“49% of teens are ‘eager’ to learn more about money management. Only 14% had taken a class on a financial literacy topic and over a third want to learn money skills from their parents.” – Capital One
As parents, we play an important role in the success of our kid’s long-term financial stability. We teach them how to go the bathroom, how to tie their shoes, how to prepare for college, etc., but many of us don’t use everyday learning opportunities to teach them about money. It’s often a challenging subject to discuss without coming across boring or confusing, so here are my tips on how to have a conversation about money with your kids.
1. Understand the right time to have the “money talk”
Timing is important. I can’t say that there’s an exact age to start, but waiting too long can have detrimental results. Credit card companies begin targeting teens and young adults early. They bank (pun definitely intended) on the fact that this age group lacks the financial literacy and skills to manage credit responsibly.
“Students and parents agree that college students are not well prepared to deal with the financial challenges that lie ahead (The Hartford Financial Services Group, Inc.).”
Here’s a quick break down of what money topics to bring up at each age:
Teens (13-19): Visualize the future
This is that transitional age between being a kid and being an adult. Helping your teen visualize what type of lifestyle they’d like to have, where they would like to live, what type of career they’d like to pursue, etc. will help open the discussion for how much all of it will cost. This is where you begin to explain things like rent, food, car expenses, etc. This is also a great time to discuss saving (including retirement), and the effects of compound interest. Finally, you’ll want to talk to them about managing money as their income increases, and how debt plays a huge role in them being able to really live the the life they visualize for themselves. Here’s a clip of an episode from The Cosby Show that shows what your teen may be envisioning vs. reality.
Tweens (9-12): Cultivate a Money Mindset
This is an age group where our little “babies” begin to shape themselves. They’re going through many changes, and are heavily influenced by the things around them. Developing a strong money mindset is essential during this time because “tweens have an enormous spending power in the United States and are the target of marketers for their money (and influence over their parent’s buying power) [verywell.com].” Helping your tween understand the importance of delayed gratification, and not “keeping up with the Joneses” will help them shape their own identity around money. Using a “commission” system for chores and making them use their earnings for wants, is a great way to “discuss” money during this often confusing stage.
Download this free guide to get the full breakdown of age appropriate talking points and the BEST interactive money games for kids.
2. Hitting key points without being boring
No matter how much money you have, helping your kids understand that money is a tool is vital for its purpose in their adult lives. However, trying to talk about it can be so boring! Here are my tips.
Play games that demonstrate how money can be used. My favorite is Monopoly, but Life, Cash Flow, and Money Habitudes are great options as well. You can download this free guide to get a full list.
Create an “in-house” commission and reward system. Schools do this a lot to encourage certain behaviors, but the same concept can be applied at home. This is an excellent way to teach your kids how to earn, spend, and save. Again, you can download this guide for examples on how to implement this sort of system into your home.
Create little challenges to get them motivated to save money. One of the things I like to do is to “match” their earnings. So, if they save $XX, my husband and I will match it. This not only encourages them to save money, but also teaches them the basics of 401(K)’s. This concept can be used to explain several key points including interest, debt, and goal setting.
3. Implementing the stewardship mentality
Helping your kids develop a sense of purpose behind money allows them to structure their finances more strategically. As they begin to earn, spend, and save; their value system will help guide difficult financial decisions. Implementing a stewardship mentality early on teaches them that their earnings can be used for causes bigger than them, and gives their money a sense of purpose. So, on the surface it may like you’re not teaching your kid(s) the right money skills, but, in fact, you’re teaching them an invaluable concept that money (and the world) doesn’t revolve around them. Here’s how to implement this type of mentality:
Use the “3 Jar Method”
This is a simple method of taking three jars (like these), and labeling them “Give,” “Save,” and “Spend.” As your kids earn an allowance (or a commission), have them separate it into these three categories.
“Do as I say, not as I do” doesn’t work well in this situation. The best way to implement a stewardship mentality is to practice what you preach (I’m full of puns today!). When your kids see you give, they automatically assume that’s what they’re supposed to do with money.
Have them volunteer
As your kids get older, they will truly understand the concept that “time is money.” When they learn how to sacrifice their time for others, it changes their perspective and ultimately their spending.
You can continue reading more tips and tools on how to implement financial literacy into your home by downloading this free guide.