If you’re a parent, chances are you want nothing more than success for your child as they grow, including how they manage their finances. The reality, however, is that unless you take steps early on to prepare your children for future financial decisions, chances are they’ll end up like many American adults today. According to a January 2022 Bankrate survey, only 44% of American adults had enough savings to cover an unexpected expense of $1,000.
While your home was like mine growing up, money wasn’t a common theme in discussions with your parents, at least not as a young child. While this may have been the case for us, it does not necessarily have to be the case for our children. It’s never too early to start talking to your kids about money.
Why Have Money Conversations With Your Kids Early?
Talking about money with young children may seem too early or a waste of time and energy, but children are often more attentive than you think. They watch us and imitate our actions and attitudes. The more conversations we have about money with our children early on, the more likely they are to learn how to manage their money properly. Here are some reasons to start talking to your kids about money when they’re young.
It normalizes money conversations
For many parents today, money was a taboo subject growing up. It just wasn’t something one casually discussed around the dinner table. Many of us didn’t know how much money our parents earned or spent, how much they saved and invested, or how much money they had saved for retirement. I could tell that my parents earned enough to take care of our family and take our kids on family vacations every year, but I had no idea what their financial situation was. Perhaps, more importantly, I didn’t know what I didn’t know once I got old enough to have a job and earn money.
By having frequent, age-appropriate money conversations with your children early on, you can create a more open environment for learning and asking questions about finances. Just because money hasn’t been openly discussed with your family doesn’t mean you should create a similar environment for your children.
It can help them make better financial choices
Teaching children the basics of money management can help them develop the skills needed for financial success later in life. From saving and investing to creating and sticking to a budget, early money lessons can give your kids a boost when it’s time for them to make more important financial decisions.
It can help them learn from past money mistakes
Chances are you’ve made mistakes in managing your money in the past. I know I’ve done a few that I’m not proud to admit. The good news is that we can turn these mistakes into positives by sharing our struggles with our children and helping them make better choices. Young children may not be faced with life-changing financial decisions, but they will as they get older, including paying for college or a house, learning to use credit cards responsibly, and avoiding debt.
Talking about your financial missteps with your children can help them avoid making them too.
They can’t learn any other way
If you think school will prepare your children for the many financial decisions they will face as young adults, think again. The Council for Economic Education’s 2022 survey of states found that only 23 states require high school students to take a personal finance course to graduate.
Young adults make some of the most important financial decisions of their lives in their late teens and early twenties, but feel unprepared to make them. According to a recent survey by Junior Achievement, 54% of teens say they don’t feel prepared to fund their future projects. Don’t wait for someone else to teach your kids how to manage their money.
Tips for talking about money with your kids
Having conversations about money early on can go a long way towards fostering a healthier environment in your home for financial success. Here are some tips to start talking about money with your children.
- Use everyday situations: Take advantage of ordinary occasions to talk about money with your children. Whether it’s paying your water bill or planning your monthly budget, use common tasks as opportunities to share ideas, ask questions, or even get feedback on how to spend your money.
- Take advantage of technology: Several mobile apps and other resources help teach financial literacy to all ages. We live in a digital world, so why not use it to your advantage to teach your kids about money?
- Make it a game: Turn real scenarios into games with your children. Next time you go grocery shopping, give your child a small budget and let them plan and shop for a complete family meal. Let them help you decide what activities to plan for your next family vacation. Let them compare costs and find the best deal. You don’t need to give them full access to your budget or have the final say, but letting them participate in small family financial decisions gives them a sense of ownership.
- Open a child’s bank account: Many banks offer savings and checking accounts specifically for children and teenagers. Most of these joint or custodian accounts come with parental controls and tools that teach financial education. Use a children’s savings account to help your children set and reach savings goals.
The bottom line
Having conversations about money early on will not only help your kids feel more comfortable discussing finances, but it can also play a pivotal role in helping them grow into successful, financially responsible adults. Find ways to incorporate discussions about money into daily conversations with your children. Provide a safe and open environment to ask questions, make mistakes, and learn now, to prepare them for the future.