I often get asked when parents should start talking to their kids about money. My father started his Money Lessons with me when I was thirteen, but I began teaching my girls when they were only toddlers. It’s my belief that children as young as age three begin observing their parents’ money habits.
It makes sense when you think about it. Our children learn how to walk and talk by mimicking us. Why wouldn’t they watch how we interact with money? These observations— good or bad—are their first introduction to money and create a long-lasting impression on them that they often carry into adulthood. Your money hang-ups become their money-hang-ups. This is one of the reasons why I encourage you to take stock of your own relationship with money, then demonstrate good financial behavior to your children.
The other question I get asked frequently is how do I talk to my kids about our family’s financial situation, particularly when there is substantial debt involved? Debt is often a foreign concept to kids as they have no personal experience with it, and it can be scary for them once they understand what it means.
Your goal is to get them onboard with your debt repayment efforts while minimizing their fear at the same time.
While I’m generally not a huge fan of sit-down money conversations, this is one topic that probably warrants it. However, I suggest keeping it in a casual environment, perhaps over dinner. The more of a “to-do” it becomes, the more nervous your kids will be. You want to project confidence and control, but still create an open atmosphere where their questions and concerns are welcome.
Before you talk to your kids, have a plan in place that both you and your spouse fully support. You’ve crunched the numbers, know what needs to be cut, what changes will directly impact the kids and most importantly—are prepared to answer these two questions:
You don’t have to give your kids play-by-play of the steps you’re taking to eliminate your debt. Instead, focus your attention on how it affects them and how they can support your efforts. Know in advance what will most likely trigger a meltdown, so you can help them see the bigger picture. Offer alternatives, such as helping them cultivate their entrepreneurial skills, so they can earn enough money to continue participating in their favorite activity or buying the latest gadget or designer jeans if those things mean that much to them.
Repeat often how getting out of debt will make their lives better. Give them specific examples. Ask them for their support and let them know how much you appreciate it.
Depending on your situation, your life may become quite spartan for a period of time. One mistake I see families make in this situation is to believe no-frills means no-fun. Au contraire, my friends. You may not be able to afford extravagant vacations, but there is no reason why you cannot have fun. You just need to get creative. Look for free family events in your local community. Plan a family day at a local park or beach and pack a picnic lunch. Go camping, even if it’s in your own backyard or Grandma’s. Borrow a movie from the library or a friend and have a make-your-own pizza and movie night.
Look for ways to earn money together. Hold a garage sale and agree that 10% of profits can be used for family fun. Or have your kids sell unwanted toys and clothes on Craigslist or eBay and agree on what percent they can keep (maybe even all of it) and what percent goes towards eliminating family debt.
We think in order to live a “rich” life that we need to spend lots of money. This belief has caused many families to live beyond their means and go into debt. In my opinion, a “rich” life isn’t based on how much money you spend, but how you use your money on what matters most. And by getting yourself out of debt and giving your family financial stability, you are living a “rich” life now.
Shannon
SHANNON RYAN, CFP®
I've watched a number of kids that grew up in homes where the parents weren't necessarily in debt, but were so frugal that the family never did anything fun together. So once the kids were 21 or so they were anxious to get out and experience the life they never had. They were sick of being frugal because they were taught as kids that frugal meant no fun, so they went out and spent lots of money to have fun and make up for lost time. But, if as you said, they had been taught that you can have fun for less, they may not have been in a such a hurry to spend loads of cash to have the fun they felt they missed out on.
That being said, I was so ashamed when we were in credit card debt that I would have had a hard time talking about that, and I think lots of parents are in the same boat. I wouldn't want to make my child feel bad or scared, but I think it would be good to let them see the consequences of getting into debt. Thankfully, we can talk about it from the outside looking in rather than right in the middle.
It's hard to admit to but I haven't really ever had an honest money conversation with my sixteen year old daughter. My daughter has an awareness that we've got bill and debt that we're trying to pay off but nothing beyond that.
I think you raise an important point about talking to my kid about money - I'm not really sure what to to say yet but I think I need to do this. No need for her to repeat my mistakes if she can learn from mine!
You are not the only parent who hasn't started talking to their kids about money, so don't feel bad. But I'm glad that you are aware you need to start. Understandably you might not know where to jump in and I would suggest integrating it into a normal conversation - rather than making it a big to-do. Parents sometimes think it should be a big production, but it doesn't need to be. The conversations should be fun! :) One idea to start the conversation is to give her a back-to-school budget and work with her to identify the things she "wants" and the things she "needs". Help her prioritize and find creative solutions to get the most bang for her buck, so to speak! Once you start talking to her about money, you'll find the conversations get easier and more spontaneous.
As parents, we don't want do develop that fear in the dinner table whenever our kids sense something serious is going to be discussed, let alone the family debts.
I find really important, though hard and challenging, to be honest with our kids since we all don't want to disappoint them in a way, or give them a hurdle of emotions knowing that there is a serious situation - which they are in to - specially when they are in a young state. These things can be brought about when they grow up, but I also firmly believe in the importance of honesty and being truthful with the current situation as well. These tips will really help a lot delivering the message to our kids and let them learn a lesson or two from the situation or problems a family has.