Parents seem more than willing to talk to their kids about what foods to eat, how long they should stay on the computer, bullying or even the birds and bees. Yet, when it comes to money, so often this subject falls to the wayside.
The old adage about money not being everything is certainly true, but teaching your kids how to have a healthy relationship with money from an early age can make life a lot less challenging for them in the future.
In reality, it’s never too soon to start talking to your kids about money. Topics like budgeting, money management and credit can cause a boatload of problems for your kids as they get older if they don’t have a solid education. It makes no sense to just expect them to know how to manage money, or hope they will learn all they need to know in school. You want your kids to study hard and do well in life, but if you don’t teach them how to manage their money, it’s like sending them out to sea without a map.
In addition to knowing how to deal with our changing economy, recession, job loss and financial security, they also need to know how to budget to be able to function in, and survive, adulthood.
Here are some tips when it comes to talking to your kids about money:
Communication is key. When you want to talk to your kids about money, open communication is always the best approach. Identify teachable moments in your life to talk to them about money. Talk to them about the difference between a want and a need, and how sometimes in life they will have to make financial decisions whereby they won’t get everything they want.
Understand how your child learns. Take into consideration your child and how he or she processes information before you have a talk about money. Some kids will respond better to the sit-down, formal kind of strategy session, while others will learn more if you integrate the money lessons into everyday life. You know your kids better than anyone.
If your child is more of a visual learner, draw diagrams or charts to illustrate your points. You could also save some receipts to give her a visual of how much things cost.
If your child learns faster by doing, take them grocery shopping with you. Give him or her a certain amount of money and a list that contains both needs and wants. Ensure the list will total more than the money they have so that they understand strategic spending and how things will work in the real world.
Set a good example. As with most parental duties, the best way to teach your kids about money is to set a good example. If you handle your own finances responsibly, it will set your kids on the right path from the start. They like to watch everything you do, and how you manage your money is no different. In most cases, they aren’t consciously processing what they see, but you can bet it’s getting in there, especially if you consistently handle your money poorly and are stressed out about it.
Choose age-appropriate lessons. Children are never too young to learn about money. Here’s how to talk about money with your kids at each age:
- How to introduce money to preschoolers: For toddlers and preschoolers, now is a good time to introduce coins to them. Give them a jar to see their coins accumulate. Play games with your child using their coins and teach them how to count.
- How to introduce money to Kindergartners: Kindergarten-age children could start to have a small allowance. You could stipulate that they should expect to do a few weekly chores in exchange for the allowance. Keep the amount the same each week. Use allowance as a tool for money management, not as punishment or reward.
- How to teach elementary school children about money: Elementary school children can be told how you earn money and you could perhaps start to explain your monthly expenses such as food, transportation and housing to them. You can also start to talk about wants and needs.
- How to teach pre-teens about money: Pre-teens are starting to be pressured by their friends to keep up with the newest and the best. Be a strong role model and demonstrate smart spending and financial decisions. You can share past spending mistakes and how you’ve learned from them. Talk about a spending and savings plan as you increase your child’s allowance each week.
- How to teach teenagers about money: Talk to your teenager about opening a savings account at your bank in their own name. You can even consider getting them a pre-paid credit card to help your child establish a credit history and good credit practices while they still live at home. Discuss the idea of them getting a part-time job so they can manage and earn their own money and start to save for further education or larger items such as a used car. For more tips on how to teach your teen to be money-savvy, check out this post.
- How to talk to adult children about money: Before your adult children move out on their own, you can review their living and education expenses, go over their financial responsibilities and talk to them about budgeting.
In short, if you don’t talk to your kids about money, somebody else will, and it might not be the advice you would like them to have. Parents are not perfect. Be honest explaining your achievements and your own mistakes and try to guide them to the best of your knowledge.
Whatever you do, try to remember that sometimes the lesson is just as important as the teacher. If you’re having trouble or aren’t sure how to proceed, don’t hesitate to ask for professional help. You want your kids to respect money, not fear it. Let them know it is a very important topic, but not a source for anxiety. Take your time, be a living example and watch how your kids will respond.