Communication and Money: How to Communicate with your Kids about Money

Category: Weekly Columns

What are the biggest “problems” in marriages? Kids? Money? Sex? Communication? All of the above? What are the biggest challenges in parenting? Yep, all of the above – except sex, of course, ‘cause we don’t even want to think about that!

How you communicate with your kids about money and what you teach them about money will define their lives. Heck, they define yours? How often is communication or most specifically, poor communication, at the root of any problem you may be having with a friend, spouse, co-worker, boss, or child? Maybe ALL the time?

When you combine both bad communication with bad money habits, you have a recipe for double jeopardy! First, let’s address the bad communication part of the equation. Many parents tend to think that their children will learn by osmosis, that simply because mom and dad may do something a good way that their children will do the same.

Sorry! It doesn’t work that way. You have to educate your children in all behaviors. Yes, modeling is important, but mostly modeling good behavior is just reinforcing what has been taught. Equally, modeling bad behavior might reinforce or encourage bad habits. I’ve written about Parental Hypocrisy, so I’ll let you read that column to learn more on that subject, but suffice it to say that the “Do as I say, not as I do” idea simply does not work!

So, if mom and dad are good savers, good budgeters, and know how to balance a checkbook, that does NOT mean that the kids will just pick it up by observance. They have to be shown and taught. There are many money games available, many online websites that can help, and classes that might offer instruction. But, nothing is better than teaching your kids your best practices when it comes to money.

After writing 25 columns for, I got to enjoy doing lists. So forthwith is a short list of topics, ideas, and suggestions for communicating good money skills and habits to children:

Allowance: allowance should never be an assumption, a given. Allowance should be earned by regular household chores and obligations. If those chores and obligations are not met, there should be deductions to their allowance JUST as there would be if they did not show up for a regular job or did not complete a free-lance assignment-for-hire.

Book Allowance: A separate allowance idea, when kids are beginning to read and especially if they love to read as my boys did for a long time, is to provide a summer book allowance. It should be a weekly amount that is just enough to buy an inexpensive book, but not enough to buy a special book. This then teaches them to save a couple weeks or more of their book allowance to buy the more expensive book. With my boys, the older one “got” that idea sooner than his younger brother. When the younger brother saw the more expensive book his older brother saved for, he then understood the value of saving. Win-win. They learn about money and they’re encouraged to read.

Christmas and Hannukah: Kids need to learn that the world does not revolve around them. So, when these big occasions come around, teach them that some of the presents go to dad and mom, other family members, while some presents/money is allocated for those in need. With Hannukah, it was simple because it’s an eight-day holiday. We designated certain of the days as days for others. While this is not a explicit money lesson, it is one that combines the value of money with the value of giving.

Saving and Delayed Gratification: Everyone, dad and mom included, should know the value of saving and the reward of delayed gratification. Parents can teach both to their children by showing them the things they are saving for – a new car, a new computer, etc. and give them an idea of how they’re saving for such items. Show how a paycheck or a gift of money is put into different places such as for bill paying and for that special item that requires an accumulation of savings. For littler kids, the separate jars idea often works: one jar for spending, one for saving for something bigger, and another for charity/giving.

Banks, ATMs, and Bill-Paying: Let the kids come with you to the bank. Explain what a deposit is. Have them press the buttons on the ATM and ask them how much money they think YOU need for a week’s spending or a week’s groceries. Have them sit with you when you pay the bills. Let them see how much it costs to “run” a house.

Checking the Restaurant Bill: Give the dinner or lunch bill, when it comes to the table, to your kid(s) to check and review for addition mistakes, deletions, or errors. Have them pay with your cash or credit card so they begin to learn the process. Ask them to figure out the amount of a tip and what your family believes is the right percentage for a tip. Teach them – perhaps – that “we” don’t order drinks, coffee, and such out at a restaurant because the cost of those drinks for a family of four is expensive. That’s what we do.

The above ideas are just the beginning to your kid’s education about money. I will continue this subject in a future column, let’s say “Part Two,” but I also welcome your ideas for great savings games, habits, and lessons to impart to our children.

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  • Ryan Biddulph

    Helpful tips Bruce. Virtually all of us needed to work – or still work – through some whacky money blocks picked up from parents. Not anybody’s fault of course, but using your communcation-based tips creates a brighter financial future for the next generation.

    • Bruce Sallan

      It’s harder than ever – these days – to figure out MONEY…

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  • Patrick Wagner

    These are some great tips for any parent.  A few years back I was at a conference where I heard, author John C. Maxwell share this great kids money tip.

    “Never give a kid an allowance for the sake of giving them one. There should be tasks they do as part of the family ie. clearing the kitchen table or clean with everyone on Saturday & they earn an  allowance on any tasks above and beyond the weekly family routines.”

    You never want your kids thinking they get money for just being part of the family. What does everyone else think?

    • Bruce Sallan

      Thanks for sharing that Patrick…obviously, I couldn’t agree more!

  • Josh

    Great tips Bruce. I wish I saw more parents using them.

    • Bruce Sallan

      Well Josh, it is harder than ever for families these days, to be sure.

  • Heather

    I believe that communicating with your children about money and setting them up for the ‘win’ is key. Bruce all of these ideas are excellent! Here are some things that I do with my 9 year-old girl (going on 15) in regards to allowance I found has worked:

    I don’t give her an allowance at all. She has the option to earn money by doing specific things and achieving specific goals, but it is not a pre-set allowance or pre-set chores. For example: 

    >Report Cards – she gets $10 for every A, $5 for every B – nothing for C’s and anything below a C she owes me $5 for.

    >Cleaning her room with the idea of donating – every time she cleans her room and identifies clothing that does not fit, as well as toys she no longer uses – and boxes them up for donation to Goodwill or other, she receives a reward for her generosity. [Note that cleaning her room or maintaining her room on a regular basis is just expected and there is no reward for that]

    >Pet responsibilities: Dog Walking, Dog Bathing, Changing the Bird Cage, etc. she can earn compensation for, by letting me know once she has done it.

    >Maintaining her teeth – while this is a sore spot for me, and I don’t like to reward for doing required things, I have seen an improvement since we started – and given the cost of her Orthodontist – I feel it justifies itself. Every time she gets a clean bill of dentist health (no cavities, proper flossing etc.) she gets a reward.

    >Yard work is another thing she can get rewarded for.

    >Things like washing her dishes, cleaning up after herself at the dining room table, and maintaining her room and bathroom are required and no compensation is given.
    The idea is that she learns that if she wants money, there are things she can do to earn it, but what she earns is a direct result of work effort she puts in. Sometimes she does nothing – and another time she will do 3-4 things in a day, it typically ties into when she has a financial goal that she wants to achieve. (i.e. a new toy she wants)

    She also knows how crucial it is to save, because there have been times (nintendo ds 3d!) that she wants something as soon as it comes out, and I won’t buy it for her, so if she doesn’t have money saved up she is out of luck.

    It seems to be working pretty well considering she has a bank account with $2,150 in it that she has managed to save completely over the past 3 years (also contributing birthday and Christmas money from family into it!)

    • Bruce Sallan

      Great additions, Heather. I want to comment on the pay for grades idea. I completely BELIEVE in it. WHY NOT? I know some parents think it’s wrong, but how is it wrong when that is how “work” works? It actually teaches the REAL WORLD because we get paid in the REAL WORLD for success!

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  • Brian Vickery

    I think I’ve mentioned how we taught the value of money in our house. Besides the basic rule of “spend less than you make”, we used 3 envelopes w/allowance:

    1st envelope – 10% tithe
    2nd envelope – 50% short-term
    3rd envelope – 40% long-term

    Anything not spent from the 2nd envelope after 3-4 weeks could accrue and then get put into the 3rd envelope. One daughter became ultra-frugal and would fill that 3rd envelope and make several bank runs to deposit into savings. The other daughter balanced that frugality with filling that 3rd envelope for purchasing an upgraded camera and bike.

    Other than that, you’ve seen our house…we want for nothing, but we also do not have big screen TVs, huge SUVs, or a gourmet kitchen. We will get some of those in their own time – while trying to pay for college!

    • Bruce Sallan

      The key to your wise comment BV is YOUR PERCEPTION that you “want for nothing.” Some people are never satisfied with all the bounty they have – always wanting more. You and me are grateful for the abundance we ALREADY have. As far as I’m concerned, anything else is just “gravy!”

      Your envelope idea is another great version of the different jars and a FABULOUS thing for parents to teach their kids! Thanks for sharing!

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  • ginavalley

    It is interesting for me to see how each of our children has very different financial “personalities” considering they are all being raised by the same parents. I have a couple misers, a couple big spenders, and the rest are pretty well balanced.  Interesting to me, though, is that all of them want to empty their accounts to buy gifts for family members at holiday and birthday time. I think their wanting to do that is a good sign, although, I won’t let them over-spend, even in such a nice way.

    • Bruce Sallan

      Wait a minute…2 + 2 + the rest = HOW many kids do you have, Gina????? Their generosity is indeed a VERY GOOD thing!

      I think you deserve a gold star for EACH child you have/raised!

      • ginavalley

        I have 7, but when they move fast sometimes it seems like more.  I also get to have my 2 little nieces spend a lot of time with us.  So, still very much in the midst of loud and sticky at our house.

        • Bruce Sallan

          Currently YOU are the mom with most at #DadChat. We did have a mom with ten, I think, but I think she got distracted and hasn’t been back in a while!

          • ginavalley

            I can understand 10 being a little distracting.
            I also have 2 dogs and a live hamster, so that’s kinda 10 (I’m not even counting the guinea pigs, fish or turtles).The stream for #DadChat is so fast that I’m afraid it is gong to give me an aneurysm sometimes! I’m amazed how much I missed when I re-read it afterward. Seems like a good group chimes in on it.

          • Bruce Sallan

            Use TweetGrid and set the refresh rate to 20 seconds or so. If you want, I can give you a quick tutorial on how to use it and how best to follow a quick-moving chat like #DadChat (by phone)? Email me at: [email protected]

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