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How to Explain Money to Kids

Money is a pretty complex concept, if you think about it. Just ask any average elementary schooler. In spite of its inherent complexity, money is something everyone needs to understand, and the sooner you grasp the intricacies, the better. We recommend talking to children about money at a young age, to set them on a journey to financial well-being sooner rather than later. Ready to start the conversation? Here are three simple starting points to get the discussion going.

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Explain that Money Is a Tool
If you ask them, a lot of kids might say that money is something they collect, save, spend, or trade for other things they want. And while that may not capture the whole of our complex currency system, it’s true — right on the money, you might say, for explaining it to kids. Trying using simpler terms like these to get started so you relate to them on their level.

Consider Giving Your Kids an Allowance
An allowance is a great way to teach kids the value of a dollar. Some parents relate chores directly to an allowance to teach them about earning money, while others keep allowance separate from chores to focus more on money management. Whatever you decide to base an allowance on, it’s a great way to teach kids about saving and spending.

Stress the Importance of Planning
Let your kids know that you put a lot of thought behind the spending and saving that takes place in your household. Most of us after all, do not have an endless stream of income. Share your spending and saving choices with them, at the appropriate level. Let them know you’re making conscious decisions.

Any honest conversation about money will help your kids begin to grasp the concept. Give it a try! And let them see you spending and saving real dollar bills and coins so they begin to get a real, hands-on understanding.