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Top questions kids ask about money (and how to answer)
How to turn uncomfortable questions into an opportunity to teach kids about money.
Despite their children’s curiosity, parents tend to be tight-lipped about family finances. But children’s questions—and your answers—can provide a valuable education and keep kids from thinking that money topics are scary or taboo. By engaging with your children about how money works and your family’s relationship to it, you can shape their perspective on spending and saving.
Here are several questions children often ask about money, as well as suggestions as to how you might answer.
Why can’t we just go to the ATM when we want money?
Money is an abstract concept for children, and they may assume you have an unlimited supply. Rather than simply telling them that money doesn’t grow on trees, try explaining in a way they understand that money is limited.
If a child keeps change in a piggy bank, for example, explain you do the same with the money you earn at work. Just like that piggy bank, you can’t take money out of the bank that you haven’t put in. Explain you use the money you keep at the bank to buy things the family needs, such as clothes and food.
How much money do you make?
Many parents are reluctant to share their salaries with their children—in part because they understand how eager their kids might be to compare notes with their friends. But children have concerns about money, and refusing to talk with them about it could cause anxiety and a fear of the topic that may well last into adulthood. Too much information can overwhelm kids, though. So try to be honest without telling them more than they need to know.
As a first step you could explain that you make enough money to ensure your family has everything it needs. That doesn’t necessarily mean disclosing a number. In fact the difference between $50,000 and $500,000 might not mean much to your fifth-grader. Instead think of the question as an opportunity to talk about how the money you make helps pay for the things your family needs, such as food and housing.
For younger kids, you can use a pile of change to represent what you take home every month. Then list your family’s monthly expenses—from groceries to TV bills—and draw from that change pile to show how that money is spent. The remaining money, you can explain, goes into savings and can be used for expenses, such as college or family vacations.
Are we rich or poor?
As early as elementary school, children look to define themselves—and their families—in relation to their friends and the rest of the world. Although they may have heard friends talk about being rich or poor, it’s still hard to appreciate what either means.
As a parent you can shape a child’s definition of what it means to be well-off. Nearly every parent can note there are people who have more than you do, and people who have less. Being rich means having a lot of something, but that doesn’t necessarily mean money. For instance you could say your family is rich in happiness and love for one another.
Can we get a vacation house like Tommy’s family has?
In this case you could say everyone spends their money differently based on what they think is important. For your family that may be having a home, as well as money for toys, vacations and college.
It’s unlikely a third-grader appreciates the true cost of a bigger budget item such as a second home. Help contextualize it by having your child list things she might want—new toys, dinner at her favorite restaurant, a vacation—and then write down what they cost. Next you can note the cost of a summer home. By comparing those figures, you give your child a sense of how a big purchase could limit her ability to have those things. The exercise can help kids think about prioritizing spending and identifying the things that they value.
Can we go out to eat tonight?
A change in spending habits—going out less, for example—can confuse children. They may overhear tidbits of adult conversations and draw their own conclusions, which may be significantly worse than the reality. If you are trying to cut spending, it’s a good idea to be upfront. You might explain, for instance, that the family has a big expenditure coming up—a new roof or even a special vacation—and you need to save up for it.
It’s important to emphasize what doesn’t change in their lives—for example, they always have food to eat, regardless of where they eat it. Kids may be especially motivated to support this effort if you make it fun. For example if you can’t afford to eat out as often, ask them to help you plan the week’s meals.
By approaching children’s questions with honesty and understanding, discussions about money can be an opportunity to embrace rather than a chore to avoid.
The material provided on this website is for informational use only and is not intended for financial or investment advice. Khan Academy assumes no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.
Khan Academy doesn’t provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
Want to join the conversation?
- in the first paragraph it said that parents tend to be tight lipped about family finances, why is that?(25 votes)
- Well, for my parents, it was cause they kept thinking that I was too "young" to understand money, and that they didn't want me to worry about money. In reality, not clarifying made my 7 year old self worry more about money.(46 votes)
- Are these things good for high school students to learn?(18 votes)
- Yes, so we know budgeting hacks and personal needs.(16 votes)
- how can i save money while having to spend money(6 votes)
- try to set aside an X amount of money per paycheck it could be just $20 a paycheck or $50 put this in another account or another bank entirely you don't have to put away a whole lot all at once. Over time that money will add up and eventually you can use it for whatever, like an emergency fund.(18 votes)
- Why do parents try to keep stuff hidden from children? I know sometimes they want to "protect them" but later i just leads to doom for the child and their finances.(8 votes)
- They mainly underestimate children, I guess. Perhaps they think kids will get anxious and fearful knowing they depend on having money and that it's possible to not have any, or not have enough for everything.Just my two cents. It's hard for me to imagine, I and my peers were brought up very differently.(7 votes)
- My mother is very secretive when it comes to money and I'm almost an adult. I need to know how income works but she refuses to clarify this to me sometimes.(6 votes)
- When its time for you to get a job, ask her to teach you about finances. Things may come out.(4 votes)
- A lot of this sounds like general advice on how to get out of actually answering children's questions about money. I highly doubt all this dancing around the subject is going to satisfy a child's curiosity.(6 votes)
- As a high school student, why should i learn this?(3 votes)
- Usually it is because most people your age don't have the financial wisdom their parents might have. If you can, consult with your parent or guardian about this.(1 vote)
- How we can answer such questions asked by a teenager child.(4 votes)
- How can you save money if you have to spend it?(2 votes)
- Just spend what you need to; the rest can go to savings (Or what you need).(4 votes)
- What is a good lesson to tell your kids about budgeting(3 votes)
- have them slowly pay rent and make them pay for the stuff they need like soap and all that it shows them that not everything is going to be free everything will have a cost even eating(1 vote)