Talking To Your Kids About Money In Today's Economy

by Stuart Ritter, CFP®

In recent months, children have been exposed to a flurry of messages about the economy, including stories about debt and recession. To children, these may be foreign and confusing topics – in fact they may even confuse many adults. However, today’s news provides a perfect opportunity for parents to explain the basics of personal finance to their kids.

It’s never too early to start teaching your kids about money. As soon as children realize that money is how people obtain the things they want and need, they should begin to learn money lessons.  And since today’s children will be faced with financial decisions before they know it, learning these lessons early has never been more important.

The following are five tips to help parents have these important discussions with their children in today’s economic landscape:
  1. Use everyday moments as a way to teach your children about money. If you’re paying for groceries using a credit card, explain that you will receive a bill for that expense, which you will have to pay back.
  2. Triple digit market swings allow parents to share the importance of long-term investing. While the stock market’s short-term performance often garners a lot of headlines, parents can reinforce that sticking to long-term investing is needed to achieve important goals that are many years in the future, like college and retirement.
  3. Explain to your kids that diversification – spreading investments across different stocks and different bonds – helps to lower your risk. If your funds are diversified and one part of the market is doing poorly, this provides an opportunity to explain to your kids why it is good that you don’t have all your money in that sector.
  4. Use the recent news about the debt ceiling as a way to discuss the importance of spending within your means. Explain to your children that setting a budget can help to ensure that you don’t spend more money than you actually have.
  5. Make money talk fun. T. Rowe Price has created many resources to help parents accomplish this, including a free activity book, “Journey to Your Dream Goal,” that teaches children to make smart money decisions through puzzles, games and challenges. The activity book is a companion to The Great Piggy Bank Adventure® free online game at
By following these tips, you will be able to use the current state of the economy and the news it’s generating, as a way to teach your kids important lessons about money, while giving them the foundation to become financially responsible adults.


Stuart Ritter, CFP
® is a financial planner at T. Rowe Price and the father of three young kids.