5 Things to Talk to Kids About Finance
5 Ways to Teach Kids About Money and Finance
By Tracy Byrnes
The next time your kids buy something using an electronic payment method, ask them if they have any idea where the actual dollars come from.
Sadly, many don't.
I wish more emphasis was placed on personal finance in our K–12 system. Unfortunately, it's not. So it's up to us to take responsibility for the next generation.
We need to become financial mentors.
5 Ways to Teach Kids About Money
Mentorship matters – especially in finance.
I'll bet that many kids, teenagers, and even young adults would feel better about money if they had a "financial mentor."
And let's be clear: you don't have to be a finance professor or even have taken a finance class in college to mentor them.
You just need to talk to them.
Here are five things you can talk about right now to help financially empower the next generation.
1. Talk About Money
First, talk about earning it. Saving it matters too.
Help them build healthy habits at a young age.
Want that new fancy phone? Okay. Pick some chores, and start saving together.
Teach them how to budget.
Remember, financial literacy goes way beyond money management.
When you teach kids about money, especially through open conversations, you're giving them tools that last a lifetime.
It's a life skill, problem solving, decision-making and critical thinking.
You're setting them up — personally and professionally — by talking to them now.
2. Talk About the Economy
Again, you don't need to be an economist or have taken Econ 101 in college. Just talk about it.
Inflation? What does that really mean?
Have your kid call Grandma and ask how much a loaf of bread cost when she was young. Then take them to the grocery store and compare prices today.
Supply costs have gone up. Sometimes companies pass those prices on to us. That's why some things are more expensive now.
Make it that simple.
Why should you care about interest rates?
They affect your student loans. They'll impact your car loan. When you get a credit card, interest rates will affect how much you owe.
See? Nice and easy.
Taxes, Interest, and Paychecks Matter Too
Another great lesson: that first paycheck.
At first, they're excited — until the "Um, where did half of it go?" moment.
Talk about taxes. Why do we collect them?
Some help maintain roads and buildings. Some support seniors or public services.
Encourage kids to follow the news and see where their tax dollars go.
As for the unemployment rate:
When you graduate and look for work, high unemployment means more people are looking for the same jobs.
That's all you need to say.
3. Talk About Risk and Reward
Everything in life involves risk — and potential reward.
Understanding this helps kids make better decisions.
Even asking someone on a date is a risk. But if it works out, the reward is sweet.
The same goes for investing in companies.
Buying stock is a risk. You spend money now hoping the company succeeds later.
If the company grows and sells products, the reward could come.
But if the company goes under, you lose your investment.
Teach them to think through which risks are worth it.
4. Talk About Compound Interest
Compound interest is powerful — and often confusing.
So keep it simple.
It's like a snowball rolling downhill. The more it rolls, the bigger it gets.
The same happens with money that earns interest over time.
Here's an example:
Let's say you have $100 earning 5% annual interest.
If they do nothing, by next year they'll have their original $100, plus an extra $5 in interest.
That $5 could be spent or reinvested.
If they reinvest it, their investment becomes $105. Next year, 5% of $105 is $5.25.
Now it grows to $110.25. The following year, it becomes $115.76.
The snowball grows, and they're not doing anything extra.
That's the beauty — and power — of compound interest.
Let that snowball roll.
5. Talk About Your Financial Mistakes
We've all made poor financial decisions.
Be honest. Share the lessons.
Kids are less likely to repeat them if you say, "I did that, and it didn't work out."
One of mine? I graduated college with credit card debt.
Back in the day, credit card companies could set up tables on campus.
I was a naïve sophomore with a brand-new credit card. Terrible idea.
Share your story. Help them avoid your mistakes.
Lastly, send them to ubs.com/thecode.
There's tons of approachable information for kids of all ages to learn about money and personal finance.
Also, check out the recent 5 Things with Tracy Byrnes podcast — I cover all of this and more.
And if there's a financial topic you'd like me to explain, email me at tracy.byrnes@ubs.com.
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