Throughout the course of your children’s growing experiences, you will probably have many “planned” discussion with them. One of the “easier” topics on that list should be teaching them about good financial practices—an extended discussion that will probably continue throughout their young adulthood.
Teaching kids about money can start at a very early age with simple concepts that involve putting money in a piggy bank and explaining how they can “bank” that money away to buy something they want in the future. You can reinforce the concept when you go shopping and they request a special purchase. Simply state that (if you don’t object to the item they wish to purchase) if they want it, they need to have the money to pay for it and ask them how much they have saved.
As children get older, you’ll want to include them in more complex concepts in finances. An allowance is an excellent way to introduce them to the idea of having a “job”—not only from the aspect of being able to earn and save money, but also what it means to be responsible when others are counting on them to get things done.
Having money and learning how to spend it wisely represents a passage to a new level of maturity for children. Young people view managing money as a symbol of maturity and independence, so discussing personal finance with them shows that you see them as responsible young adults.
This is a good time to introduce the concept of a budget. Show them what it costs on a monthly basis to pay for things like vehicle loans, vehicle insurance, gasoline, cell phone bills and other things they’ll need to know about when they are considering a step up to a job in the “real world.” Show them what taxes will do to their gross pay and help them figure out what they will need to earn on an hourly basis to meet their monthly expenditures.
It may also be a good idea to open up your own checkbook to show them where your hard-earned money is going. Not only will it help to explain what it takes to run a household, it’s also a great way to show that you’re not “made of money” and why it takes planning to make major purchases or go on a family vacation.
To ensure a successful conversation at any stage of the process, here’s a few tips to help make the discussions both easier and more rewarding for both of you:
1. Approach the discussion with a positive attitude.
2. Set a tone of confidence, openness and trust.
3. Laughter always helps. Lighten the mood with humor when possible.
4. Make the talk an equal exchange, not a lecture.
5. Ask plenty of questions and listen carefully to the answers.
6. Don’t ever talk down to your child. In many cases, this is all new territory for them and they need to know they can explore without ridicule.
7. Don’t bring up old financial disagreements you have had with your children in the past unless it provides a constructive example.
8. Make sure your kids know they can always turn to you for financial advice, information or help.
