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Talking to Your Kids About Money

Opening up and starting conversations about how to handle money and finances with your kids may seem overwhelming, but it doesn’t have to be – and their natural curiosity will likely invoke these conversations on their own! As a parent, you can serve as a positive financial influence in their lives by taking a few first steps and being consistent over time. 

The money lessons that your kids learn and the money beliefs that they form through your direct teaching and indirect socialization around money will stick with them for a lifetime. Keep in mind that what you don’t teach your children about money, they will pick up from others and society in general. Therefore, if you want to teach something different from the culture around you, it is important to begin shaping those discussions.

Here are five things to consider as you embark on helping your children understand the importance of being responsible with their finances. 

1. Start Simply, When They Are Young

Start discussing money with even the littlest ones by including them in everyday activities, such as grocery shopping or budgeting. This allows money to become a tangible concept and not some abstract thing that they cannot see. You can also ask them questions such as "We have five dollars to buy a treat, would you pick ice cream, fruit, or something else?".  These types of conversations help children to understand that there are trade-offs to any decision, and that money is not infinite.

Another thing to consider is involving them in chores around the house and rewarding them with money for completing those tasks. This helps to associate money with working as well as a simplistic form of budgeting. When they are young, kids tend to be very visual, so wadding up dollar bills in a clear mason jar allows them to more clearly see the money grow. As they get older, you can begin separating their money into three categories (save, spend, and give) to help them learn to develop and adhere to a budget.

As they grow and can handle additional complexity, you can begin opening a savings account or investment account in their name to illustrate the power of compound interest and investing.

2. Be Truthful  

Being honest with your kids is a great first step to opening the door to discussing finances. You can share the family budget for items like groceries or entertainment, and remind them of this limit when they ask for items that don't fit within it.

Additionally, if there are things in your financial past, such as going into consumer debt, that you are not proud of, share that with your kids as they become older. Honest moments with your kids are very valuable and will help build trust. The more open and honest you are with your kids around money, the more open they will be with you, so being truthful about your finances is a great place to start, keeping in mind their age and developmental appropriateness.

3. Talk About Values 

Encourage your kids to consider what is important to them for their future. Start by asking questions such as, "Do you want to own a house or rent when you grow up?” or "What splurges would you like to be able to make when you grow up (travel, cars, etc.)?" and “Do you think those desires might change over time?”

Helping kids to visualize what they want for the future is a crucial component in talking to them about money and financial goals so that they begin to conceptualize money not as an end in itself, but as a means to achieve their goals. Talking about what they value and hope to have in their future allows them to take a long-term view, which is critical to the concepts of budgeting, saving and investing, and using debt wisely.

4. Establish Family Goals 

As a family, talk about your budgeting methods and set specific goals together. For instance, perhaps you set a weekly grocery limit of $150. Take your children to the store with you when you shop and have them help look for sales or clip coupons to keep your cart under budget – and allow them to help allocate those saved dollars to other uses. Involving your children however you can with the family finances is a great hands-on way to educate them and give them a chance to see real-life examples of how their financial habits will impact them in the future.

5. Lead By Example 

There may be certain financial topics that you are not as knowledgeable about, and that’s okay! Take the opportunity to learn with your kids. Showing your kids that you are interested in growing your understanding of financial topics will heighten their interest in it as well. 

Talking to your kids about money may seem like a daunting conversation to have if you don’t know how to approach it properly. However, broaching the subject sooner rather than later will reap many benefits for you and your kids. Ultimately, you want your kids to have the knowledge and skills they need to handle their finances responsibly as they grow up. 

As a parent, it’s your job to instill this knowledge in them and to open the door to an often-taboo subject so that you can help them start on the right foot with their finances. Financial habits are formed young, so it’s critical that you start early. Make your kids feel comfortable talking about finances with you by using these tips. 

This content is developed from sources believed to be providing accurate information and is provided by Strategic Financial Planning, Inc. The opinions expressed and material provided are for general information only. Please consult professionals for specific information regarding your individual situation.