Money talks are complex conversations for many families. But things get much harder when parents have to talk to their kids about money. Some parents think it is taboo to talk to their kids about money. It is not surprising to see parents who choose to suppress money talks at home and hope their kids will figure it out once they become older. As a result, kids grow up with zero knowledge of money and higher chances of having financial struggles throughout their entire lives.
According to findings from GOBankingRates, 1 in 4 Americans never talked bout money with their parents. That is an entire 25% of the whole population which justifies why many people struggle with money decisions after growing up. You don’t want your kids to be among those who cannot get their finances together or learn from the wrong people. You can help with the basic money tips and shorten your learning curves.
There are many reasons why parents distance themselves from their children when it comes to money talks. Some parents, for example, don’t talk about money with their children because they don’t know where to start. Others think that that school will cover that part of their children’s lives. To some parents, conversations about money are not that important or necessary. The truth is that talking to your kids about money can easily shape who they become and the financial decisions they make after growing up.
If you don’t know how to talk to your children about money, this article is your complete guide. Even if you want to make some changes to how things are going now, you will find the money tips covered in this post useful for those changes.
Your kids become who you raise them to be
As a parent, you are the primary caregiver and teacher to your children. Your kids look up to you for guidance. In order words, they copy what you do, the instructions you give them, and follow in your footsteps. What you do, how you do it, the decisions you make, etc. all affect the way your children grow up.
Financial education should be incorporated into daily conversations and decisions between parents and their children. If done right, your children can grow up with all the financial knowledge they need and have fewer financial struggles down the road.
Talking about money with your kids, however, is not an easy process. Your children do not have the same knowledge or mental capacity to grasp the financial maze. You need a specific plan and sometimes use trial and error to figure out what works for your children.
Some kids learn better by observing. Others prefer visual presentations with practice. As a parent, you need to devise a money talk plan that works for every child. Never assume that one plan will work for all your kids the same way. Nobody knows your kids more than you do. For this reason, if there is anyone who can teach them about money, it will be you.
This article will walk you through 9 tips you can use to talk to your kids about money.
1. Start early
One of the best times to talk to your kids about money is to start as early as you can. Kids adopt the behavior of their parents. What you do as a parent gets transferred to your kids. This is because, at an early age, your kids will know nothing about the world except what you tell and show them.
In order words, parents are the most important teachers to their children, especially at a young age. You can easily tell the behavior of a child by observing their children. So, as a parent, your job is to make sure that your kids get the foundation necessary about any topic including money as early as possible.
Now is the right time to have those money discussions with your kids. You don’t want to wait until your kids are old to talk to them about money. By then, they might have developed their own understanding of money from other people which could be bad money habits depending on where they learned it. You don’t want your kids to pick up wrong money habits because you waited too long.
You should not act like parents who only talk about money with their kids when they are asking them about toys, games, movies, etc. Saying that you cannot buy them those toys or games because they are expensive does not teach them anything about money.
2. Start slow
Kids do not have the brain capacities of adults. In addition, they don’t have all the life and financial experiences adult people have. For this reason, any financial education and money talk with your kids should be slow and steady. How slow? As slow as your kids can understand it.
It is not like a class your kids are taking and you hope them to graduate in a few months. Just like you watch them grow for many years and have to teach them how to read, talk, listen, walk, etc; the money conversations you have with your kids should also be taken at this pace.
Start slow and be consistent. This will help them remember the money skills you taught them and build upon those skills. The more you talk about money, the more they will remember.
A big mistake many parents make when talking to their kids about money is to have a one-time conversation and close the books. Money is a complex topic that even adults struggle with. A one-time conversation cannot teach your kids anything about money. You need to teach your kids what money is, how money is made, how to invest it, and how to manage it and spend it properly. This is not a one-day conversation. It is a lifetime financial education.
3. Establish money goals together
A very effective way to talk to your kids about money is to establish money goals together as a family. For example, if you are shopping for Christmas gifts, include your kids in the conversations and decide what to buy together. Have them see and learn how you are making your Christmas shopping budget, what you are planning to buy and why. At this time, you can help them understand how budgeting works and how you are using a budget to avoid spending more than you are supposed to spend on Christmas gifts.
You can also include your kids in other goals you are making. For example, if you are planning to buy a house 5 years from now, start a savings account together and make sure that your kids are involved throughout the whole process. If you have a piggy bank at home, start stashing money in there together and make sure that everyone’s voice is heard. As you add more money into the piggy bank or savings account, calculate together how much you have saved and what is left to reach your down payments. After reaching the necessary down payment, buy the house and celebrate together.
With this process, your kids will be learning how budgeting and savings work, the benefits of creating a budget, and why everyone should live below their means. In addition, your kids will understand why it is utterly important to have saving goals.
4. Learn about money together with your kids
Inclusion is one of the best practices in money management and decision-making. Kids learn by observing and practicing. As you go through your own process of learning about money, do not leave your kids behind. Include your kids in every step you are taking to learn about money.
For example, if you are learning how to manage money through budgeting, have your kids with you when you are reading about this topic or when you are creating a budget in excel or other software you use. Tell your kids what you are doing, the purpose of it, and what you are hoping to accomplish in the process.
Although your kids might not pick up everything you will be doing, they will retain some of that information. As you go through the whole process of creating this budget, putting the money into the account, and cutting down your expenses, your kids will have a chance to ask questions. Some of the questions you should expect your kids to ask are: What is a budget? Why do you need to save? How does a savings account work, etc? You should be able to honestly answer these questions to the best of your abilities.
There are parents who never talk about money at home and consider this subject taboo. As a result, their kids grow up with zero knowledge about money. That is why many people struggle with money during their adult lives. Their parents never taught them anything about money. The little knowledge they get is from school which is only theoretical and does not cover everything.
As a parent, you can easily give your kids the financial education they need at an early age through inclusion.
5. Simplify the language
When talking to your kids about money, simplify the conversation. Your kids do not have the same financial background or understanding of money. They also don’t know complicated terms used when it comes to money management practices. As a parent, you should consider these factors and simply the language for them. You cannot use the same language and vocabulary you use when talking to your clients and financial advisors.
Change the language and use terms they will understand. Kids usually learn by visual interpretations. If possible, try to use examples that include physical objects to interpret your concepts. Your kids might not remember the terms you used, but they will for sure remember the objects, examples, and how everything fits together.
6. Keep the conversation honest and fair
Many parents don’t feel comfortable talking to their kids about money due to their lack of money and confidence. By nature, no parents want their kids to know that they don’t have money or they are poor. The hard reality is that if you are poor, your kids probably know it whether you told them or not.
Humans learn by observing their surroundings and making conclusions. Kids are not different. Even if they have not developed a financial mindset, they can sense it when they are struggling financially or not. Your kids can evaluate your financial standing by comparing your family with your neighbors or other school friends’ families. For example, your kids can use the following information to make a conclusion about your current financial situation.
- The car you drive
- The house you live in
- How often do you eat out
- The kind of food you eat
- Your neighborhood
- The people you hang out with
- The conversations you have at home, etc.
You don’t need to hide that you are struggling, your kids know it already.
They(your kids) can also use the micro-events that take place inside your family. For example, almost every family establishes rules about the usage of water, electricity, electric equipment, etc. These rules are important because they help kids to start acting responsibly at an early age. Some families, however, establish these rules due to financial constraints. Kids always know when something is going on. They might not tell you but they know.
For example, you might get mad when your kids take long showers or forgot to turn off the lights. These are clues to them that you might be struggling financially.
Another common example of financial struggles in many families is school-related memberships. What do you think happens when your kids ask if they can join the soccer league and you said no to them? They don’t see a no. What they see are the opportunities they are missing due to the lack of financial resources. Be honest to your kids and do not say no without giving them a reason. Financial education is not the same as tooth-fairy fantasy. It is about real-life experiences that shape your kids’ successes and failures.
7. Teach them how money is made with examples
A good financial tip to help you talk to your kids about money is to go straight to making it. This is different from making your kids work for money at an early age. Instead, it is a process of helping them understand the cost of making money. In order words, kids won’t know that everything comes at a cost unless you show them how.
Instead of telling them that it is hard to make money, have them work for it. You heard me right. Many parents give their children chores they can do for a given amount of money. For example, you can have your kids clean the house every Saturday and give them 50 bucks each. Or you can have them clean your car and pay them $20.
Some parents take it to the next level and have their kids make a lemonade stand, cookie stand, etc. As the kids make sales on these stands, they learn a lot of skills at the same time. Not only that they will be learning how money is made, but they will also be developing important skills such as bargaining, sales, and communication.
Once your kids have learned how money is made and the cost of making it, it will be much easier to talk about it. You will not have to tell them that it is hard to make money. They will know that already.
8. Do not lie to them
Some parents find it awkward to have financial conversations with their kids. Kids ask honest questions that some parents find intimidating. Some of the topics most parents struggle with include money, reproduction, beliefs, race, and religion. So, the parents find peace in lying and hope their kids will figure it out on their own.
For example, many parents never talk about money with their kids simply because they don’t know where to start. When kids ask questions about money, parents lie about it. That is why kids grow up with lies or learn about money from their friends and other people they hang out with.
As a parent, you should be honest and truthful with your children when talking about money. Kids learn more from their parents and every answer parents give them defines who they become. If you give them lies, they grow up thinking and believing that those lies are the truth. As a result, your kids can end up in financial trouble due to the lies you told them. No matter how hard the truth is, tell it the way it is. This is the only way you can prepare your kids for the harsh reality and give them a chance to carve their own paths, should they want a different lifestyle.
9. It is not a one size fits all strategy
There is no single technique that works for all children. What works for someone else children might not work for you. Also, what works for one of your kids might not work for your other kids. At the end of the day, you know your kids better than anybody else. You know who learns faster, who is slower, what methodology that works for each child, etc.
You should not design a system and assume that it is going to be used on all kids. Instead, establish plans that address each child’s weaknesses, strengths, and behavior. If one learns faster and better using visual examples, use those examples when talking to that specific child about money.
On the other hand, if some children learn better by working for it, give those kids small rewards for every task they accomplish.
The point here is that you should apply different methods when you are talking to your kids about money. Sometimes you might need to try many options before you find out what works for each kid.
