I have long believed that kids start forming their money beliefs and habits as young as age three. Our kids are always observing us and learn by mimicking our behaviors and actions. So why wouldn’t they pick up our money habits and beliefs? You are only fooling yourself if you believe they don’t.
This is why I started teaching my girls about money when they were toddlers and free of any money bias. I wanted to help them build a healthy, sustainable relationship with money, where they made confident decisions with their money now and in the future. It’s a gift my father gave me and one I am passing to my children.
Having experienced the positive impact my money conversations have had on my own daughters, it has become one of my life’s passions to help other parents raise financially confident kids. Many are receptive to talking to their kids about money, but sometimes I am meet with fierce resistance.
This resistance generally stems from three concerns:
I understand your concerns, but I also know delaying these conversations comes at price—one your kids will have to pay. In a recent article on MSN Money, they shared how many money habits are set by age 7. After reviewing previous studies, behavior experts David Whitebread and Sue Bingham of the University of Cambridge concluded that money habits are typically formed early in childhood.
“The window is zero to 7,” said Guy Shone, research director for the British government’s Money Advice Service, which published the study. “It’s very hard to reverse those habits later in life.”
We need to start talking to our kids about money today.
Money has been a taboo topic in homes for too long and it’s time to break this cycle. Today, I am going to focus on very young kids that fall into the 0-7 age group.
I taught my girls every time they earned or received money they had three choices to make:
These form our save, spend and share goals, which is how we give our money purpose. When the girls turned six, they began setting their own personal goals, but we started first with family goals. My husband and I shared with the girls how we planned to save, spend and share our family money. We wanted them to feel highly motivated to help us achieve our goals. Now they understand why we can’t buy them everything they want because it impacts our ability to achieve our goals, which is our top priority. We avoid saying, “No, we can’t afford it” when they get a case of the “I wants” and instead help them understand we’re actually saying “Yes” to our family goals, thus eliminating any feelings of deprivation.
These days it can be very common for kids to never see money exchanged for the things we purchase. They see us slide a plastic card and a store clerk hand us a bag full of merchandise. It’s no surprise so many kids think credit cards are free money and wonder why we just can’t slide that plastic card and buy them whatever they want.
For many years, I used to receive strange looks from cashiers when I’d go shopping with Lauren and Taylor. Whenever I’d slide my credit card, I would ask the girls, “Who pays for this when Mommy slides this plastic card?” They would respond, “You do!” I would then ask them, “How do we get the money to buy these things?” They would answer, “You work real hard!”
The girls didn’t automatically realize this on their own. I told them. And then I asked them again and again until the answers were drilled into them. They know there is no credit card fairy. They know that even though there is no exchange of money that Mom and Dad still pay for everything we buy and that we work hard to earn the money to buy those things. They know we choose to use credit cards for our purchases (for reward points) and as they grew older we explained how we use them to our advantage without creating any consumer debt.
Be aware that your kids are observing and learning from you regardless of whether you are consciously teaching them. So watch how you talk about money. Do you speak about it in a positive manner? Or grumble about not having enough or someone having too much? What are your actions teaching your kids? Do you tell your kids to not tell Mom or Dad about a purchase you just made? Or tell them credit cards are bad then pay for all your purchases with a credit card?
Your words and actions matter and carry a lot of weight. So be mindful of your behavior and help your kids develop a positive relationship with money. It will be one of the greatest gifts you give them. In The Penny Club E-Workbook, I go into more detail on setting goals, handling “I want” and being a good financial role model.
Next Monday, I will share how to talk to kids, ages 7-12 about money and ways to reframe some of their money beliefs and habits.
Shannon
SHANNON RYAN, CFP®
Joking aside, very true that most habits come from an early age so better start talking about good financial habits as soon as possible.
My kids are older now but I have talked to my daughter about teaching my grandson about money. He's only 21 months but pretty soon the time will come and I'd like her to teach him at an early age.
Thanks for the tips! Hope you had a great Friday! Have an awesome weekend!
Thanks for sharing,
-Nicole
I know it's seen as 'bad' to talk about money with your kids and, as you said, it's wrong keeping them into dark, especially now, when it all seems so easy with the credit cards. When I was younger at least I'd see my folks come back home with a small stack of money and was able to see how it gets smaller as we'd pay for all the utilities, food etc. Now, the 'credit card fairy' (love the expression) can really prevent kids from understanding that we don't make money in sleep and that the 'plastic money' is actually hard worked money.
We're not yet parents (will be in 5 months), but we do plan to discuss openly with your child about this. Even if she'll be too small to understand too much, at least she'll hear us talk about saving, about prioritizing our expenses, about budgeting and keeping off debt. As she'll grow we'll be able to help her understand more and also teach her how to handle her own money.
I'd rather have a teen who's making some mistakes with the money and not an adult child who drove herself into bankruptcy, just because mom and dad didn't want to 'upset' her with grownup talk :D
I especially like that you include "sharing" and not just saving and spending. Instilling the concept of giving to others is very important for our young ones to learn.