In too many families, talking about money is the equivalent of picking a fight. It can be hard to talk about money with your kids, especially when they’re always asking for it!
Yet, our kids can’t learn how to manage money well unless we talk with them about it and also give them opportunities to practice managing money. Half of teenagers say they want to learn more about how to manage their money, reports a Capital One survey. Many teens say they want to learn about money from their parents, but only 27 percent of teenagers say their parents talk about money matters with them on a regular basis.
So let’s get talking with our kids about money. Start with the easy topics first and then begin to address the hard stuff. We can teach our kids positive ways to manage their money so that they can make smart choices now and in the future.
Here are four ways my family did it:
1. Setting an Allowance: When our kids were 4 years old, my husband and I started giving them a weekly allowance. We made four boxes to decorate: one for spending, one for saving, one for giving, and one for taxes. (We had them put a photo of the president of the United States on the tax box). We then gave them an allowance in dimes so they could easily put 10% into savings, 10% into giving, 10% into taxes, and the rest into the spending box. As they got older, we talked about how the tax rate often is much higher than 10%, but at least they weren’t surprised by the concept of taxes!
2. Saving For the Big Stuff: We also gave our kids opportunities to earn additional money if they wanted to save for something special. One year, my son did all kinds of odd jobs to save up enough money for an iPod. Six months later, he was saving again when he dropped the iPod in water and it stopped working. That was a hard money lesson for him to learn, and it also was tempting for us parents to help bail him out—but we held firm.
3. Communication: In our family, we talk about money on a regular basis so that we can learn our kids’ thoughts on money and how they are using it. That’s how we discovered our seventh grader was in the habit of borrowing money from friends and that he owed seven friends money. If we hadn’t found out about that, I fear what other poor money habits he could have developed!
We also talk about our money management strengths and weaknesses. We have two family members who are great at saving, two who enjoy helping good causes by giving money, and two who find it too easy to spend money. These discussions encourage us to help each other so that we’re making positive money choices, learning from our money mistakes, and supporting each other as we consider better ways to use money.
4. Honesty as the Best Policy: We’re also honest about what’s happening to our family with the current economy. According to a Northwestern Mutual survey, only 21 percent of Americans feel extremely or very secure financially. Most families are feeling financial strain—or financial insecurity—and it’s important to talk to our kids about this without scaring them.
Capital One Financial Corporation, “Capital One’s Annual Back-to-School Shopping Survey Reveals Gaps in Budgeting Priorities and Communication Between Teens, Parents,” news release, August 5, 2010.
Northwestern Mutual, Financial Responsibilities: Changing Timeframes (Milwaukee: Northwestern Mutual, June 16, 2010).
ParentFurther.com, kids and money, http://www.parentfurther.com/parenting/money