These early habits often later determine how a person will make financial decisions in the future and throughout their life. So when is it worth starting to consciously talk about finances with children, how to do it, and what mistakes do parents most often make?
“As September 1st approaches, children return to a more independent daily routine – school, interacting with teachers and classmates. Often, they are sent to school with a certain amount of pocket money. The moment a child is entrusted with money already shows that conversations about finances should have started,” says Julius Ivaška, Director of the Business Service at Urbo Bank.
According to him, various situations occur: some children spend their lunch money on treats, others distribute money to gain classmates’ favor, and some skip meals to save it. To avoid such extremes, it is important to teach a child from an early age to handle money responsibly, plan purchases, and ensure that neither their own needs nor relationships with others suffer because of money.
About money – through everyday experiences
According to the Urbo Bank expert, there is no specific age to start financial lessons, but one should not wait for the first independently spent money. You can start talking about money with children aged 3–5 – at this age, the most important thing is to learn that you cannot get everything immediately, sometimes you have to wait, choose between several desires, and give something up. Research shows that by about age 7, some financial habits that will accompany a person later begin to form.
According to J. Ivaška, responsibility can also grow with age. Children aged 6–12 can already learn to plan, save for a specific purchase, compare prices, and decide how to use part of the money they have. Teenagers can be entrusted with a small weekly or monthly budget. The most important thing is that the tasks match the child’s maturity – for one 6-year-old, a few euros will be a challenge, for another – a usual amount.
“It is not necessary to sit a child at the table and hold a separate lecture about finances. The best lessons arise in everyday situations: in the store, planning the weekend, or choosing a purchase. For example, you can explain aloud: I am buying this item because we need it, I am giving up this one today because it is not necessary, and here I compare two prices and choose the more favorable one. This way, the child sees not only the final purchase but also the decision that was made before it,” the specialist points out.
He mentions that this is especially relevant now, when payments are often made by card or phone. The child does not see the moment when the money “leaves,” so they may get the impression that just tapping the card is enough and the item is simply obtained. Parents can show the bank account balance or explain that even when paying by card, part of the money disappears from the available amount each time.
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“Another way is not to explain but to give the child a small real task. For example, allocate 10 euros for snacks for the family and let the child decide what to buy with this amount. When the money runs out, no extra euros appear – they have to choose. For an older child, you can suggest saving for a specific desired item or earning money by doing a pre-agreed task. This way, the phrase ‘money doesn’t grow on trees’ turns from an abstract phrase into experience: the child sees the connection between work, a limited amount of money, choice, and purchase,” shares the Urbo Bank representative.
How not to instill financial extremes in a child
According to J. Ivaška, one of the most common mistakes is to talk about money only when there is a shortage or when the child behaves improperly. Threats or constant discussion of family financial worries in front of the child can create anxiety rather than responsibility. Psychologists recommend avoiding dramatization even when refusing a purchase: instead of saying “we don’t have money for that,” say “this time we are allocating money elsewhere.” This way, the child learns that money means choice and priorities, not a threat of shortage.
“Equally important is not to go to extremes and divide money into three parts: to spend, to save, to share. Money should not be turned into a measure of love, kindness, or success – research shows that material things used as rewards or expressions of love can encourage a materialistic attitude. Also, a child can allocate part of the money for a gift or a good cause but must understand that generosity does not mean an obligation to finance friends’ wishes. Likewise, one should not praise just for not spending anything – the ability to spend wisely is the same financial competence as saving,” says the Director of the Business Service at Urbo Bank.
According to him, another common parental mistake is not allowing the child to make mistakes or immediately “correcting” every mistake. If the money for weekly entertainment is spent on the first day, giving extra money the next day does not allow learning from the mistake. It is better to separate money for necessities from money that can be experimented with in advance. If the latter is spent earlier, the child will see that they have to wait until the agreed time for more. This way, the child learns from real experiences.
“If the problem has already arisen – the child secretly takes money, lies, spends it irresponsibly, or gives it away to others, it is better to avoid punishments and threats. Instead, temporarily limit financial independence, calmly explain what was wrong, and then gradually return it. If the money was spent earlier, there will be no more until the agreed time – they will have to manage without it or use savings, thus postponing the goal for which they were saving,” advises J. Ivaška.
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