Money is an essential part of our daily lives. It’s natural for kids to be curious about it and to ask questions. Some money questions are straightforward, like the cost of a toy, while others, like why things cost what they do, can be more complex.
When kids start asking questions about money, it’s a great opportunity to help them build a foundation for financial literacy that will serve them well in the future.
This article is sponsored by Apple Federal Credit Union.
If your child is asking questions about money, or if you want to be ready for future ones, keep reading to learn how to explain these financial concepts in ways they can understand.
Why is it important to talk about money with kids?
Kids start thinking about money earlier than you might think.
Research from the University of Michigan shows that kids begin to form emotional reactions to money—whether it’s happiness from saving or excitement from spending—as young as five years old.
Starting money conversations early can help kids develop positive feelings around healthy financial habits and avoid common financial pitfalls in adulthood. Plus, talking openly about money with kids can remove the mystery and stigma around finances. This can encourage them to become confident and responsible with their money choices as they grow.
10 Questions Kids Have About Money
Young Kids (Age 9 and Younger)
Where does our money come from?
For young children, the concept of income can seem mysterious. Kids might assume that parents have an endless supply of cash or can easily access money anytime they need it.
If your kids are curious about where your money comes from, this question is a great opportunity to teach kids that money comes from work. Explain that you work to earn money, which you then use to buy the things your family needs, like food and clothes.
To make this idea relatable, consider sharing what you do for work and how it contributes to the community. For example, if you’re a teacher, explain that you help kids learn every day, and in return, you earn money.
You could also talk about jobs they might recognize, like firefighters or doctors, and how people in those roles work hard to earn money to support their families. This discussion can help kids understand that money is earned through effort and isn’t unlimited.
Why can’t we just get more money from the bank or ATM?
For kids, an ATM might seem like a magical machine that gives money whenever you need it. This belief can lead to the idea that there’s an endless supply of cash.
To explain the limitations, let your child know that the bank or credit union only holds as much money as you’ve put into it, and every time you withdraw money, there’s less left.
If your child has a piggy bank, use that as an example. When they take out a dollar, there’s one less dollar inside. Once the piggy bank is empty, they’ll need to earn more to replenish it.
You can also talk about monthly expenses, like bills and groceries, that reduce your account balance. This can introduce the idea of budgeting and the importance of careful spending, even if the bank makes it easy to access money.
How much does something cost?
Kids might ask for toys or snacks every time they visit a store, and often it’s because they don’t grasp the concept of cost. They may not realize that different items have different prices or that money is limited.
To help them understand, consider giving them a small amount of their own money, like an allowance or a gift from a relative, and let them use it on a shopping trip. Explain that they can buy whatever they want with that money, but once it’s gone, they’ll have to wait until they earn to buy anything new.
This exercise teaches kids about prices, budgeting, and decision-making. They’ll soon see that money doesn’t stretch as far as they might have thought, which can encourage them to weigh their options more carefully. They might choose a favorite snack instead of a new toy or decide to save up for something bigger. This experience helps kids learn to make informed choices based on their budget.
Are we rich or poor?
Kids are naturally observant and may notice differences between families’ lifestyles, which can lead to uncomfortable questions about wealth.
When a child asks if they’re rich or poor, it’s a good time to discuss the concept of needs versus wants. Explain that wealth isn’t just about the things you own but also about making responsible choices with money to meet your family’s needs.
A helpful way to frame this is by focusing on security and contentment. You can explain that while your family might not buy every toy they want, you work hard to afford the things you need, like a safe home and healthy food. By emphasizing values like gratitude and smart spending, you can reassure your child without getting into specific financial details.
This conversation is a chance to help them understand that money doesn’t necessarily buy happiness and that having enough to meet your needs is something to be grateful for.
Preteens (Age 10 to 12)
Why do things cost what they do?
As kids get older, they may notice that certain items cost a lot more than others, and they might wonder why. This is a great opportunity to introduce basic economic principles, like supply and demand.
To explain supply and demand, use examples they’re familiar with, like toys or video games. Ask them why they think the newest video game is pricier than an older version. You can explain that when lots of people want a new game, the company can charge more because it’s in high demand. Over time, as interest fades, the price might drop.
You can also mention that the cost to produce certain items impacts their price. Televisions, for example, require expensive materials and are harder to make than pens, which is why a TV costs significantly more than a pen. By using these everyday examples, you’ll help your child understand why prices vary.
Why don’t all countries use the same money?
If your family travels internationally or watches shows set in other countries, kids might notice that other places use different currencies, like euros or yen. This can be an exciting opportunity to explain that, just as each country has its own language and traditions, they also have unique forms of money, called currencies.
To make this idea more concrete, explain that each country’s currency reflects its economy and that trading between currencies lets countries set fair prices for goods and services.
You could also show them how exchange rates work using an online currency converter or by exchanging a few dollars for another currency at a bank. This activity can help them understand that different currencies have different values, depending on where you are and the current exchange rate.
Why do some jobs pay more than others?
Kids may wonder why some people earn more money than others. This is a good opportunity to explain that wages depend on several factors, including job difficulty, education requirements, and demand.
Use an example that makes sense to them, like comparing a cashier’s salary with that of a surgeon. A surgeon undergoes years of training and takes on a high level of responsibility, so they’re paid more. Meanwhile, a cashier might make less because the role has fewer education requirements and is easier to fill.
Talking about this topic introduces kids to the idea of skill, effort, and the value of education in the workforce.
Teenagers (Age 13 to 18)
How does the stock market work?
By the time they’re teenagers, kids might hear about stocks on the news or from adults and wonder what they are.
Explain that stocks represent ownership in a company. When a company sells shares, it lets people buy small portions of the business. If the company grows and earns more money, those shares become more valuable, allowing shareholders to sell them at a higher price.
Encourage your teen to follow the stock prices of well-known companies like Google or Tesla to see how market news can affect share prices. This exercise can show them how events and trends impact the stock market, helping them understand the potential risks and rewards of investing.
Let them know that while stocks can lead to profits, they can also result in losses, as share prices can go down as quickly as they go up. Luckily, there are other forms of investments, like Certificates, that are less risky and can also yield returns.
If your teen is interested in investing, check out Apple FCU’s 12-Month Starter Certificate. Unlike other Certificates, their 12-Month Starter Certificate lets you open with as little as $50 and earn competitive rates on savings up to $5,000.
What is inflation, and what causes it?
Teenagers are likely aware of inflation as they see prices rise on things they want or need, like clothes or gas.
Explain that inflation means the cost of goods and services is increasing over time. This happens when there’s a high demand for items that are in limited supply or when the costs of production go up, as seen with food prices rising due to supply chain issues.
For example, you can explain how inflation affects their allowance or part-time job income. If inflation is high, the money they earn won’t stretch as far as it did before, so they may have to save more or spend more wisely. Showing them how inflation affects everyday purchases reinforces the importance of budgeting and planning ahead.
What is a credit score?
As teens approach adulthood, they may start to think about things like buying a car or applying for a credit card, both of which are influenced by credit scores.
Explain that a credit score is like a financial “report card” that reflects how well someone manages money, especially debt. Paying bills on time and keeping debt low can lead to a good credit score, making it easier to qualify for loans with lower interest rates.
Use a library book analogy: if they always return their books on time, the librarian trusts them and will let them borrow more books. Similarly, banks and lenders use credit scores to determine if they can trust someone to repay loans.
By managing credit responsibly, they’ll build a strong score, which can open more opportunities as they move into adulthood.
Kids’ curiosity about money is a perfect opportunity to introduce them to the basics of financial literacy. Answering their questions helps them understand how money works and equips them with skills they’ll need to make sound financial choices in the future.
These early conversations lay the foundation for lifelong financial responsibility, preparing kids to become smart savers, careful spenders, and confident investors.
Learn more about how to talk with kids about money with the Financial Fitness Fairy from Apple FCU! Their series offers an entertaining approach to teaching kids and families about managing money together. The Financial Fitness Fairy uses humor to deliver important lessons about responsible spending, fraud prevention, and the value of saving.
Visit Apple FCU’s YouTube channel to watch the Financial Fitness Fairy series today!
