When I talk to parents about teaching their children how to handle money, I get a variety of responses from nodding heads to flashes of panic and fear to outright disapproval. Often times when parents start getting resistant, I know what their argument will be: Kids should be kids and we don’t need to talk to them about money. Sorry to burst your bubble, but that’s a myth. This belief is why money remains taboo in so many homes and puts children at a disadvantage when the financial support from Mom and Dad ends.
I agree that kids should be kids and enjoy their time as one. We know how fleeting that period really is. 🙂 However, your children need and want to learn about money from you. Why? Because kids realize at a very young age the power money has. They understand quickly that things they want—toys, clothes, gadgets—require money. They see whomever has money (i.e. Mom and Dad) has the power to say “yes”. What they don’t understand is how to balance and prioritize their wants, when “no” means “yes” to a more important goal or how to use their money in a way that honors their values.
Left to their own devices, many kids would just spend. Few would worry about tomorrow because children naturally focus on today. Sadly this becomes reality for too many kids who leave home ready to spend but unprepared to make good money choices. Now armed with a credit card and too many memories of hearing “no”, they say “yes” and slide that card again and again without understanding the consequences of living beyond their means. And let’s get real—few kids even understand what their “means” are.
Parents who don’t want to talk to their kids about money often feel this way because they consider money to be a grown-up worry and don’t want their kids to get stressed out over it. I understand. I don’t want my girls to stress over money either, but that can happen whether we actively talk to them about money or not, which is why I choose to talk to them. Now they know money is not taboo in our home, so if they do get scared or stressed, they are comfortable coming to me with their questions or concerns.
When we were saving for our Disney Cruise, we talked to the girls regularly about how we were diligently saving for the big trip, so we couldn’t always say “yes” to things they wanted because our vacation was a top priority. And it worked, almost too well. Lauren lost her retainer and was devastated because she thought the cost of replacing it might mean we wouldn’t be able to save enough money for our vacation. Obviously, I did too good of a job. 🙂 So Lauren was introduced to a new financial concept called the family emergency fund.
I’m glad I discovered Lauren’s growing concerns and was able to nip it in the bud quickly, but I also don’t regret teaching her about goal-setting and prioritizing goals over lesser wants. Kids are always observing how we and others use money, and I would rather have us learn and make mistakes together. This way when things go off track, as they often do and did with Lauren, I can right the train before any long-lasting negative money beliefs are formed.
I also don’t believe that learning about money needs to be boring or a formal lecture. They are simply conversations around every day activities on how you use your money and why. These talks should be fun and not even appear to be a lesson. It’s just like sneaking veggies into their favorite foods. Here are a few ways to make learning about money fun for your kids.
A garage sale is a great way for kids to get rid of unwanted items (and clutter) and earn some money while doing so. Help them go through their clothes and toys and pick out what they want to sell and figure out reasonable prices. They keep any earnings and allocate them to their save, spend and share goals. Donate any remaining items.
I am a big believer in kids earning money over parents just handing money upon request. Depending on your child’s age and interests, identify ways they could earn money beyond doing extra chores at home. Some ideas include babysitting, mowing lawns, raking leaves or shoveling snow, pet sitting or dog walking or coaching or tutoring other kids in a activity or subject they excel at. Help them figure out appropriate rates and how to market their business.
Set a monthly entertainment budget and let your kids manage it, if they are old enough to do so. Otherwise, give your children options—both cheap and expensive choices—and let them decide. Help them understand that they can either do many things or one or two more expensive choices. Make sure they understand when the money is depleted for the month, there will be no additional funds added. We do this with the girls and I am surprised by how frequently they choose the less expensive options and don’t beg to do additional things once they money is spent.
Most kids by nature are not automatic savers. By turning saving into a game, it makes it fun for them and helps them see the power of saving at a early age. Grocery shopping is a great way to demonstrate this to your kids. Have them work with you to create a weekly or monthly meal plan based on the store’s sales flyer and look for additional coupons to increase savings. At the store, talk to them about why you are willing to pay more for some items, than others. Calculate how much you save each week and then at the end of the month, do something special with the saved money.
We teach our kids reading, writing and arthimetic because those are skills every person needs. And every adult handles money and makes choices every day on how to use their money. This is why helping our kids learn how to manage their money wisely is just as important as teaching them their ABC’s. I don’t want my girls to learn by trial and error. I want them to leave home financially confident and prepared to make smart decisions that align with their goals and values. This is why I teach them about money AND let them be kids.
Shannon
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SHANNON RYAN, CFP®
Teaching kids about money at a young age can help foster healthy and happy attitudes towards work and wealth which pay so many dividends down the road! I didn't remotely feel like I grew up and stopped being a kid when my Dad started instructing me about basic finances at seven.