Last week I shared a few tips to help you start talking to your kids about money. Many of you have already begun having these important conversations, and I challenge the rest of you to make money conversations or financial literacy a priority for your kids.
I was fortunate. My father taught me how to manage money when I was a teenager. Those “money lessons” inspired me to become a financial advisor and still guide my money decisions today. I know the long-term benefit heart-to-heart money talks can have on a child.
Today I’m going to share another 3 Tips to Guide Practical Money Conversations with Your Children. Through ongoing, casual conversations and demonstrating good financial behavior, I am amazed by how much my girls absorb and learn.
The most important lesson my father taught me was to be emotionally competent when handling my money. How many things have we bought out of fear, frustration, anger, boredom, loneliness and even happiness? I’m all for rewarding yourself when you achieve a major accomplishment, but some people have a tendency to reward themselves right into debt.
You can never stop feeling emotions (nor should you) so how can you stop making emotional money decisions?
Just as my father taught me—your goals and values should drive how you spend your money, not your emotions. A goal gives you something to weigh against an emotional need that may be clouding your judgement. Without goals, you have little reason to say no.
Kids need to be aware how their emotions can drive their spending. To help combat emotional shopping, they should ask themselves—”Will this bring me closer or further away from my goal?”—every time they find something they want, outside of their goals. It may take a few tries before they can successfully differentiate between a want and a need, but it will happen with regular practice.
I frequently model this in front of my girls by selecting something I like when we’re at the store, then choose to honor my goals instead of purchasing the item.
Success Tip: I realize we occasionally stumble onto an amazing deal. When it happens, I remind my girls this is why I always encourage them to keep money in their spend jar at all times, so when they find an amazing bargain or a great opportunity presents itself, they always have the money to say “yes” without derailing their goals.
Kids today may be all OMG and LOL, but IMHO, they also need to familiarize themselves with some common financial terminology and concepts, particularly as they grow older.
My oldest daughter is nine and has already managed her back-to-school shopping budget and her birthday party budget with a little help from Mom. It was an easy way to build her decision-making muscles. She learned how to differentiate between a want and need, prioritize her needs, compromise, and look for great bargains. All skills that will serve her throughout her life.
Success Tip: If you have children 9 or older, I would encourage you to let them handle a small budget and get some hands-on experience. If you are unsure where to start, I developed e-workbooks with five age-appropriate money lessons in them. The downloadable workbooks are available in The Heavy Purse Store.
Kids aren’t born knowing they shouldn’t talk with their mouth full. They learn this is inappropriate because we tell them. Money is no different. We need to set money guidelines with our children.
When my girls were young, I taught them there were three things they could do with the money they earned and received: they could save it, spend it or share it. My goal was to set the expectation that they would give their money a purpose and use that purpose to guide their decisions.
As they grow older, we’re having more heart-to-heart conversations about how money works. Too many kids head off to college with little understanding of money, debt, credit cards and investing and soon find themselves in trouble. This is not the future I want for my girls.
Success Tip: When your children are teenagers and working part-time jobs, it becomes critical that you set expectations with them. Will they have complete control over the money they earn? Or will a portion be “invested” and be put towards a car or college fund? Explain the responsibility of having a checking account and the pain of late fees and overdrafts.
Money mistakes will still occur, but it’s my hope through regular money conversations, mistakes will be rare and my girls will be equipped with the tools and experience to thrive financially.
The Heavy Purse Store is now open! My new downloadable Money Club Workbooks are now on sale. Each workbook provides five targeted lessons to help you raise Financially Confident Kids. Please check them out in The Heavy Purse Store.
SHANNON RYAN, CFP®
With summer approaching my kids may get summer jobs and I'll definitely encourage them to put aside money for savings. I just hope they'll listen and not get caught up in the excitement of having money.
Thanks for sharing these great tips Shannon! Definitely passing this on to my fam who has kiddos.
I was thinking about the emotional point you made. There are emotional reasons why we spend money, and then there is the emotional piece associated with being deeply in debt, and even more so, having to face the problem and deal with it. I found that when I dealt with our spending problem and let my emotions get in the way, all it did was create more fear. When I began dealing with our debt in a practical way the fear was suddenly gone and the future seemed a lot brighter :-)
I plan on teaching my children the power of a 401(k) match and retirement savings by matching any contributions to a Roth IRA that they make while they're in school.
This is kind of funny because over on my Facebook profile last Monday I asked how old should a child be when they learn about money? I love to get people talking so there were a lot of different answers on that subject.
The one I liked the most was when they ask for something. Now I wasn't raised to understand money because all I ever heard was that we couldn't afford it. I didn't ever know why because that was never explained.
I wasn't good with saving money I guess but I've been very budget conscious about it my entire life. I never spent what I didn't have. I also don't have any kids of my own so I'm sure I wouldn't have raised them very well with this either.
Honestly Shannon, I wish kids were taught as young as possible to at least know where the money comes from so that they'll understand that their parents aren't just able to get all the money in the world out of that one little ATM machine.
You've done a great job with your kids.
~Adrienne