How to Talk to Your Child About Money

As parents, we want to prepare our kids for the future, and teaching financial literacy to kids is one of the essential life skills they’ll need. But let’s be honest: talking about money with your child can feel awkward, overwhelming, or even unnecessary. You might think, “They’re too young to understand,” or, “I’ll teach them when they’re older.” Trust me, I’ve been there too. However, starting early can make a world of difference in shaping their understanding of saving money, budgeting, and making responsible financial choices.

Why Is It So Hard to Talk About Money?

Money is one of those topics that can feel taboo, even within families. Many of us grew up in households where money wasn’t openly discussed—or it was a source of stress and anxiety. So, when it comes time to teach our own kids about it, we might not know where to start.

For me, the turning point came when my 5-year-old asked, “Why can’t we buy a new toy every time we go to the store?” At that moment, I realized I didn’t have a clear, age-appropriate way to explain the concept of budgeting. I didn’t want to say, “Because I said so,” but I also didn’t want to overwhelm him with details about our family finances. Sound familiar?

Another challenge is that kids are naturally curious and observant. They see us using credit cards, tapping phones to pay, or talking about “not having enough money,” and they start forming their own (often inaccurate) beliefs about how money works. If we don’t guide them, they’ll fill in the blanks themselves—and those early misconceptions can stick with them for years.

Why Talking About Money Early Matters

Teaching financial literacy to kids doesn’t mean sitting them down for a lecture on compound interest. It’s about weaving small, meaningful lessons into everyday life. Studies show that children’s money habits start forming as early as age 3, and by age 7, many of their financial behaviors are already set. If we wait until they’re teenagers to teach them about saving money or budgeting, we’ve missed an important window.

Plus, talking about money can help kids feel more confident and less anxious about it as they grow up. Instead of seeing money as a mysterious or stressful topic, they’ll learn that it’s simply a tool we use to achieve our goals.

3 Real-Life Examples of Teaching Kids About Money

Now, let’s get into the practical side of things. Here are three everyday scenarios where I’ve had to talk about money with my kids—and how I handled them.

1. The Grocery Store “Why Can’t We Buy Everything?” Moment

Picture this: You’re at the grocery store, and your 4-year-old spots a display of colorful snacks they absolutely must have. You say no, and the inevitable meltdown begins.

Here’s how I approached it differently the second time this happened. Before we even got to the store, I explained that we had a list of things we needed to buy and a certain amount of money to spend. I gave them a little “job” to help me stick to our budget—like finding the best deal on apples or crossing items off the list. When they asked for something that wasn’t on the list, I reminded them, “We’re using our money for the things we need today. If it’s something you really want, we can save up for it together.”

This turned what used to be a power struggle into a teaching moment. My child started to understand that money isn’t endless and that we have to make choices about how we spend it.

2. The Piggy Bank Dilemma

When my 6-year-old got a birthday card with $20 in it, he was thrilled. But then came the big question: “What should I do with it?” Should he spend it all on a toy? Save it? Donate it?

We sat down together and talked about the three jars we use at home: spend, save, and share. I explained that money can be split into different purposes—some for fun, some for bigger goals, and some to help others. He decided to put $5 in the “spend” jar, $10 in the “save” jar (he’s saving for a LEGO set), and $5 in the “share” jar to donate to a local animal shelter.

By giving him a simple framework, I helped him feel empowered to make his own decisions about money while learning the importance of balancing short-term and long-term goals.

3. The “Money Doesn’t Grow on Trees” Conversation

One day, my 7-year-old overheard me saying, “We can’t afford that right now.” He looked at me with wide eyes and asked, “Are we poor?” I realized he had no idea what that phrase actually meant—it just sounded scary to him.

Instead of brushing it off, I took the opportunity to explain that “can’t afford” doesn’t mean we don’t have money. I told him, “We have money, but we’re choosing to save it for something more important, like our family vacation.” I also reassured him that we always have enough for what we need, like food, clothes, and our home.

This conversation helped him understand that money is about choices and priorities—not just about having or not having enough.

Common Mistakes Parents Make When Talking About Money

If you’re feeling a little unsure about how to start these conversations, you’re not alone. Here are some common “money talk” pitfalls to avoid:

Avoiding the topic altogether: It’s tempting to think your child is too young to understand, but even preschoolers can grasp basic concepts like saving and spending.
Overloading them with information: Kids don’t need a crash course in economics. Keep your explanations simple and age-appropriate.
Saying, “We can’t afford it,” without context: This can make kids feel anxious or insecure. Instead, focus on teaching them about choices and priorities.
Using money as a reward for everything: While occasional incentives are fine, tying money to every chore or behavior can create unrealistic expectations.
Not modeling good financial habits: Kids learn by watching us. If they see us impulse-buying or arguing about money, they’ll pick up on those behaviors too.

Final Thoughts: Start Small, Stay Consistent

Talking to your child about money doesn’t have to be complicated or intimidating. Start small, use everyday moments as teaching opportunities, and remember that it’s okay to admit if you don’t have all the answers. The goal isn’t to create little financial experts overnight—it’s to help them develop a healthy relationship with money that will serve them well for the rest of their lives.

So, next time your child asks, “Why can’t we buy that?” take a deep breath and see it as an opportunity. With a little patience and practice, you’ll be teaching financial literacy to kids in a way that feels natural and effective.