Talking Money with Young Children

‘I want this one.’

The year was 2015. Toilet training was on the agenda. To make a big deal out of it, we were at the shops picking a stool for my 2.5-year-old daughter to use.

(Yes, I could have got one second-hand or off the local Buy Nothing group, but I didn’t on this occasion.)

My daughter was pointing to a plastic stool with Winnie the Pooh on the front of it. Price: $14.

Next to it was an identical stool. Same size, shape, colour, everything except the image. Instead of Winnie the Pooh, it had ‘I’m a star’ written on it, with a grey star cartoon just in case we didn’t get it. Price: $5.

With my first thought, I mentally cursed the store, then marketing people everywhere. They did this on purpose, the bastards.

With my second thought, I remembered my daughter was like a sponge.

She was subconsciously absorbing whatever I did or said till she reached seven. Maybe beyond. I thought I’d better do and say the right thing.

By this point, one second of real life had passed.

My daughter picked up the Winnie the Pooh stool and headed for the check out. I grabbed the star version and followed her.

As we walked, I explained that I wasn’t buying the Winnie the Pooh stool. It was $14, and the one I was holding was just the same but only $5.

My daughter appeared unfazed by this information.

I tried a different tack, explaining I could buy the star stool plus a loaf of bread and a bottle of milk for the same price as just the stool she was holding.

She stared at me. I could see the cogs turning in her mind. Then she carried on her way to the check out, still holding the $14 stool.

In line to check out, I continued explaining: I understood she wanted that stool, but I simply would not buy it. It would be a waste of money to do so. Money was a resource to be used wisely, and this wasn’t wise.

Seeing she was listening but still unconvinced, I suggested I could buy a sticker of Winnie the Pooh and put it over the star.

Again she stared at me. ‘But I want this one’.

I replied: ‘I know. But we’re not buying it.’

We repeated this conversation three times before our turn came to check out. I was gritting my teeth, holding my breath and preparing for tears…

We’ve all been there, right?

That’s why they created confectionary-free checkouts. Parents were sick of the inevitable ‘I want chocolate!’ showdown every time they queued for groceries. Back when they used to queue, anyway.

We’ve all got our script, like the bedtime ‘no-more-drinks-or-stories-or-songs-just-go-the-f*ck-to-sleep’ one. A list of rational reasons you provide for why you will not be buying what your child says they want right now.

Sometimes it works.

Sometimes extra persuasion (e.g. bribery or ‘Because I said so’) is needed.

So what’s your script when money is involved? Do you know what you’ll say before the question ‘Can I have this one?’ is asked?

Thinking that I’m overthinking this? Guess again…

Why is this important?

Because your children are constantly learning from you.

Whether you plan it or not, how you choose to spend your money affects your child, as does how you talk about money to and around them.

Don’t believe me? Try asking your friends about their money beliefs and where they came from.

A course I attended springs to mind. The presenters spoke about our mental baggage about money. At the close of that session, several people shared their ‘breakthroughs’.

One woman spoke about believing she had to go into debt to own anything because that’s what her parents said and did. 

They used credit cards and loans almost exclusively. They told her she could have anything, but she had to get it on credit. She literally saw her credit card as cash.

Another woman spoke about her belief that she could have money, but only if she worked hard for it.

She had inherited her father’s strong work ethic and she was working hard, but she wasn’t getting enough money and she wasn’t sure where she was going wrong.

Similar stories popped up around the room. Conversations with family about being poor, not being able to afford what they wanted, feelings of deprivation. All overhanging their mental states and attitudes to money decades later.

In every case, it came back to a belief they’d inherited from their family. It may have lain dormant in their subconscious for decades, but it was there.

Can you imagine the cost of this?

How much has each individual foregone – financially, mentally, emotionally – because of limiting beliefs? It could be hundreds of thousands of dollars or more. Thoughts like these have the potential to destroy relationships, hinder careers and cause untold stress in everyday lives.

That’s an expensive piece of subconscious programming.

But, I bet the parents of my fellow course attendees did not intend for that programming to be there.

They thought they were doing the right thing. How could they know these conversations and throwaway comments would shape the lives of their children so seriously and well into adulthood?

Further, for each individual, knowing they have that programming in their heads is just the first step.

Now they’ve got to do something about those beliefs. Undoing all that subconscious programming will take time and energy, and there’s no guarantee it will be successful.

I’d be exhausted and overwhelmed just thinking about it. Clearly it would be much better to get the programming correct in the first place, right?

Of course it would.

Knowing this, you have a golden opportunity:

You can consciously influence how your child thinks and acts about money

That’s why the conversation I was having with my daughter about a $14 stool – and the conversations you have every day about money with and near your children – are so important.

Children learn what they live.

When I was growing up, my mother had an abridged version of Dorothy Law Nolte’s poem ‘Children Learn What They Live’ in her wall. Here are two lines so you get a taste for it:

In other words, the example you set is the behaviour your child will likely inherit from you.

It’s the same with money.

Our kids learn about money almost peripherally.

It’s handled daily, used in transactions like grocery shopping, getting petrol for the car and buying those babycinos they all seem to love. The way you think and talk about money is rubbing off on them, whether you like it or not.

When they grow up, how do you hope they will think about money?

Now reflect on what you’ve said about money recently around your kids.

Does it match with your hopes, or is there a gap?

It’s important to be deliberate about how you speak and act about money. As I learned from the attendees at the marketing course, your words and actions will stick around in your children’s brains well into adulthood.

Now to the crux of the matter: knowing you can shape your child’s point of view on money, how do you do it?

How to talk to kids about money

Here’s my thoughts on the topic, but first, please note: it can become complicated.

What you say and do will depend on what you believe and value around money. This can differ vastly from person to person.

For example, take the seemingly straightforward topic of giving:

• Person A values giving money. They may set aside 20% of their gross salary to donate to causes they believe are worthy.

• Person B doesn’t value giving money. They may decide not to donate any money to charity, believing the money would be better spent sending their child to university.

• Person C values giving money, but thinks he/she can do better. They may decide to defer giving, believing they can make more of the money than a charity, preferring instead to donate when they have billions of dollars rather than mere hundreds (case in point: Warren Buffett).

• Person D values giving time over money. They believe volunteering for causes the care about is more beneficial than donating.

With four such vastly differing points of view, it would be impossible to recommend a set a words or actions that teaches your child about giving in a way that would satisfy these four hypothetical people.

So I’m not going to give you specific phrases or detailed activities.

(Apart from one phrase I think you should avoid like the plague - ‘We can’t afford it’. Explainer on that below.)

Instead, here are three fundamental concepts I think can underpin any belief or value around money that you care to pass on to your kids:

1. Reduce waste: Money is a resource. We use is wisely, and we don’t waste it.

2. Opportunity cost: Every financial decision you make knocks out other options. Make your choices knowing the options you’re eliminating, so Future You is satisfied.

3. Enough: What does ‘enough’ look like for you? Save and invest towards that goal, not some endless pile of money for its own sake.

I’ll explain the first concept in detail below.

If there’s enough interest and feedback on this article, I’ll write up ‘opportunity cost’ and ‘enough’ separately.

Explaining ‘Reduce waste’

We tell our kids to turn off the lights when we leave the room, or turn off the tap when brushing our teeth, in the name of reducing waste.

Money is a resource just like water and electricity.

And time.

Consider how much of your time you exchange for that money. Time you’ll never get back. Wasting money is like wasting the hours you spend working when you could have been doing something else.

If you can get your child treating money like a resource to be used wisely, they’ll be less likely to fritter it away wastefully.

And please note that by targeting waste, I’m not saying you can’t have nice things.

I reckon it’s only a waste if it:

• doesn’t meet an essential need,

• doesn’t bring sufficient and lasting joy or satisfaction to make it worth it, or

• causes conflict with your values.

Throughout any discussion about waste, you won’t hear me say ‘We can’t afford it’ to my child because it’s rarely - if ever - true.

After 12 years, my daughter has yet to ask for anything I couldn’t choose to buy if I thought it was a good use for our money and more important than something else I’d already earmarked for spending.

I say ‘No’ often. Here are some of the explanations I’ve given my kids in the last few months:

• We already have one. It’s an older version but it still works, and it would be wasteful to replace it before it breaks. We don’t need to add to landfill unnecessarily.

• We had one of those before and it never got used, so we gave it away. I’m not buying another one that’ll just sit in the cupboard.

• We’ve got one, I think it’s broken but Dad/I will mend it.

• I bought you [that snack] before and had to throw it in the bin when it expired. I’m not doing that again.

• You don’t need it. [This item] does the same thing.

• These come up on Buy Nothing [a local Facebook group] occasionally. Let’s wait till I see one again.

It’s the same with the Winnie the Pooh stool.

I could afford a $14 stool. That’s not the point.

To buy it when an identical stool is available for $5 is wasteful.

Even small children get this because you don’t have to talk numbers. Explain it in terms they can understand.

For example, I talked to my daughter about what the equivalent value of the $9 difference in stool pricing meant: a loaf of bread and a bottle of milk.

I think impulse control probably matters with this particular concept, so probably best to wait till they’re developing some self mastery. From memory and according to my child health nurse, that starts between two and three years old.

So what happened with the stool?

To her credit and my eternal gratitude, when it came my turn to pay, my daughter handed the Winnie the Pooh stool to me – with barely a pout – so I could leave it with the cashier to put away.

We headed out on our merry way to do the grocery shopping, including that loaf of bread and bottle of milk I’d mentioned.

No tears, no tantrums, no fuss.

I was reminded several times to find a Winnie the Pooh sticker, which unfortunately they didn’t have in the grocery store. We agreed I would keep looking somewhere else on another day. I don’t think I ever found one, but it wasn’t mentioned again so I think I got away with it.

One last thought

I chalked the stool chat up as a win, but there have been wins and losses in my quest to reign in wasteful spending with my kids over the years.

You won’t always win. You won’t always get it right.

You might be rushing and use the ‘We can’t afford it’ shortcut. Perhaps you cave because you just want your teenager to smile at you for a change (can you tell we’re entering the grunting years of teen-hood in my household?)

Please don’t beat yourself up over occasional lapses and losses.

Keep persisting, most of the time, when you can.

You and your child will be grateful in the future when that tendency to spend wastefully has been minimised by repeated practise and discussions.