What beliefs and values are you passing onto your children about money? 

Think about this: in your child’s formative years, they will pick up money habits and ideas that will stay with them for life. 

While the overall culture shapes their money beliefs, you as their parent have more influence than you might imagine (even if your kids are older).

Here are five fundamental money lessons that every child needs to know:



1. Instill a sense of financial purpose. While it’s good to teach your kid good saving habits, nothing will help them make it a lifelong habit like teaching them the reason they need to save. Show them that you’re saving money for a vacation and let them save money for something they want, like a book, premium sneakers, or a bicycle. Depending on their age, it’s easiest to grasp savings by seeing cash getting deposited into a shoe box, for example. 
2. Explain to them that money is emotional. By instilling your child with the knowledge that money is emotional, they will be prepared to regulate things like impulse spending later in life. Offering your child an allowance is a great way to help them learn how to plan and feel the impact of impulsive spending. And, if you say or do say something impulsively or regretfully, own it and use it as an opportunity to be vulnerable with your child. Say, for example,“I got reminded of my father when I yelled at the store clerk for the high prices.” Or, “I overreacted when the stock market decreased today; we’re actually fine.” 
3. Steer them clear of a scarcity or fearful mindset, especially one that says people need to compete for resources. Instead, tell them that the economy thrives when people do their best work and create value for others; creativity and knowledge are limitless resources that can be applied to any field or industry.
4. Explain that one day, they’ll need to earn money for themselves. It’s a gift to your child to share this. It’s surprising how many parents don’t explain this to their children, maybe because we’re so focused on trying to earn a living ourselves. However, kids need to be instilled with the early belief that one day, they will be capable of earning money. It also helps to let them know how much work it takes to earn a livable income so they can take on productive habits early in life. 
5. Practice what you preach. Your child will internalize your actions even more than your words. It’s important to show them your confidence in your ability to earn, save, invest, and give money wisely. Showing them is the best way to communicate your values. Model money behaviors that you want them to cultivate - share with them that you were tempted to buy something but realized that you didn’t need it, tell them about a purchase that you feel really good about, or the time you bought something impulsively and never used it. Share that you’re spending within your means and not only will it encourage you to live within your means if you aren’t doing so already, but you’ll also help nurture in them one of the best possible money practices they’ll have in adult life.

Charitable gifts are also a great way to teach your child about money. Tell them what you’re trying to accomplish with your gifts and ask them if there’s something they’d like to support. 

You can also teach your child about financial limits by giving them a set spending amount when you go on vacation. This way, they’ll learn that if, for example, they spend their money at a tourist shop, they’ll have less money to spend at the amusement park later on. You can also bring cash to the supermarket and have your child keep track of how much is being spent and the tradeoffs between more expensive packaged products and healthier options.

What’s important is that your child has positive associations with money. Tell them about the magic of money and how anyone can trade with someone on the other side of the world in exchange for currency if they don’t a tradable good that the other person wants. They don’t have to speak the same language or know anything about each other, but the exchange is still possible and desirable for both parties because of the magic of money.

Finally, talk to your child about what it means to have ‘Enough'. Let them know that some people have less (especially outside the U.S.) and some have more, but that there are enough resources to earn enough money for food and shelter, and that it’s ok to be ok with what you have. It’s better to be a content person with few resources than an unhappy person with a lot of resources. Some adults, just like kids, always want more and are never satisfied, while others are satisfied with what others would consider little. How would you prefer your child to be when they grow up?

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I’ve been a financial advisor for over thirty years, co-founding the wealth management firm Abacus, and was one of the first to apply mindfulness techniques to the profession. Check out my website for more on how to build a better relationship with money.