Your kids take English, math and science in school, but do they take personal finance? And do you compensate by talking to them about money at all?
Leaving them out of the money conversation leaves that door open to disaster later in life. But by talking to them now, you teach them that money isn’t a scary word, nor is it one to be taken lightly. Even in the early years, kids can understand concepts, if not details. And all of these early conversations keep the lines of communication open for questions and understanding when they are faced with money decisions.
Use these 9 tips to make your kids comfortable with money early on.
1. Keep your tone light. Your attitude toward money affects how they see it. Using a resentful tone teaches them to resent it as well. Aim for a tone that educates without bias so they can excel when it comes to money.
2. When your bills come, share them. Explain what they are and why you get them. Explain the difference between variable and fixed monthly costs. Why does the water bill go up when they leave the water on when brushing their teeth? Or why the power bill goes up when lights are left on? Remind them how helpful they are by turning things like this off when they are not being used. Also explain the ones that don’t change. You pay X for your home because that this was an agreed price that won’t normally change.
3. When you get paid, explain what you have done to earn that money and how often you get it. Your children will eventually link the two together, but make it a point to explain that money will pay your monthly bills and every other expense that the family incurs.
4. Explain why and how savings work. Help them understand that it’s important to start saving for the future for emergencies, for their own children, for their own well-being later in life so they aren’t reliant on credit when it comes to the bumps that life throws at them, not to mention for their own retirement.
5. Help them learn by doing. Schedule some “work” time around the house where they do more than what they are expected to do (as part of the family unit) and pay them. Teach them to save first and that the rest will be for “fun.” This ingrains a sense of priority for them later.
6. Help them open a checking/savings account. Let them feel the power of decision. Show them the beauty of a growing savings account and the wisdom of not spending all of their “fun” money as soon as they get it.
7. Talk to them about what to avoid like unnecessary credit cards and overly expensive vehicles. Explain why some cards are better than others, and why it’s best to pay for a vehicle that suits their needs, not their wants. (The aim is understand the concept and not necessarily the details. They will also learn the door is open for a follow-up conversation when they are older and can do the math better.)
8. Talk to them about your decisions when you make purchases. Why did you decide on this product over the other? Why did you choose the High Energy washer and dryer, even though it was more expensive than the regular units were? Show them that thinking long term helps to make wise spending choices.
9. Teach them about self-control and the difference between “need” and “want.” Yes, they want the new Barbie, but they just shredded their jeans falling on the playground. Teach them the pros and cons of each purchase, while relating it to your income and budget. Learning this early makes it easier for them to make trade offs later in life. They will also appreciate the things they do get, and will take better care of everything they own.
The more you involve your kids in your financial decisions, the easier it is for your kids to learn how money relates to everyday activities, how the monetary system works, and how to make it work for them.
What will you do to get your children involved in the family finances so they come to respect and understand them?