Career & Finance

How a Child’s Relationship With Money Affects Their Future

Source: Rawpixel
Source: Rawpixel

I still remember when my mother took me to open my first bank account as a young girl. I had been baby-sitting for a few months and up until then had been keeping my money in a piggy bank, as do most 11-year-olds. But now, I was ready for something more—something more secure. I stood in the bank feeling so proud and accomplished at the idea of having my own safe space to save my money. Turns out, that decision my parents made at such a young age had a big impact on my relationship with money in the future.

I have always been a saver vs. a spender, and I attribute some of those habits to my parents. So I have started teaching my 3-year-old daughter about money too: how objects cost money and that money must be earned, saved, and spent well. It’s not easy trying to teach such a young child about the idea of what money is, but I want to make sure to get started young with my daughter. And I’m not alone.


Parents Know Teaching Their Kids About Money Is Important

In a recent survey done by fintech company Greenlight, 93% of teens believed they need financial knowledge and skills to achieve their life goals, and 97% of parents agreed. Learning and practicing smart money habits like budgeting, saving, and investing at a young age helps kids learn lifelong financial skills.

In the same study, it was shown that half of parents (50%) said that the most important financial skill for their children’s future is how to budget and spend wisely, and 35% of teens agreed it’s #1. How to save money was cited as most important by 32% of teens.

An article on CNBC by Jessica Dickler also noted that teaching children about financial education pays off in the future and can have a good impact on college financing behaviors, better credit scores in the future, and lower debt. Teaching children about money from an early age can also have positive impacts on various aspects of life—a recent study suggested that financial understanding at a young age can even have an impact on romantic relationships in adulthood.

Jennifer Seitz, a Certified Financial Education Instructor (CFEI) and Educational Content Lead at Greenlight, the family fintech company on a mission to help parents raise financially smart kids, is here to help. Seitz shared some tips on how to teach children about money, how parents can be conscious about talking about money around their children, and how to help children start smart money habits.

Meet the expert
Jennifer Seitz
Certified Financial Education Instructor and Educational Content Lead at Greelight
money habits

Source: Andrea Piacquadio | Pexels


Start by Explaining the Difference Between “Wants” and “Needs”

One of the early lessons parents can teach children about money and choices is the difference between wants and needs. Of course, teaching this to children can be a challenge, but it’s very important to understand the difference between wants (like going to the movies) and needs (essentials like food and clothing).

“Both wants and needs have a place in a budget, and the key is in the balance,” Seitz said. “While dinner is a need, expensive takeout may not be the smartest option. These are the ongoing conversations where you can discuss what is necessary and what is additional for your family.”


Be Conscious About How You Talk about Money

Whether or not done intentionally, how parents speak about money around their children can have a significant impact on their children’s financial understanding. So it is important that while the topic of money can and should be discussed around children, it’s essential to know how to talk about money.

Seitz said that discussing money early on and not shying away from conversations when they are interested will help kids establish a positive money mindset. “Because of the technologies we use daily, many kids don’t see the physical money used for purchases,” Seitz said.

“Kids are always observing your behaviors, so get in the habit of explaining moments out loud, like what trade-offs you’re making to purchase items or what the overall cost is. Show the thought process for money decisions, like how you’re choosing the best price at the grocery store or choosing not to get something today to save up for a fun treat later. Demonstrating your own healthy money decisions is the best way to make sure your kids will, too.”

Parents should also steer clear of fighting about money in front of their children. Money is an everyday part of life, and between rent, mortgages, bills, grocery shopping, and more, spending money plays an essential part in how we live our lives. Of course, money can create many conflicts, but try to not discuss any money troubles with kids in earshot.


talking about money



Help Children Build Smart Money Habits

Just as my parents opened a bank account for me at a very young age, Seitz said getting children involved in hands-on experience with money can have a positive impact on them. “Parents can use Greenlight, the banking app for kids and teens, to introduce earning and managing money,” Seitz said. “For example, parents can use the chores and allowance features in the Greenlight app to assign weekly or one-time chores and have the option to automate allowance or pay their kids only once chores are complete.”

This is a great incentive for children to learn the basics about money, like the fact that you have to work for it and earn it. “With chores and allowance, kids can make the connection that ‘if I do this work, then I’ll earn money.’ Once kids begin managing money, they can learn to save and spend wisely,” Seitz said.

Seitz also suggested setting savings goals with your kids to help them set money aside for something special while still spending within their means. Kids can set a goal and put money aside as often as they want as they work toward this goal.

Something I’ve started doing with my 3-year-old daughter is letting her pay for things (even though it’s with my money at the moment). When we are shopping, I give my daughter money to pay so she can begin to associate the idea that to purchase items, we need money for them. That way, she can understand items don’t just magically appear. It’s one small step I’m helping her take toward building her own healthy money habits.

What You Need to Know About Talking to Your Kids About Money
Click to Read