Parents accept that they will have to engage in difficult conversations with their children. Sex, drugs, alcohol — there’s no shortage of uncomfortable topics.
Among the educational conversations that should not be overlooked is teaching your kids financial skills. You are the main influence over how your children will behave with money as they emerge into adulthood, so it’s important to be proactive and responsible with the dialogue.
What to Teach, When to Start
Talk to your kids about money progressively. But don’t wait — habits form early.
Begin as young as toddler-age, teaching money as a tool of exchange, equivalency, borrowing, trading and saving. At this age children are like sponges, absorbing more information than we imagine. They are beginning to develop habits and skills that will last a lifetime.
As kids move to ages eight to ten, they should learn the time value of money. Some parents will introduce an allowance as a teaching tool. With an allowance it’s less about the amount you give and more about mechanics. An allowance should be based on family dynamics and capacity. Don’t use it as a reward, but tie it to specific responsibilities. If you provide an allowance, do so on a regular basis — almost as if it were a paycheck that your children have to make last. Be clear on what your kids need to pay for out of their allowance. It’s OK for them to make a mistake with their allowance, so don’t bail them out.
With pre-teens and teens, it’s time to get them a bank account and begin letting them use financial tools.
They also should be learning about responsible use of credit cards while still in the nest. A part-time job is great, real-world experience. Teens also can embrace concepts of insurance and investing.
Finding Teachable Moments
Teaching financial skills should be embedded into daily decisions and discussions. Talk about money frequently, but don’t turn it into a lecture. Be on the lookout for teachable moments and times where you can engage your children in a discussion. Always be positive, but don’t push it to the point where your kids are likely to tune out and you risk losing their attention. Think of teaching financial skills as an inoculation — you need booster shots along the way.
Should You Share Your Own Financial Struggles?
There’s a lot to learn from our mistakes, but put it into context of what you learned from it. Avoid angst, and be careful not to create fear or blame what happened to you on someone else. Kids repeat everything you tell them, so if you don’t want it passed on, don’t tell them. Whatever is discussed should be appropriate for your child’s age and maturity level. You also can cite mistakes others have made in guiding your children.
You are on the frontline to inform, guide and correct. Don’t expect that your children will learn what they need to know about money in school — or that it is the sole responsibility of the school to teach this skill. Because you have the greatest influence, you should not rely on someone else alone to instruct your kids. Not talking to your children about money is the most common mistake. Remember this is not a one-time discussion, so don’t overdo it. Don’t preach or lecture, and don’t avoid questions. If a question comes up and you don’t know the answer, agree to find out the answer together. Don’t pretend that you’re infallible. Don’t try to be too prescriptive in what you teach: One size does not fit all. You know your family — and your family’s values — best.
It is essential to remember that your children may be mirroring your money habits. While you are teaching your kids these core concepts, make sure that you are following your own advice. From your good example, they will begin to see how to apply these basic ideas practically.