A mother and daughter sit together discussing financial education

Talking to your kids about saving for retirement

Aug 4, 2020
Empower Insights

In the famous “Stanford marshmallow experiment,1” children were given a choice — they could have one marshmallow now, or they could wait 15 minutes and have two marshmallows then. Not surprisingly, this harrowing dilemma reliably produced agitated children.

Surprisingly, follow-up studies2 found correlations between the ability to delay gratification and a variety of positive life outcomes.

If you want to talk to your kids about retirement, it might be helpful to think about it like a massive, complex marshmallow experiment. While it’s difficult for kids to conceptualize one marshmallow now vs. 4,000 marshmallows a month 55 years from now, kids as young as four can start to understand basic financial concepts like earning, wants vs. needs and saving.


A great place to start when talking to children about money, is establishing the concept of earning.

It’s all too obvious to adults that money doesn’t grow on trees. This isn’t always the case for kids, though — and who can blame them? There’s nothing inherently economic about a few dollars magically appearing under your pillow every time you lose a tooth.

Earning is simply getting money for doing a task. If you’re currently working from home, it’s easier than ever to have a “take your child to work day” to demonstrate this concept. Set aside a little time to talk to them about your work responsibilities — including the ways they relate to your team and how your team supports larger company goals.

When you’re out in the world, you can also point out people doing jobs, ask your child what their favorite jobs might be, and let them know that different jobs are compensated differently.

a mother and son view a tablet device reviewing financial information

GET STARTED: While giving your child an allowance is one of the classic ways to teach them about earning, some studies3 warn that tying an allowance directly to individual chores might not be ideal. Instead, it can be better to explain that certain responsibilities are simply what you do as a member of a family. Some experts suggest communicating that while some chores are part of family life, others can be completed for additional money. Whatever you decide to do with regard to paying your child an allowance, just make sure you’re clear and consistent regarding its amount, frequency and purpose.


Advertisements are ubiquitous, and whether we like it or not they’re one of the primary sources of financial information for your child.

One topic that advertisements will never cover is the difference between wants and needs. Let your child know that their physical needs are actually fairly minimal: food and water, shelter and security, protective clothing, and maybe some hygiene products so they don’t get exiled from society.

GET STARTED: The above list means that almost everything your child sees advertised is a want (even a cell phone!). Talk to them about ads you see together. Discuss whether those ads are advertising needs or wants and whether or not you might buy them. Are there less expensive alternatives to the advertised product? Do you already own something that serves the same purpose? On a grocery shopping trip, you can also ask your child to categorize the groceries you buy as wants or needs.


Once your child knows where money comes from and can identify things they want vs. things they need, it’s time for the true financial marshmallow test — saving.

The next time your child asks for something that isn’t too expensive, tell them that if they save their money they’ll be able to buy it for themselves. Talk to them about how long it’ll take — what is the cost of the item? How much money are they earning and how frequently?

Everything seems like it takes forever when you’re a kid, but remind your child that they actually have a fair amount of experience with waiting. They wait for their birthday, they wait for holidays, they wait for summer — they can do it. They can wait a month (or however long it may take) until they can afford the item they want.

GET STARTED: Instead of giving your child one piggy bank, provide them with three jars: one for spending, one for saving and one for sharing. The sharing jar will help normalize charitable giving and help teach gratitude for ways in which they may be more fortunate than others.

When your child is paid their allowance, talk to them about how to allocate their money between the jars. Is there an immediate need they might satisfy with the spending jar? Are they saving for a special want? Is there an animal shelter or other charity they feel particularly passionate about giving to? Keep track of how much they have in each jar, and help them see how the numbers change from month to month. Once they see how their actions affect those numbers, they’ll begin to understand that their decisions can really add up over time.

Check out this Personal Capital article for more tips on how to teach kids about money.

Big kids or kids at heart can save in an Empower Investment Account

1 Walter Mischel, Ebbie B. Ebbesen, “Attention in Delay of Gratification,” 1970.

2 Yoichi Shoda, Walter Mischel, “Predicting Adolescent Cognitive and Self-Regulatory Competencies From Preschool Delay of Gratification: Identifying Diagnostic Conditions,” 1990.

3 Beth Kobliner, “Make Your Kid a Money Genius, (Even If You’re Not),” February 2017.

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