Could you believe it? Most kids go through their entire childhood with no clue about how money works. Why? While we feel a little weird to talk about it, but it’s certainly fine with other topics, such as Technology, AI, Science, History, etc.
According to a 2017 T. Rowe Price survey, 69% of parents have some reluctance when it comes to talking about money with their children. And only 23% of kids say they talk with their parents frequently about money.
The fact is that we need and use money every single day. So it is important to talk about it, learn it, and master one or two financial skills on how to use its tools or strategies efficiently. And it is time to start it as early as possible, at this changing era.
Here are five tips for talking to your kids about money.
1. Start slow.
We don’t need a 2-hour lecture to review bank account balances and retirement plan with kids. However, it is certainly fine to start with your children about some topics, such as the different value of a pet & an award-winning book, cost of restaurant meal, their monthly transportation ticket renew, grocery shopping list, “need” vs. “like”, and so on and on. No rush to do it every day, start slow and its importance first. You may be surprised at what they already know or what they like to know, after that you may think to arrange a plan for what they need to know to prevent many money problems in the future. (Don’t forget to come back for a complete list of Chelsea98’s Money Topics needed from Baby to Senior for free!) Once they realize you’re open to the “Money” discussions, they may be more comfortable coming to you with diverse finance questions.
2. Talk values, not figures.
If you’re hesitant about disclosing your salary and major expenses to your kids, don’t sweat it. Your kids may don’t really want to know.
The trick is that before they could pay attention to Money, they need few concepts like price, value, saving, budgeting, debt, and giving, for them to understand the value of Money better.
To help your kids get an idea of what real-world budgeting looks like, encourage them to do part-time jobs (when age-appropriate), or play some money games. Teach them to track spending and see how their money is running. Soon, establishing a budget will feel like second nature. And if they stick with it, they’ll be well ahead of the curve by the time they hit the college campus.
Don’t forget to different the value from those price tags. And teach them how to increase Money value by good rational spending habits.
3. Set family goals.
Let your children contribute to family budget committee meetings. Just you and your spouse are the adults, and make the final decisions. If you are paying off debt or finishing an investment goal, let the kids join in as you celebrate reaching milestones along the way. As you set family financial goals, remind your kids that goals require sacrifice. That might mean skipping a vacation in order to cash-flow a car. But they’ll catch on slowly—especially they could accept these sacrifices when it is bringing positive affect on their future soon.
4. Be honest.
Everyone makes mistakes. Be honest and speak out to your kids. So, if you regret loss in Stock market or no saving for college, tell your kids. If you ran up debts in your past and had difficulty paying them back, share that. Even share them with details (feelings, results, legal things) when they could understand better and remember long. It is not shame for parents to open the painful experience for kids to learn from these live samples. Just be honest with your children. Kids can handle it and more importantly, they can learn how to deal it better.
Remember, it is part of the life. If your kids could learn from your failures, they could stand on a better position to understand its negative effect deeply since an early age. They’ll appreciate your openness and gain a lifelong-valuable lesson about Money or Finance.
5. Learn about Finance together.
Sooner or later, you’ll touch on topics you may not completely “get” yourself—like Mortgage, TFSA, RRSP, or Mutual Funds. If you don’t feel knowledgeable on these financial concepts, that’s okay! Admit you don’t have the answers, do the research together, and find more financial ways of securing your family’s better future. It’s also a great way to spend some quality time together!
So go ahead and open up about the family finances, but keep it simple. Start the Money conversation slowly, be honest to teach & lead by real examples, talk values, set up your family goal, and learn about Finance together. Someday, your money-smart kids will be proud of followed your big financial footsteps along the way to be financial free soon.