07. 01. 2019

Teaching Kids about the Value of Money

There are many reasons why we want our children to enjoy the latest products—toys, technological innovations, fashion, etc. Often we indulge children with things they want before we indulge ourselves, sometimes we defend the situations when the child is excluded from their peer group for not being ‘cool’ enough, and sometimes we want to make up for the time we didn’t spend with our kids. But when there’s a lack of money or a budget priority for some other things, it’s better to stay strong and resist our own temptations and pressure from our children.

Relationship towards money

Children are taught by us how to think and how to understand money, and different financial situations. The daily conversations about our budget, or our sighs over what we can’t afford, develop our kids’ relationship with money. Kids can learn unhealthy love and desire for money as well as a belief that money is something that initiates only quarrels and worries.

Life’s unfairness?

Kids often feel it’s unfair that some classmates’ families can afford more expensive products than theirs can. Listen to their worries, and talk to them about the different financial situations of individuals and families. Explain how and why financial and living conditions not only differ in other parts of the world, but also in your own neighbourhood. Encourage kids to think about how they can be grateful for other things they have besides lots of money, such as a close, happy family, a big backyard to play in, or a special toy that holds a lot of meaning. Try to show children both sides of the coin in every situation; try to show how kids can perceive the value of life through experiences, relationships, and self-understanding.

Be open

Incorporating the topic of money into casual conversation teaches children that finances are important, accessible, and not something to be afraid of. Don’t avoid their questions about money, and don’t pretend that it’s unimportant. Teach your children from an early age that reasonable money handling in a smart and generous way is one of the very important aspects of a successful and happy life. Kids often think that you can get money in a cash machine or that you just show a card to pay for a purchase; it’s very abstract for them to imagine the value of money. Try to pay in cash when you’re with kids, if possible, and explain where the money comes from, what your work is, and talk to them about other ways of making money, such as selling goods you already own.

Introduce a budget

Explain to kids that each month there’s a budget covering items that are necessary for a comfortable lifestyle. Then there’s a part of the budget that’s for extra things like holidays, new clothes, car repairs, etc. Each month you have to decide what to buy and what not to buy. If your kids are understanding the concept of money thus far, you can let them help plan your budget, or even give them their own pretend budget and ask them to list what they would buy with it. The truly rich people are those who don’t spend money unnecessarily and have a well-thought-out budget.

How to communicate with kids about your money situation

If you really don’t have the money for something your child is craving, here are a few suggestions:

  • Let your child put the item they want on a ‘wish list’. The ‘wish list’ can be very general, or it can be for a specific event, such as a birthday or Christmas. This gives you the chance to save up a little more for the item. You get the benefit of teaching your child about delayed gratification, and sometimes kids lose interest in the desired thing after a while altogether.

  • Suggest that your child save up to cover some (e.g. half) or all of the cost of the desired thing, which, like the wish list, teaches about delayed gratification. The saved money can come from gifts, pocket money, chores money, or some other ways.

  • Offer an alternative to what your child wants. For instance, if your child wants to go to the cinema with friends all the time, you could suggest that they can watch a film online and host their buddies at your house. This choice holds a good opportunity to talk about costs, value, and general cost comparison.

‘We can’t afford it’

Expert advice says not to use this phrase around your kids. It could worry children, who might think the family is struggling financially. It can be a kind of stressor for them. You can use a different phrase that’s a little more positive, such as, ‘Sorry, sweetie, but this isn’t a part of our budget this month’, or ‘I like it too, but we won’t buy it today’, or even ‘Your dad and I would rather spend money on the brand new shoes you need for school. Aren’t you excited for new shoes?’ As parents we give the signal that we have the financial situation under control, that we can manage it later, when we plan for it.


Varda Epstein. Why You Should Never Say I Can’t Afford It To Your Kids. Kars4kids smarter parenting.

Bankaroo. Education, kids and budget, teach kids about money. What to Say If You Can’t Afford What Your Child Wants

Peer: What do you say to your kids if you can't afford something?

T. Harv Eker, Secrets of the Millionaire Mind, HarperCollins Publishers, 2005

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