The never-ending parent to-do list includes talk with your kids about money. You know it’s important yet money talk with kids sinks like an anchor because you don’t what to say. Or don’t believe you have time. Or don’t think you know enough.
Relax. It’s easier to talk with your kids about money than you think. Your goal is a casual two-way conversation where you and your kids comment, ask questions and share experiences and information.
Keep in mind that talking with your kids is a conversation; talking to your kids is a lecture. When you have conversations with your kids you develop a valuable long-term learning situation for your family.
Money talks with your kids give you the opportunity for a better understanding of what your kids know about money and what they need to learn. As a result, your entire family learns how to talk about a topic that many families avoid.
You and your kids will learn some new things together because money keeps changing over time. Look back in your own life. As an adult you are using forms of money and payment options that were unheard of when your grandparents started a family. In this aspect money will continue to change.
What will not change is the role of money in our lives. The ability to control one’s money provides the power to make choices. As in life in general, power without responsibility can be dangerous. Yet responsibility without control is unrewarding and frustrating.
Learning about how to manage money is more than understanding dollars and cents. Having money and making good choices are the foundation for financial stability. To develop this skill children need to know how to manage money as well as why.
Knowing how to manage money is a process, a skill that requires practice. For example, the process explained in my book The No-Cash Allowance provides a reliable, consistent process for children to use to keep track of their money. Think of the how as the math and numbers part of money management.
Knowing why to make money choices is be based on principles, values, and personal guidelines. While your children will learn about the values that are important to you, know that they may develop their own as they mature. Having the money talk will give your children the opportunity to developing their own value system.
In any family conversation about money it is important to keep the how and why separate. This helps parents focus the message and makes the message clearer for their children.
For example, parents often want to encourage their children to save money. Saving money is a value decision, a guideline for how to use money. Saving money, however, does not help a child know how to keep track of their money. Both are important but one is a process and the other is a value decision.
Money talk techniques
As you start money talks in your family there are four basic concepts to help you keep the conversation from turning into a boring lecture. For an example, let’s start a conversation about how a family uses money.
Start with a general statement. “As a family our money has to be used for many things. What does our family spend money on?” Listen carefully to what your kids include and what they leave out.
Add some educational information. Whether or not your kids mentioned housing and food as expenses, you can let them know that your family is like most others. “Did you know that most families spend similar amounts of money on housing and food? As parents we have a responsibility to pay for these things.”
U.S. consumers spend the biggest percentage of their money on housing 27%, followed by transportation 12% and food 10%. To view the infographic showing the complete spending breakdown click here. Bureau of Economic Analysis
Expand the conversation. Pose a question or comment that makes the discussion relevant to your child. “When you get money, how do you decide what to spend it on?” You’ll probably find that your kids are quite average.
Parents say most of their kids’ allowance is quickly spent on outings with friends or toys. American Institute of CPAs
Summarize. Wrap up the conversations by saying something like, “Parents have to spend a lot of their money on taking care of their family. We have to make responsible choices with our money. When you get older how you will have to make choices so you can pay your bills just like we do.”
Opportunities for money talk with kids
From this example you can see that you don’t need to be an expert to have a money talk with your kids. Money talks can short, during a car trip or at a meal. The very act of starting a dialogue about money will set the tone for helping your kids understand and learn from the people they look to for financial information.
A 2013 survey showed that 63% of high school seniors who discuss personal finance and money management very frequently feel “very confident” in their ability to manage their personal finances vs. 24% of those who do not discuss it frequently. High School Seniors’ Financial Knowledge and Outlook: A Discover Pathway to Financial Survey.
As your family creates a comfort level with money talk you all benefit from the experience. Future posts about money talk will address other topics about money and money management.
Lynne Finch helps parents teach their kids about money from piggy banks to online banking. “It’s time to teach the kids how to manage money they can’t see or touch,” says the author of The No-Cash Allowance. Follow Lynne’s common sense approach for teaching children about money from pre-school through high school.