Challenging Conversations About Money: Talking With Your Children

Originally published on U.S. Bank company blog

For many parents, discussing finances with their children can feel awkward because it wasn’t a topic of open discussion when they were growing up.

“As the father of three children, I know firsthand how hard it can be to speak with them about money – living within your means, saving and investing, and more,” said Scott Ford, President of Wealth Management at U.S. Bank. “While we recognize that it’s not always easy talking with children about money, there are many benefits to having open, honest and transparent conversations. I, for one, am committed to doing so with my children.”

Here’s a guide from Thomas Thiegs, who has helped many families navigate this terrain during his career. Here’s how Thiegs suggests tailoring money conversations toward children of all ages.

Toddlers: Start early

“Tailor your messages to your child’s age and life stage,” Thiegs said. “The general rule: start early, start simply and add complexity as children mature.”

While preschool children are too young to grasp some economic and financial topics, it’s not too early to start laying the foundation.

For toddlers, it’s good to teach them the basics, he said. “Start by talking about the relationship between work and income, which allows you to have money to spend. You can begin by saying something like ‘We work in order to earn money to buy things,’” Thiegs said. “You can discuss what you do at your job and how the money you earn helps fund your lifestyle.”

Try to connect this concept to something concrete for them. If they’ve asked for something at the store, talk to them about how buying something now means that money will not be there for something later.

Shopping presents an opportunity to discuss the importance of making wise choices, he said. You can give your child $5 and let them choose what to spend it on.

“This reinforces the finite nature of money and that we exchange it for the things that are truly important to us,” Thiegs said.

Preteens: Build good habits

In the preteen years, you can help children develop good habits for working, saving, and planning, Thiegs said. Pre-teen children might have an allowance or paid chores, deposit their earnings into a bank account and set their own goals, like saving up to buy a game or clothes.

The benefits of budgeting can also be discussed at an early age, and it’s better for them to understand this concept with a smaller scale and lower consequences than at an older age he said.

“I’d recommend starting with a cash allowance and shifting some of their discretionary purchases to them, as it puts a ceiling on spending,” Thiegs shared. “As they become familiar with living within a set limit, children can advance to a debit card.”

At that stage, you may want to consider a debit card like Greenlight. With their many features, these debit cards and apps can help kids and teens learn to earn, save and spend wisely – while parents can send instant money transfers, set flexible controls and get real-time notifications.

Preteen years are also a good time to discuss the value of charitable giving.

“You can start at a young age with the ideas of sharing and helping others who are less fortunate,” Thiegs said. “Kids connect with charities they have a natural interest in – animals, the environment, music and art. You can give them a budget whereby they decide where to donate their money.”

Teens: It can get expensive

During their teenage years, children often work part time, earn money and want to buy things, Thiegs said.

“Parents know how challenging it can be to encourage teenagers to live within their means, and there is often pressure to keep up on the latest trends,” he said. This dynamic is a great time to discuss the differences between wants and needs.

Parents are divided about setting financial boundaries for their kids, as 47% in a recent U.S. Bank survey said that it’s parent’s job to do so.

“Parents can consider providing a credit card in a child’s teen years and instill the virtues of using it prudently and paying off the balance each month,” Thiegs said. “Teaching teens how to spend and manage a virtual account in their teen years can help them avoid some of the issues many face if their first experience with credit cards is in their 20s without parental support.”

The lessons learned can include the benefits of borrowing, building a strong credit history and avoiding late fees, he said.

“A good credit score not only helps people get a mortgage and car loan, but it also impacts the chances of getting a job and renting an apartment.”

A teen working a summer job gives parents a natural opportunity to discuss many issues: how taxes affect take-home pay, the importance of direct deposit, how to save for future expenses like college tuition or a car. The bank’s survey found that most parents (64%) are having conversations with children about college tuition and how to pay for it.

This is a good age to discuss the importance of investing, Ford said.

“Parents know that it's important to impart basic financial concepts, teaching their children about things like stocks, bonds, mutual funds, ETFs (exchange-traded funds), 401(k) plans at your job, IRAs and other financial foundational basics,” Ford said.

It’s important to talk to teenage children about the wisdom of maintaining a long-term investment perspective, the benefits of diversification and the power of compounding over the long haul, Thiegs said.

“Talk about the ups and downs of investing, conservative and aggressive investments and the possibility of loss,” he said. “Teens can invest in the companies that make the products they love – cellphone/laptop manufacturers, clothing brands, restaurant chains and more.”

Young adults: It’s complicated

Even when children are grown and living on their own, it’s important to continue the money conversations, Thiegs said. While 43% of parents in the survey said their children don’t manage their money in ways they agree with, 79% said that their children are able to successfully manage their finances.

However, nearly 4 parents in 10 (37%) said they worry that their children will require financial assistance into adulthood. This number jumps to more than half for Gen X parents.

As young adults start full-time jobs, you can bring up topics like contributing to workplace retirement plans such as 401(k)s, Thiegs said.

“The power of tax-advantaged investing is considerable,” he said. “Especially over the course of a decades-long career.”

As children mature and form their own families, parents will want to discuss topics related to their own senior years, Ford said. Parents can discuss sensitive topics such as wills and other legal documents, estate plans, insurance protection and more.

“Health, aging and money are potent topics and can make for awkward conversations,” Ford said. “Despite the sensitivity, it’s best not to postpone these types of discussions because the risk of something going wrong can increase with age. It’s best to face these tough talks with confidence.”

Conclusion

While the survey revealed that many families are talking about financial concepts around the dinner table, most parents said they do not feel comfortable talking about their own financial situations – possibly because they are worried about being judged or feeling embarrassed.

Financial advisors can help ease the conversation by acting as the “new therapists,” getting families to talk more openly about money, Ford said. More than half (53%) of mass affluent Americans* said their financial advisor helped their family work through uncomfortable conversations about money. Reach out to your financial professional to get the conversation started.

Join the bank’s upcoming webinar (March 12, 2025) to learn more about this topic. Register here: Challenging Conversations About Money: Talking to Your Children | LinkedIn

Read the full report here: Challenging Conversations About Money

Get the conversation started

With younger kids

• Bring up money during a casual conversation. Don’t build it up into a big event.
• Start small: Look at some of your household bills with your kids. Discuss what things cost.
• Assigning small jobs around the house for your kids to earn money can be a helpful way to help them understand what it takes to have enough money to buy their favorite treat.
• Deliver information in bite-sized pieces and allow time for questions.
• Money can feel like a taboo topic for a lot of families. The only way to make it feel less awkward is to have regular discussions about money with everyone in the household. Talks don’t have to be serious or scary.
• Make sure everyone gets a say, and involve kids in the decision-making.
• Consider your tone and keep it positive.
• Be open about your own experiences with finances, good and bad. As your kids get older, explain what kind of financial help they can expect from you in the future, such as help with buying a vehicle, and their responsibility, such as insurance premiums.
• When the time is right, talk about the cost of higher education. Walk through tuition, room and board expenses, and break down ways to pay for it before it’s time to start applying to college. If your child will need to get a loan, talk about how student loans work.
• If there’s more than one partner/head of household, make sure both are on the same page about money before communicating to children.

With adult children

• If you haven’t talked to adult children about money yet, start now.
• Plan a time to meet in as relaxed a setting as possible. Like discussions with small children, think about this as a series of discussions over time.
• Use life events as an opportunity to start the discussion about money: going to college, buying a car, getting married, buying a home, starting that first job.
• Ask your kids how they’re doing financially: can they afford their rent? Do they have student loans? Are they able to set some money aside for savings/investments? Do they need financial help? Talk about the value of investing even a small amount of money at a young age (over time, a little can grow into a lot).
• If they need help and you can afford to help, as parents you should meet first and decide: what are the rules we might put in place? Where do we need to have additional discussion?
• To avoid resentment, try not to judge how your children spend their money.
• Give your children some context. For example, share how much you were able to save in your 401k over the years. Some years you might have been able to save a lot; others, you might have saved less. That will help them feel more at peace about their own decisions when they are thinking about saving for their own retirement.