to understand complex financial concepts. However, avoiding these discussions can leave children unprepared to navigate the financial challenges they will face in adulthood. Here’s why discussing money matters:

  • Life Skill Development: Money management is a critical life skill. By teaching children about money from a young age, you empower them to make informed financial decisions as adults.
  • Building Financial Literacy: Understanding money isn’t just about counting coins; it’s about financial literacy. Teaching kids about budgeting, saving, and investing helps them become financially literate.
  • Instilling Values: Money discussions also provide an opportunity to instill values like responsibility, delayed gratification, and generosity. These values are crucial for developing a healthy relationship with money.
  • Avoiding Money Mistakes: Without financial education, children may be more likely to make costly mistakes with their finances in the future, such as accumulating debt or failing to save for retirement.

Approaching Money Discussions with Children

Now that we understand why discussing money with children is essential, let’s explore five effective ways to approach these conversations:

  1. First and Foremost, Start Early: It’s never too early to teach children about money. Even young kids can grasp basic concepts like earning, saving, and spending. Use simple language and concrete examples to make the information accessible.
  2. Make It Practical: Use everyday situations to teach financial lessons. For instance, when shopping, involve your child in making purchase decisions. Explain the difference between needs and wants and discuss budgeting for family expenses.
  3. Set an Example: Children learn by observing their parents’ behavior. Be a good financial role model by demonstrating responsible money management, like budgeting, saving, and avoiding unnecessary debt.
  4. Allowance and Saving: An allowance can be a valuable tool for teaching money management. Encourage your child to allocate a portion of their allowance to savings. This can help them understand the concept of delayed gratification and goal setting.
  5. Financial Goals: Finally, introduce the idea of financial goals to your child. Discuss short-term and long-term goals, like saving for a toy or college. This helps teach them the importance of planning and setting priorities.

Teaching Children the Art of Saving

To impart the importance of saving to children, parents can employ various strategies:

  • Savings Jar: Give your child a clear jar and label it their savings jar. Encourage them to put a portion of it into the jar whenever they receive money. This visual representation of saving progress can be motivating.
  • Goal Tracking: Help your child set achievable savings goals. Whether saving for a new video game or a special outing, having a clear goal gives purpose to saving.
  • Interest Education: Explain the concept of interest to older children. Show them how money can grow over time when saved in a credit union or bank account or invested wisely. This can be a powerful motivator to save more.
  • Matching Contributions: Consider matching your child’s savings contributions as an incentive. For every dollar they save, you match it with an additional dollar. This can teach them the concept of employer-matched retirement contributions in the future.
  • Delayed Gratification: Encourage your child to delay gratification by saving for a bigger, more meaningful purchase rather than spending their money impulsively on smaller items.
  • Open a Credit Union Savings Account: When your child is old enough, consider opening a savings account in their name at your local credit union. This will introduce them to the concept of earning interest on savings. Tap to learn about the various savings options at Benchmark Federal Credit Union. 

Start Teaching Your Child About Money Today 

Undoubtedly, learning how to approach money discussions with children is a vital aspect of parenting. It’s a journey that begins with pennies and evolves into a foundation of financial principles. Parents can equip their children with the knowledge and skills needed to make wise financial decisions by starting early, making money discussions practical, and emphasizing the importance of saving. From emergency funds to financial independence and goal achievement, saving is the cornerstone of financial success. Instilling this value in your children is a gift that will last a lifetime. Above all, please don’t shy away from money conversations; embrace them as opportunities to shape your child’s financial future.

Learn more about saving in our blog “How to Maximize Your Savings with a High-Yield Savings Account.” 

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