Tips for Talking to Your Kids About Money
Piggy banks, savings accounts, and games like Monopoly are all great tools for helping your children understand the concept of money. But what steps can you take to truly prepare your kids for financial success in the future?
The reality is that many young adults enter college and the “real world” without a real concept of how to manage their money or balance a budget. This can lead to outrageous credit card debt, missed payments and ailing credit scores. So, let’s consider a few ways that you can help your children develop good money habits.
Talk about Money at a Young Age
Kids start asking questions at a young age and often mimic their parents’ actions. This opens the door to start discussing money and setting an example of how to steward your money at an early age.
Consider giving your child a clear jar, rather than a piggy bank, where they can place any coins or dollars that they have received from you or other family members. This gives your children a visual of how their money is growing, and the opportunity to discuss the growth in their jar.
You could also set small goals with them. If there’s a toy that they’ve asked for, explain how much money that toy costs. As their money adds up in the jar, you can count it together and discuss how much more they need to save in order to purchase the item. When the funds finally add up, you can take the child to the store and let them purchase the item themselves.
You could also put the ball back in your child’s court. Ask them if they still want to make the purchase or if they want to continue saving their cash. This helps your kids learn if a purchase is worth using their hard-saved money on if they want to continue saving for a more valuable item.
Resist Impulse Purchases
The latest video game was released. A new fall line of dresses hit the racks. A new iPhone model was just unveiled. There’s always something exciting and new that children and teenagers want to get their hands on… immediately. Given that we’re living in a material world, it can be hard not to add it to your Amazon cart and push the purchase button.
Instead, though, discuss the cost of the item with your children and don’t immediately give in to the purchase. Let time pass and then have the same discussion. Always consider having them use at least some of their own funds for any such purchase. This will help them better internalize the cost.
In the same vein, set the example for your children. If you’re constantly making impulse purchases, it leads them to believe that this normal buying practice. But if you’re weighing the cost and waiting to make a purchase, don’t be afraid to discuss these reasons with your children. It will ultimately help teach them about impulse control.
Teach Needs vs. Wants
How many times have you asked your child, “do you need [insert item] or do you want that?” We all know there’s a difference between needs and wants, but if you don’t follow up that question with a discussion, your child still may not understand the difference.
There are plenty of lessons, videos and worksheets out there from reputable sources like PBS that can help you start the conversation about needs versus wants with your children. Consider checking out a few if you think your children would benefit from more visual examples.
But, ultimately, you should stress the importance of needs for daily life and wants for “nice to have.”
To further exemplify the differences, consider creating categories of needs, like food, clothing and homes. For example, in your home, you can’t run the stove or washing machine or lights without electricity, which means you need to pay the electric bill on time every month. You also need food and water to survive, so the grocery and water bills are top priorities in monthly budgets.
On the other hand, categories of wants could be entertainment (i.e., movies, video games, music, etc.), snack foods, the latest electronic gadgets… and the list goes on.
Consider making a game of it to hit the point home. You could cut out pictures from magazines and flyers. Then have your child place the pictures on either the want or need side—and discuss with your child why they chose to place the item in each category.
Examine Your Financial Beliefs
Children are sponges, and as we discussed before, they closely watch their parents’ actions and will likely mimic these actions. So, how you discuss money with others and utilize money in your day-to-day life are equally as important as talking to your children about money.
Consider examining your financial behaviors, whether verbal or non-verbal. Are they setting the example that you want for your children? Determine what values you want to pass on to your children and act accordingly when it comes to your finances.
Now, as we wrap up, let me stress that these are only a few examples of how you can start discussing money with your children and setting the example of how to better manage your funds. If you’re looking for more steps to teaching your children about budgets and money management, give me a call today. I’d love to discuss how you can help your children make better money decisions.
It’s not a stretch to state that a major difference between an adult and a child is the ability to delay gratification. Helping your children understand and value the cost of things and how they are rationed in a family budget is just another step in helping them become adults.
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Sources:
https://www.daveramsey.com/blog/how-to-teach-kids-about-money
https://privatebank.wf.com/conversations/wealth_and_values/