Growing up, my parents never really talked to me about money. I occasionally heard them discussing finances when they thought us kids were asleep or not around. I remember being told to “stop turning up the thermostat” when I was cold and “put on a sweater” or add another layer of clothing. I remember my parents being very thrifty and their seemingly magical ability to stretch their dollars into the impossible. I also remember my mother’s constant encouragement of me to save my money for something “big” rather than spend it on every little momentary whim I experienced. So, while we never really talked about money specifically, by observing my parents spending behaviors, I learned the value of money, especially because it was not something we had in abundance. I didn’t understand that part then, I just thought my parents were being stingy, but now as a parent myself with the responsibility of keeping my household afloat and functioning, I fully understand my parent’s perceived “stinginess” was actually them actively budgeting and planning for our family’s financial survival.
Raising my children in a time quite different from that of my own childhood, I realized conversations with our children about money, financial literacy, and budgeting must be ongoing. Like me as a child, I’m sure my children can infer a great deal based on observation; however for me this subject is worthy of discussion. The question is how to do you broach the subject with your children and at what age will they be capable of understanding the value of money and the role it plays in our daily life?
Here are some tips to get the conversation going:
1.) Start Young – While it is never too late to develop good money habits, starting the “money conversation” when your children are young means they will be well versed in good money management and responsible behavior when they are older and more is at stake for them.
2.) Talk About Money – As I mentioned earlier, my parents didn’t really talk to us about money because they were taught by their parents that this is a topic you don’t discuss with children. However, ongoing conversations about money and finances are an important step in ensuring your children develop a “healthy relationship” with money. One way to begin this discussion is to include your children in basic financial decisions. For example, when you are preparing for “back-to-school” shopping you can say, “based upon what we’ve budgeted for back-to-school shoes, we can either buy you one new pair of shoes or two to three new pairs of less expensive shoes.” You can also start the conversation about why some things cost more money. Have your children price compare and read product reviews and advertising claims to determine whether items are basically the same product and if one particular thing is only more expensive because of the name brand. Ask them to explain if that is important and why or why not? Explore with them whether or not there are other factors that might justify a higher price.
3.) Talk “Value” Not Dollar Amounts – If you’re reluctant to divulge your salary and major expenses to your kids, then don’t. Period. The good news is your kids don’t really want (or need) to know those details anyway, but rather the underlying concepts that impact and control the numbers such as budgeting, saving, giving/donation, paying down on or off debt, etc. To help your children understand what “real-world budgeting” looks like, encourage them to download age-appropriate budgeting apps. With budgeting apps, they will learn to track spending habits and see how far their money is going. Soon, establishing a budget will feel like second nature to them so by the time they are ready to go off to college or leave the nest, they’ll be well ahead of the curve and more equipped to deal with the challenges and temptations of life at that stage.
4.) Be Honest – If you harbor any regret about going into debt or not saving more for college, tell your kids. If you ran up debts in your past and had difficulty paying them back, share it. Your children will appreciate your openness and will learn valuable lessons from you about overspending and learning to budget, among others. Instead of hiding your financial failures or covering things up when money is tight, tell your children the truth. Parents very rarely have opportunities for open, honest moments with their children and budgeting and finances offers a great medium for some “real talk” and connection with your children.
5.) Set Family Financial Goals – Allow your children to participate in and contribute to family budget meetings with the obvious caveat that you and your spouse are the adults and that you, “the adults,” are the ultimate arbiters of any decision(s). Set goals as a family and help your children understand that achieving goals requires sacrifice.
6.) Learn About Money Together – At some point, you will begin to broach topics you may not completely understand yourself; this is not cause for worry but rather opportunity. Confess you don’t know everything about everything and turn it into an opportunity to learn, research, and grow together as a way to secure your family’s financial future.
The bottom line is: Be open and honest about the family finances. At an age-appropriate level, have the money/budgeting conversation regularly, and practice what your preach. That way in the future you can “bank” on” the fact that your children will be smart purveyors of money, will know how to budget, and that no matter their income level, they will understand how to live comfortably within their means and be financially independent.