How to Respond to Kids’ Money Questions

Children are sponges, continuously absorbing information as they interact with the world. They don’t always understand or know how to interpret what they see, hear, or experience. Parents of young children are well aware of this, especially when they’ve been asked “why” more than twenty times in the past hour. Now and then they’re going to have questions about money.

Occasionally, your kid’s inquiries may have clear, simple answers – “Can I have a bike?” But many of their questions will be far more difficult – “How much do you make?”

First and foremost, it’s essential that we talk to children about money personally, rather than assume they’ll learn what they need to know elsewhere.

Think back, how many “money messages” did you encounter that weren’t taught directly. Chances are good that when left to your own observations, you internalized quite a few myths and misconceptions. Even when you “got it right”, your newfound knowledge was likely incomplete.

One thing we’re sure of, what we learn about money as kids impacts our beliefs, behaviors, and financial outcomes in adulthood. Sometimes the connection is obvious, other times it’s more subtle.

When Should We Start Talking about Money?

At what age does a child’s financial education begin? Long before they bring it up. Kids’ first “questions” aren’t usually spoken. They learn through imitation (and interpretation) from a young age. They quickly begin to adopt behaviors they see. Your financial habits will speak louder than any of your words of wisdom.

Are you being a good role model?

Researchers at the University of Michigan found that children as young as five already had distinct emotional reactions to spending and saving money, and that these translated into actual, real-life spending behaviors.
Spendthrifts and Tightwads in Childhood:
Feelings about Spending Predict Children’s Financial Decision Making
Craig E. Smith, Margaret Echelbarger, Susan A. Gelman, Scott I. Rick

Parents are often uncomfortable talking about money in general, and even less so discussing the topic with their children. Many are unsure about what they should and shouldn’t say. For instance, should parents disclose the ins and outs of the family budget, if asked?

Remember, children will draw conclusions whether you answer their questions or not. In addition to it being important to encourage and reinforce curiosity, it’s crucial to serve as a reliable, credible source.

Although it may be difficult, some days, try to be grateful that your kids are asking questions, regardless of how challenging they are. Embrace your part in their educational journey and learning process.

By teaching kids about money, from a young age, we can get intentional about the information they’ll internalize, to ensure they develop a strong foundation for lifelong financial health.

How to Raise Financially Savvy Children (Lessons for Every Stage)
Chris Elle Dove

Sure, you could just answer the question asked. Or, you can open the door to larger conversations that will help them develop a healthy money mindset and lifelong financial habits.

Here are a few value tips to help you turn challenging money questions into opportunities for financial education:

Encourage Curiosity

Make sure your child knows money isn’t a taboo topic, that questions are appreciated. No matter what I’ve taught (from social dance or sociology to financial literacy), who I was presenting to (children, teenagers, retirees), or how large or small the audience (from stadium seating to one-on-one), someone inevitably said, “This may be a dumb question, but…” I always let them know that their question was not only valid, but willingness to ask was a valuable and essential part of the learning process.

Dig a Little Deeper

Before you go into another well-crafted lecture on a concept, try to figure out what prompted their curiosity in the first place. A child may ask the same question “Are we rich?” for a host of different reasons (you just bought a new car, for the sake of comparison, or because they’re trying to understand how money effects them personally). Throw out a few follow-up questions to tease out their underlying motivations and/or assess their current level of knowledge:

“What prompted you to ask?”
“Did money come up at school today?”
“What do you believe makes a person rich?”
“Do you think being rich means having a lot of money? If so, how much is a lot?”
“Do you think being rich means having expensive things? If so, what types of things”

Open ended questions tend to be more thought provoking. Once you’ve asked one, be patient, give them time to think. With more complex or abstract topics, you may want to continue to prompt them, until you’ve gotten to the second or third response. Don’t be afraid to revisit a subject later that day (or week) once they’ve had more time to digest.

Be Honest Without Oversharing

Telling children the truth doesn’t mean complete transparency – revealing too much, or disclosing what isn’t yours to share. You don’t need to tell them exactly how many dollars are in the bank account, and I don’t advise revealing your ex’s net worth.

Sometimes, you’ll want to feed a child’s curiosity to cultivate critical thinking or share key financial concepts, other times will call for direct answers that address only what’s been asked.

The next time you hear “Can I have this?” resist saying you can’t afford it just to avoid conflict. To begin with, they’ll realize you’re not being completely honest when you buy that $7 coffee an hour later.

Not only is it okay to say “No”, but kids need to hear it. Setting limits and enforcing healthy boundaries gives children a chance to regulate their emotions, practice self-control, and become more resilient.

If you’re struggling financially and actually don’t have the money, express it in ways that won’t create undo financial anxiety or stress. Just let the kids know it isn’t in the budget right now. You may also want to share that you’re prioritizing getting out of debt or that you’re being frugal today in case something unexpected comes up in the future.

Redefine & Reframe

There are multiple ways to honestly respond to a question about money.
Revisiting “Are we rich?”, potential answers include:

“We have enough money to cover everything we need and some things we want.”
“Some people have more than us, others less. I’d say we’re comfortable.”
“We’ve worked very hard, and spent wisely, to create our version of a rich life.”
“We’re surrounded by people we love. I’d call that rich.”
“We believe building wealth (saving and investing for our future) is more important than having expensive possessions.”
“We don’t typically think of ourselves as rich.”

As Morgan Housel, the author of The Psychology of Money: Timeless lessons on wealth, greed, and happiness points out, we tend to think of someone who has a mansion or luxury car as rich, whereas true wealth is invisible – it’s all of the money we didn’t spend and, instead, set aside for the future.

Find Answers Together

Your child may ask a money question you either don’t know the answer to, or feel you have a good grasp on, but have no idea how to explain.

No worries! You can find out together. Seeking knowledge with your child lets you demonstrate ways to find (quality) information.

You’re also letting them know that:

No one knows everything, and
It’s okay to say you don’t know the answer

While searching, you might discover that someone’s already created a kid-friendly, fun, and memorable answer to your child’s question.

givE yourself time to prescreen

With the vast amount of information out there, it might be a good idea to search alone before “searching together”. This will let you bypass content that isn’t relevant, accurate, or age appropriate.

While I was looking for a video to link here, I searched for the difference between wants and needs. I found a couple great videos that didn’t use US currency (which would open another set of questions), some that had good content but used language I considered too advanced, and others that just made me yawn. One video said food was a need (necessary for survival) while displaying a triple burger and large fries. It was concerning…

Before you know it, they’ll be old enough to do research on their own. When I was little, my parents regularly sent me to look something up in the dictionary or encyclopedia set, even though they knew the answer. Soon, I was looking up words and articles without being prompted.

Go Beyond Dollars and Cents

Just as non-monetary talks can instill valuable money lessons (ex: delayed gratification), financial questions offer a chance to teach values and other life skills.

Use money to teach your kids about:

Math – How much change will I get if I buy this?
Patience – Saving for wants can take (quite a bit of) time…
Gratitude – If you appreciate what you have, you’ll always feel rich (consversely, you’ll never have “enough” if you focus on what’s lacking).
Generosity – It’s important to give back and pay forward.
Critical thinking – Evaluating options, understanding how larger economic forces influence personal finance.
Responsibility – Every family member should contribute to the household through chores.

The whole point of the allowance system is to let them experience handling money, setting goals, spending money, and saving money. […] Allowance—when separated from chores—teaches kids to battle their own emotions, weigh their own priorities, and experience the rewards (or consequences).
Allowance for Chores: Do or Don’t?
YNAB

Money conversations will come and go, but the skills and values discussed can last a lifetime. When you regularly have financial conversations – whether about spending, saving, or investing – you won’t just make your kid financially savvy, you’ll send a confident young adult into the world. One who’ll make thoughtful choices, rise to challenges, overcome obstacles, and see the big picture.

Talking to Kids about Money is Vital

Your child is bombarded with messages about money in the media. They’ll notice classmates have far more or less than they do. Some of their friends’ families will have radically different perspectives of and approaches to finance.

Whether or not we’d like to admit it, childhood experiences have a tremendous impact on our financial outcomes in adulthood.

Young adults are faced with extremely consequential financial decisions the second they leave home – when they’re offered credit cards and/or student loans.

Figuring out how much to pay for a college education is one of the biggest financial decisions people make in their lifetime, and parents often leave the final call to a 17-year-old who has never purchased anything more expensive than a bicycle.
Ron Lieber
The Opposite of Spoiled:
Raising Kids Who Are Grounded, Generous, and Smart About Money

We must develop our children’s financial literacy, ensure they see budgets as a path to financial independence rather than something restrictive, and are wary of taking on too much debt. This will prepare them for future money decisions, large and small.

Embrace Money Questions

Our kids learn from every trip to the grocery store, money conversation, and decision about saving vs spending they make (or witness). Although we can’t control the specifics of a child’s financial future, we can influence their overall perspective of money.

Financial inquiries are the perfect opportunity to shape the way your child sees money – not as the solution to every problem, or something that inevitably leads to greed, but as an important tool that will influence many aspects of their future.

Use money conversations to help your child align their spending and core values, and establish healthy money habits to build wealth. Ensure they understand, from an early age, the importance of living within their means and preparing for the future.

Demonstrate, through both words and actions, how to be the financial architect of your ideal life!

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