Talking to a child about money may sound unnecessary, or even daunting.
But kids can typically grasp concepts about money as early as age 6, experts say, and research shows that they form permanent money habits as early as age 7. Learning how to manage money and plan for their financial future can help ensure their future financial and overall well-being.
That’s why parents need to start teaching their kids financial literacy early, says Alexa von Tobel, the Harvard University-trained founder and managing partner of venture fund Inspired Capital.
Von Tobel, who founded online financial advisory firm LearnVest in 2008 and sold it for a reported $375 million to Northwestern Mutual, recently partnered with children’s media brand Rebel Girls to write a book called “Growing Up Powerful: Money Matters.” It includes personal finance lessons for kids and advice for parents on how to talk to their children about money, and is set to publish on March 26.
It’s primarily aimed at young girls — women are less confident in their financial literacy than men, on average, research shows — but von Tobel notes that “it’s really designed for all children.”
Lacking a baseline of financial knowledge can end up costing kids once they grow up — anywhere from hundreds of dollars per year to thousands, according to a 2023 survey by the National Financial Educator’s Council.
“We can empower the next generation if they understand and control money,” she tells CNBC Make It, adding that a lack of basic personal finance classes in most U.S. schools is “absolutely senseless to me.”
With that in mind, she offers her three biggest pieces of advice for parents on how to teach financial literacy to their kids:
Tone is ‘really important’
Parents need to talk about money in a “matter of fact” way, so their kids grow up with a healthy relationship with it, von Tobel says. Teach them that it’s worth discussing, but not an all-important facet of life.
Money is, simply, “a tool to help you live the life you want to,” von Tobel says. If you work hard, you can earn money. If you’re thoughtful about managing it, you can ensure you always have enough to buy what you need and, if you’re fortunate, what you want. Credit cards aren’t magical items that can buy anything.
“Money is not meant to be worshipped. And it’s not meant to be ignored,” she says.
Keep it practical
Talk to your kids about money in ways that make sense to them, von Tobel advises. That could mean talking about how much everyday items cost, like noting that a bottle of water costs several dollars at the zoo, versus only a dollar or two in a corner store.
“When you’re walking through a store and your child wants something, pick it up [and] show them the price,” says von Tobel. “‘This costs $29. Mommy doesn’t have the $29 for this today, but we can think about saving that for your birthday.'”
This approach teaches your children that costs vary, she says: Not everything you need or want is easily attainable if it’s expensive, so be mindful of prices and how much you can spend safely.
Make it fun — and empowering
Budgeting can be a fairly dry topic. Who wants to save for the future when you can spend on candy and toys now?
To keep kids excited about saving and budgeting, von Tobel recommends talking about it in an “upbeat, empowering way.” Ask what they’d enjoy spending money on, and discuss different ways they could earn and save the money they need to buy those things themselves, she writes in her book.
The book also includes quizzes, games and exercises — like decorating different-sized jars to collect loose change, which kids can save and put toward small-, medium-, and large-sized spending goals.
Adults often associate money with stress, because they’re only thinking about “the things you didn’t have,” von Tobel says. “Trying to orient kids to have very positive, empowering moments around money early in their lives, we know from data [that] can change their life.”
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