How to talk to kids about money, risks and wellbeing

As much as our kids are liable to hide under the bath mat during hide and seek, or cry when you won’t let them eat the dog’s lunch, they can also be more savvy and understanding than we give them credit for. 

That’s why it makes sense to start talking to them about money when they’re young. Instilling an understanding of money, where it comes from, and why we need it, can help to turn a curious child into a financially savvy adult who understands that a credit limit isn’t the same as having money in the bank. 

And heaven forbid they actually think we go to work every day just for fun.  

Here are the key topics you can aim to discuss with your little ones to help them understand how it all works.

Parent and family income

If money doesn’t grow on trees, where does it come from? 

Your kids already know you go to work most days, so that’s the perfect starting point to talk about how adults make money. You can also use examples of other people they are familiar with, such as the postman, or a character in their favourite movie.

Just don’t forget to highlight the other positive parts of work and the enjoyment you get from it so they can also learn that when they grow up, they can choose a career they’ll enjoy. 

Needs vs wants

Being a financially savvy adult often comes down to how well we differentiate needs vs wants. And there’s no time too soon to start learning. 

The perfect time to do this is when one of their ‘need’ items breaks or gets lost (unless you have a saint for a child, you won’t be short of opportunities). For example, say they lose their left shoe. Now you need to buy a new pair, because everyone needs a shoe for each foot. 

Compare this to them wanting a new toy. Show them that they already have plenty of toys, so this is not a need. 

Household bills and expenses

The bane of adulthood is often totally unknown to kids, but they don’t benefit by staying in the dark. Like you would if you didn’t pay that power bill. Moneyhub suggests you should talk to your kids about your bills and expenses.

The idea of paying rates might be a bit obscure, but going to the supermarket is a great physical example of household expenses. Sit them in the trolley, hand them a calculator, and get them to add up all the items you put in the cart. Don’t forget to point out special deals and really expensive items for some perspective.  

This can help them to understand that the basics around the home cost money, even the gross things like broccoli. 

Saving and investing

Being able to save and invest well are practically real-life superpowers, and a child who learns these skills early will be set up for life. 

There’s always some new toy or game that kids want, so the next time they ask for something, consider using it as an opportunity to encourage them to save up for it with their own pocket money. Make sure it’s something attainable, such as a $20 basketball, rather than a new Xbox (the kids’ version of saving for a first home in today’s market). 

Whether it’s a piggy bank or a real bank account with interest, getting your kids saving for a goal will help teach them what patience can get them. 

Credit cards and loans

Once the kids are a little older, you can introduce them to the concept of credit cards and loans.    

As well as explaining how you managed to buy that shiny new car or pay for the house, you might even consider giving them a loan of their own when they want to buy something. Explain that to pay for a new bike, you will lend them the money, but they have to pay you back X amount every week, otherwise the amount they owe will go up (or their chores for the week will). 

They might fail and spend their pocket money on sweets instead of repayments one week. In fact, it might be for the best if they do. Making mistakes during a practice run with the bank of mum and dad will help teach them what they need to learn without the real-world consequences. 

Taking financial risks 

Teaching your kids about financial risk can be as simple as learning the same way you did – with Monopoly. If they spend all their cash buying Queen Street, will they have enough to pay for expenses, or to buy other properties? 

Games are a great way to illustrate risk without actually risking anything. You can use games to talk about real financial risks such as investing in the stock market, or you might show them your KiwiSaver and explain how your money is invested. 

Understanding financial emergencies

Kids will also need to learn that it’s one thing to save for a specific goal, and another to save for something they don’t know they need yet – an emergency. You can gather more tips for life's curve balls from our Choice Reads blog.

Whether that emergency is the family dog needing surgery, the TV breaking down, or simply their favourite singer announcing an NZ tour (and they HAVE to have tickets), there will no doubt be the occasional moment to teach them the value of having a little cash set aside for a rainy day. 

Naturally, this is also a great time to talk about insurance. Explaining car insurance is a nice simple concept that will help them understand that as well as setting money aside for emergencies there are other ways to cover risk...  

Habits to implement to put these discussions into practice

While you will find opportunities for learning moments for all of the above, you can also get into certain habits to show them that being financially savvy isn’t just a one-off part of adulting. 

Try these habits for day-to-day financial wellbeing lessons: 

  • give them pocket money for chore completion to teach the value of work and money
  • encourage saving over spending 
  • teach them how to shop around when they want something 
  • encourage work when they’re old enough (babysitting and pet feeding are great for young teens)
  • talk about money as a tool, not as something that is inherently good or bad
  • tell them about things you’re saving for as an example 
  • let them make mistakes and learn from them.

And while you’re thinking about all the ways you can teach your little ones about being financially savvy, don’t forget to look out for yourself as well. Taking out life insurance can help you financially protect your family especially when they need it most.