There are some topics parents are hesitant to talk with their kids about. Maybe they want to let them “be a kid” a little longer or don’t want them to share what you’ve told them with others. But, just like “the birds and the bees” talk if you don’t educate your child about money, someone else will. So whether they are saving up for a new toy or saving up for a new house, having open and honest conversations about money is a good idea. Often, parents assume their kids are unaware of the family finances. However, even young children pick up cues from day-to-day life, what their parents buy casually and what they save for, and conversations with others. While they may see money in these contexts, this does not mean they have a coherent perspective to make good financial decisions themselves.
Involve Them in Financial Conversations
One way to address the awkwardness that can come with conversations about money is to have them regularly. While kids shouldn’t worry about whether the mortgage is going to be paid, just them knowing what a mortgage is is worthwhile. Cell phones aren’t free, neither are utilities, groceries, tuition, or sports camps. It is good for kids to see you lay out your goals, resources, and the saving/spending plans you utilize to get you there. The specificity of these conversations should increase with age.
Do your best to engage them in a dialogue as opposed to a lecture. If you’d like a resource to use as a jumping off point, the CFPB has the Money as You Grow guide on its website that lays out topics and the appropriate specificity by age range.
Focus on Values
Kids might ask how much money you make or what your house or car costs because they are genuinely curious. They do not have jobs or buy their own expensive things. They may be aware of brands but not grasp why one type of car is more expensive than another.
Before starting this conversation, make sure you and your partner are on the same page with your values, and that you live these values rather than merely aspire to them. While it’s sometimes necessary to tell your children to “do as I say and not as I do,” if you can show that you put your money where your mouth is, that can lend additional force to your point of view.
Next, rather than focusing your answer on the dollar amount, hone in on the values underlying the questions and encourage your child to speak more to them. Why do we value money? Why do we work to acquire it and save it? What can you do with money that you can’t do without it?
Give Kids Hands-On Experience Managing Money
Nothing helps kids internalize lessons quite like experience, so it’s a good idea to get them to practice their values by managing their own money. For young children this can start as an allowance and as they get older, a part-time job. The exact amount and conditions of an allowance vary from family to family; what’s important is that children have choices and guidance on how to spend and save. A good tool to help kids get started is a give-save-spend bank, which teaches kids not only to think about individual purchases but also supports the work they value and the kind of impact they want to have on the world.
Benjamin Franklin said, “An investment in knowledge pays the best interest.” With financial knowledge this is doubly true; not only will it prepare your children to engage with the world, but it will also set them up to be wise stewards of their financial assets, paying financial dividends long into the future.