I am often asked by parents what they need to do to teach their kids about money. Before I answer I usually ask the parent to tell me about their money behavior, their money values. Inevitably, it leads us to another conversation – how money was handled in their lives. How they remember the lessons from their parents. That conversation is the critical first step that parents need to take before they begin to teach their kids about money. I call it a “look in the mirror” moment. Why? Because we all carry money baggage around with us. Understanding what that baggage is – both good and bad – is important as it will come through in the lessons you teach your kids about money.
Silence is not Golden
My parents did not talk about money. My grandmother did. (Don’t we all love grandparents for this kind of transparency?) But my parents – not so much. They did not think their money was any of my business. That was until my dad died unexpectedly and my husband and I were left to see just what my mom and dad’s money situation was all about. My mom was now my responsibility and taking care of her with the money that was left was a part of that responsibility. And dad was not around to answer my questions.
I wish that my dad had explained more about how they were handling their money. What their wishes were for the money they had – and a complete accounting of their money would have been a big help. We eventually sorted it all out, but it was a nail biter for a long time. I understood after analyzing my own money education that silence was not golden when it came to money. That my kids needed to hear me – and see me – deal with money. I needed to normalize the money topic by engaging them in the money responsibilities of our family life.
Normalize Money Talk
So – in an age-appropriate way – talk to your kids about money. Make the money conversations as easy and often as conversations about chores and homework and family responsibilities. The more you talk, the more this will be an expected exchange of information. The parent who talks about money with their child will find that the adult child comes to them for money advice. What does this look like? Show them receipts, explain what a service charge is. Explain why you hold onto receipts to make returns should you need to. Explain your monthly budget and show them your own goals, long and short term. Knowing the value of everyday spending will help them understand how you achieve those goals.
Money Choices, Money Goals
How do you talk to your kids about money choices? Get physical and get a bank. (I am partial to our piggy bank as it supports the four choices you have for money – save, spend, donate and invest.) Every time money comes into your child’s life, have them makes choices and set goals for the money they place in the bank. The physical act of placing cash in the bank reinforces the choice. Goals are inspiring and keeps a kiddo’s attention long enough to realize success. If you see their enthusiasm flagging as they wait to reach their stated goal, consider matching what they have saved. Gives you an opportunity to talk about interest. Celebrate a realized goal – another way to have a normal money conversation! And remember that success breeds success – so as soon as one goal is realized – start on another.
Allowance is another way to start talking about money. It can even be tailored to just a clothing allowance or a car allowance. Put it all down on paper and have both of you sign the allowance agreement. Then agree on a time to talk about how the agreement is working – start with once a month and adjust if needed. The key is to have it in writing – so everyone remembers what was agreed to – and to have regular conversations about the agreement. An allowance is a smart way to talk to your kids about budgeting and show them your own.
Your Money Values?
Don’t forget to talk about your money values as well. Share with your children what you donate to and why. Involve them in that donation. Ask them what they would like to donate to and why and offer to match the donation. Experiences are a stronger teachable moment for kids. So whenever possible, involve them in your donations. Show them what the donation is doing. Take them along to the food pantry or the pet shelter and have them help. Helping will make an impression and help them understand the donation and continue the money conversation.
Have them set a long-term goal for investing. Start simple. A goal to put some money aside for, let’s say for our younger kids a summer activity. For older kids, the goal could be towards a bigger purchase they have their eye on like a tablet, a bike or a car. Refer back to the long-term goal about once a quarter to see how it’s going. Long-term goals are HARD for younger kids and the point is to suggest that not all goals are short-term. Eventually, as they mature, they will begin to understand how investing can make their money work for them.
These are just a few of the ways you can jumpstart the conversation about money with your kids. But before you get started, don’t forget to take that first introspective step of thinking about your money education – and what you are bringing to the table when you begin to teach your kids about money. You’re going to do great!