How to Talk About Money and Finances with Your Kids
According to a recent study people are more comfortable talking with friends and family about marital discord, mental health, addiction, race, sex and politics than money.
Money talk, however awkward, is a crucial part of teaching your kids about responsible money management. It can start simple with savings and allowances but as kids age include them in important money conversations.
Here's how to broach the subject from the toddler years to young adulthood.
Ages 3-5
Earning
- Explain how and when they can earn money (i.e., allowance, from gifts).
Borrowing
- Describe the difference between borrowing and owning. Explain why it is important to return borrowed items.
Spending and Saving
- Set a savings goal for a specific purchase, such as a new toy, a vacation or an upcoming holiday.
Financial Decision-Making
- Help a parent/caretaker make a decision about when (and when not) to spend money on a purchase.
Ages 6-12
Earning
- Identifying jobs or tasks that children can do to earn money and learn the difference between a wage and a salary (in relation to allowance).
Borrowing
- Identify situations when people pay for certain items in small amounts over time and summarize the benefits and disadvantages of using credit.
Spending and Saving
- Create a weekly savings plan, explain how savings is important to meeting long-term goals, and consider opening a savings account.
Financial Decision-Making
- Predict the consequences of spending decisions.
Ages 13-21
Earning
- Calculate the future income needed to maintain a desired standard of living and the impact of working a part- or full-time job.
Borrowing
- Describe various ways to borrow money, the importance of building a credit history, and college financing options such as student loans.
Spending and Saving
- Explain concepts such as investing, compound interest and inflation. Create a plan to prioritize expenses, manage spending and meet goals.
- Discuss the pros and cons of buy now pay later programs and how to make sure they'll fit within monthly expenses.
Financial Decision-Making
- Discuss how individual responsibility for financial well-being will change as life circumstances change.
- Discuss life after high school and the financial responsibility of going to college, a technical school or right into the workforce.
Disclosure:
The information provided is for educational purposes only and is not intended to provide specific financial advice or recommendations.
