Parents teach their children new
life skills every day. But, when it comes to money, they often prefer not to talk about it at all. While that might seem like a wise decision at the moment, not discussing
finances with your kids could rob them of future financial confidence and an understanding of critical concepts.
A 2017 Rowe Price survey showed that almost 70% of parents are hesitant to talk about money with their young ones. Also, only 23% of the kids in the study admitted that they speak to their parents about money.
For parents that think it’s too soon for their kids to know about
money matters, it is not! Instead, parents would be wise to hold family meetings, with finances as the
primary topic of discussion, creating awareness about how money can be earned, saved, and used. If they do, as the children age, they will have a better understanding of household and personal budgeting and financial goals. They will also be more likely to seek advice before making financial decisions and discuss
financial issues openly when they arise.
Tips to Initiate Money Discussions with Kids:
Start Slow
Money is a sensitive and complex topic. Parents are smart to keep the pace of
financial conversations slower with kids. Starting with an hour-long lecture about money is not what kids need. Instead, involve them in some everyday financial activities. Parents can include the kids when they shop online or take them grocery shopping. A fun and educational game is to have them keep a tally of how much is being spent.
Be Honest
When it comes to discussing money, do not sugar coat things. Instead, be open and honest. While it is not necessary to go into detail, a poor financial decision by a parent can turn into a
great lesson for the kids. By sharing your mistake, they learn that it’s good to discuss bad decisions with others so they can avoid them. They will also gain insight into how you would have done it differently. Such open and honest discussion helps the kids to become part of the
solution.
Talk about Value
Many parents are not comfortable discussing the
financial figures with their kids, thinking it might stress them out. It is not necessary for the kids to know the dollars and cents of every household bill. It is essential for them to understand the value. A smart way to teach value is by using
comparison. Compare several items that cost the same to give them a feel for any item’s value.
Set Family Goals
Holding family meetings over
financial matters encourages the kids to contribute to the discussion and planning. Make the process of setting and reaching goals a rewarding one. Be sure to celebrate success. If the family has managed to pay off a massive debt, the kids should know it and feel the pride that comes with reaching that goal. It’s very fun to see the kids
sacrifice small pleasures to forward the family goals.
Fix the Gender Money Gap
Often the son in a family has a better understanding of
financial matters, which gives them an advantage over their female siblings. Empower your girls with participation in value exercises, goal setting for debt reduction and savings, and tallying their spending.
Encourage the entrepreneurial spirit, for it is in the lemonade stands and lawn mowing services where they will learn about how
creativity and hard work leads to opportunity. It is in the home where we begin to close the gender gap. You want your little girls to grow up to be ladies who are
valued and paid equally for that value.
Avoid Sharing Fears about Money
While it is smart to share
strategies and challenges with the kids, it’s essential to approach these conversations without negative emotions. Keep the discussion rational and solution-focussed. Guilt, fear, and shame have no place in these conversations as these negative emotions can cause the kids to internalize the problems and feel
personally responsible for the family’s financial struggles. Even if times are tough, keep
financial conversations focused on improvement.
Key Learnings
To help kids understand the
complexities of financial matters and dealing with money, provide them with short lessons through regular
activities. Here is a list of the most important learnings that you will want to deliver.
Delayed Gratification
An essential skill that parents should try to instill in their kids is the art of
delayed gratification. Parents might think it is easier to just give in to their kids’ impatient demands. But the opposite is true. By delaying the delivery of much-desired gifts and experiences until a special day, they learn that life is not a
daily expectation of new thrills and they learn to find joy in the smaller things. They are also much more grateful when they finally receive what they have been hoping for when their birthdays or vacations come around. Similarly, they can be taught about waiting to save enough money to buy something they want. Parents can teach their kids to save at present to get something better in the future. Rather, the opposite habit that destroys so many financial dreams, to pay later for something they want today. Delayed
gratification may well be one of the most important lessons a child can be taught.
Wants vs. Needs
Children do not automatically know the difference between wants and needs. Talk about what types of items can be defined as needs and what qualifies as a want. Teach them that it is important to take care of necessities first, and once the needs have been met, wants and desires can be considered. Then save wants for special days. Reinforce those teachings, encouraging
self-control. Even if your kid is obstinate, try not to give in to their demands at the checkout line. Doing so will take away the chance for them to learn about self-control. It also makes going grocery shopping a truly miserable experience for mom and dad.
Working to Earn
The only way for kids to learn the true value of a dollar is for them to have the
experience of earning one. Allowance is a great way to do this. Rather than having
allowance be a stipend that parents pay without question each week, make it something to be earned. Better yet, create the opportunity for them to earn more based on the amount of work they put in. Parents should also take time to explain their jobs to their kids and help them understand how they can grow up and find work that they want to do so they can pay their
household expenses and meet their own financial goals. Don’t be afraid to talk about money matters with your kids. In fact,
embrace opportunities to empower your kids with financial intelligence that will serve them for a lifetime.
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