Questions kids ask about money & how to answer

Questions kids ask about money & how to answer

Research by Cambridge University shows children form core behaviors around money from the age of 7. Curiosity about money and questions about personal finance, however, can start earlier and last well into adolescence. Talking about money can be tricky. So here are some of the most common questions kids ask about money and how to answer them. 

Questions young children (aged 5-8) will ask

  1. What does money do, and why do we need money?


From an early age, your children see you swap money for items. For example, you’ll hand over dollar bills or tap a card in return for groceries, clothes, cinema tickets, or food when you eat out. Explain that money is a form of exchange. You give it to someone and you get something back.  


  1. Why can't you go to the ATM and get more?


Young children watch and learn constantly. Seeing you go to the ATM is one of their first learning moments about money. They see you press a few buttons and get cash. To them, it must look like you’re just going to the refrigerator for a snack. 


Explain that you can only get cash from an ATM unless you have money in the bank. But you have to earn that money to put in the bank. It’s not a limitless supply.  


To show your kids how it works, use an example of candy in a jar. Put some candy in and say they can 'withdraw' as much as they like. When the candy’s gone, give them some ways to earn candy to refill the jar again.  


  1. What are some things you can get with money?


This is a great question to brainstorm the answer to with your kids. Talk about all the things money can buy, from clothes and food to toys, somewhere to live, etc. Then expand the answer to explore how money can bring bigger things, like peace of mind, comfort and safety.


  1. Why can't you buy me what I want?


It's never too early to talk about needs versus wants and the value of money. Explain to your kids that wants are desires, things you’d like but can live without. Needs, on the other hand, are things you can’t survive without. Money has to be spent on needs first. Wants have to come second. 


“To make money lessons impactful, talk to your kids about money when it’s concrete,” says Beth Zemble, VP of Education at GoHenry. “At the supermarket, explain the difference between needs versus wants. Say, ‘we need fruits and vegetables. We don’t need candy and ice cream, we just want them. Make a game of it. Ask your kids to differentiate between needs and wants as you walk down the aisles or put items in your cart.”


  1. Are we rich?


Kids are hyper-aware of the world around them, so “are we rich?" is a common question.  Start by asking your children what they think being rich means. This will give you some context to answer the question.  


Are they asking why you don't live like a celebrity, for example? Or are they asking if you have more money than others? 


Talk about what you feel being rich means for your family. Then go on to say “We are richer than some people and poorer than others. And that’s the case for everyone.”


  1. How much money do you make?


For many people, the amount of money we make is something we’re reluctant to talk about with our children. It’s partly because we know kids love to boast to other kids. But it's a valid question for children to ask when they’re making the association between work and earnings. 


Answer it by explaining that you earn enough money to make sure you can pay for your needs (house, bills, and groceries). But also for fun things, like vacations and eating out. 

Questions pre-teens (aged 10-12) will ask

  1. What is a loan?


In finance, a loan is the lending of money by an individual or an organization like a bank. When you get a loan, as well as repaying the money you owe, you usually have to pay money for borrowing the money. That’s called interest. 


  1. What is a budget?


A budget is a spending plan based on income and expenses. Income is money coming in, like your allowance and earnings. Expenses are money going out (stuff you buy and services you pay for like Spotify.


You make a budget to help you avoid running out of money and getting into debt. And it’s usually for a period of time such as a week, a month, or a year. 


  1. What is debt? 


Debt is a sum of money owed. The easiest way to explain a debt is to relate it to a real-life situation. 


For example, you want to buy a pizza costing $10 but don’t have the cash on you. Your friend pays the $10 for the pizza but says they expect the money to be paid back. You have a $10 debt. 


  1. What are taxes?


Taxes are money the federal government requires you to pay from your earnings. The IRS collects the money raised from taxes and the government uses it to pay for goods, programs, and services to support the American public. Most of it is spent on things like social security, health care, veterans benefits, national defense, and transportation (roads, bridges, trains, and planes). 


  1. Why do some jobs pay more than others?


Supply and demand affect how much things cost, from a pair of trainers to a house. It’s the same with jobs. 


How much a company is willing to pay you depends on whether the job needs specialized skills that are in high demand. A doctor, for example, is likely to be better paid than an administrative assistant.

Questions teenagers (aged 13-18) will ask

  1. How do stocks work?


Stocks work by giving you a share of a company. They rise or fall in value depending on how well (or not) the company is doing. 


For more information on financial literacy and how stocks work check out Money Missions on the GoHenry app. It’s a learning tool designed to accelerate your child’s financial education. To access, ask your child to log into their GoHenry app and head to the ‘Learn’ section.


  1. How much money can you live on?


The real question is, do you earn enough for a decent standard of living? There is a living wage standard that shows how much money people need to buy things everyone in the US should be able to afford. However, it doesn’t show you how much you need to live on to meet all your individual needs. 


  1. How much do you save in a week? A month? A year?


How much you can save weekly, monthly, or annually varies from person to person. But as a general rule of thumb, you should try and save 20% of your earnings. 


It's also recommended you have the equivalent of at least three months' salary in your savings. This acts as a safety net should you lose your job or have unexpected expenses. 


  1. What causes inflation to go up?


Inflation is when the prices of goods and services go up. It’s measured by how much prices increase over time and tracks how the value of money falls as a result. Inflation makes life more expensive.


It happens when prices rise and the purchasing power (your money’s value) goes down. 


Inflation is all about supply and demand. When people want to buy something but there isn’t enough of it, the price goes up. If the market is flooded with a product, milk, for example, the price goes down because it’s easy to come by. 


When inflation happens you know about it. You’ll soon notice you have less money in your wallet, as everyday products you buy like cheese or milk, start costing you more. 


  1. How do banks make money?


Banks make money by loaning out your deposits and collecting interest on these loans. Basically, you put money into your bank account, and your bank lends it to other customers and charges them for borrowing it. 


Banks also make money by charging you fees. The types of fees vary from bank to bank. Some banks charge you service fees (for storing your money and running your account). They may charge maintenance fees (just for keeping your account open). 


They may also charge overdraft fees. If you spend more than you have in your bank account, they will charge you (a lot) for doing so. Every time you use an ATM that doesn’t belong to your bank’s network, you may pay from $2-5 dollars too. 


  1. What does it mean to "spend within your means?"


Your ‘means’ are your income. Spending within your means is a way of saying you can live on the money you earn without borrowing or getting into debt. 


Creating a budget, tracking your outgoings, saving money, and setting limits on your spending helps you spend within your means. These are all things you can help your child learn with regular allowance, a GoHenry prepaid debit card, and our app.

How can GoHenry help answer your children’s questions about money?

If you're looking for ways to improve your child's financial literacy and help answer questions about financial topics, our in-app Money Missions can help. These fun, bite-sized lessons are targeted to your child's age and knowledge level. There are quizzes on jobs & earnings, budgeting & plans, modern money, and more.
Written by Charlotte Peacock Published Dec 19, 2022 ● 8 min. read