Mother and daughter reading by the fire at holiday time.

How To Teach Your Kids About Finances This Holiday Season

Sarah Li Cain4-minute read
June 29, 2021

With the holiday season around the corner, you’re probably worried about how you’re going to cram so many festive activities into your schedule, plus how you’re going to afford it all.

But what about your children?

No matter your financial situation, teaching kids about money needs to be on your to-do list – who else will show them how to be savvy with their dollars? Besides, the holiday season is an excellent time to start incorporating money management lessons for kids. This time of the year offers many occasions to include real-world teaching moments. Who knows, it could bring your family closer together.

Involve Your Kids At Age-Appropriate Levels

As you’re figuring out how to teach your kids about money, it’s important to note that your child(ren) may not understand less tangible concepts if they’re on the younger side. Plus, if there are aspects of your finances you aren’t comfortable sharing, that’s perfectly fine.

There are no hard and fast rules as to you needing to divulge all details – it might not be necessary to go into detail about your 401(k) accounts, for example. The point is, incorporating ways to teach your kids about money is about finding ways to actively involve them in the planning, and being clear what happens each step of the way.

Not all of what will be covered below will work for all ages, so do your best.

Determine A Budget Together

It can be easy to go overboard and spend an inordinate amount of money on presents for everyone you know. One way for kids to start learning about the concept of money is through understanding that it can be a finite resource – meaning, it’s not possible to spend thousands of dollars on items when you don’t have the means.

Before buying anything, sit your family down and map out what you plan on doing for the holiday season. This is a good time to talk about what a budget is – an amount you’ve set aside for spending – and how much (yes, be open about the dollar amount) the family can spend.

Next, break down the budget into different categories:

  • Decorations
  • Travel
  • Cards (include postage)
  • Wrapping paper
  • Food (specifically for the holidays)
  • Parties (e.g. housewarming gifts, dishes for potlucks etc.)
  • Presents

Then, you can work together to break down the total budget amount into these categories. Give everyone a chance to justify why certain categories should have a larger chunk of the budget, and vice versa. If your kids are younger, consider modeling what it would be like to determine a budget based on your daily life and then go from there.

It’s also important to talk about the idea of opportunity costs when budgeting – doing so can help your children understand why you may be limiting spending on certain things or cutting out them out altogether.

Set Priorities

Talking about priorities can help your children understand how to use money as a tool for happiness. For example, understanding that not everyone needs to receive a gift will help to alleviate the guilt that can come with gift-giving. Or being overly generous with your budget within your own family could mean there’s less room to spoil others you love, like the grandparents or close friends.

Start by asking your children to write down a list of people they want to buy presents for. Then have them scrutinize the list – does everyone need to be on there? Ask them to determine how much they want to spend on each person and keep this list with them when they go shopping – stress the importance of sticking to these amounts by letting them know you won’t be giving them more than the predetermined amount. For those who are using money they’ve saved or funds from a part-time job, take some extra time to discuss what it means if they overspend – will it take away from something else?

Use Cash When Possible

Using cash is a better way for children to make decisions when it comes to money. First, if you’re using your credit card to purchase these items, they’re not involved in the transaction. You can’t exactly give your child a credit card; it’s much easier for them to hand cash over to a cashier.

Plus, when using cash, your child can physically see how much there is to spend. For example, say your child has $90, with a $30 limit each for presents for three friends. She ends up spending $35 each for two gifts and is able to determine she only has $20 left for the last gift.

You can use these occasions as teachable moments to show her that she can either put the more expensive presents back, or pick a gift that costs $20. It’s also a great opportunity to look at any way to save money, like looking for coupon codes online, or waiting until there’s a sale.

Focus On Contentment And Giving

The holiday season is also a great time to talk about those less fortunate than us. You can start by setting aside some money in your holiday budget toward donating to worthy causes. Or when going to the store to shop for presents, you can ask your child to pick something out for an organization like Toys for Tots.

Doing so can show your child that you’re grateful for what you have, and that you have the means to help others. In other words, money can be used for good and to spread cheer to other people. And the more grateful you and your children are, the less likely they might feel the need to spend money to keep up with the Joneses. For more articles like this, check out our personal finance learning center.

Sarah Li Cain

Sarah Li Cain is a freelance personal finance, credit and real estate writer who works with Fintech startups and Fortune 500 financial services companies to educate consumers through her writing. She’s also a candidate for the Accredited Financial Counselor designation and the host of Beyond The Dollar, where she and her guests have deep and honest conversations on how money affects our well-being.