Kids have a lot of questions:
- Why can’t I go to Tucker’s house?
- Why can’t I have ice cream for breakfast?
- Sarah’s mom bought her a horse. Why can’t I have a horse?
- Are we rich or poor?
The first three are easy answers: “Because you haven’t finished your homework;” and “Because it’s unhealthy;” and, “We can’t have a horse in the suburbs.” But the last, and questions like it, can be difficult for parents to answer.
Talking to your kids about money can be tough. And when they ask an indelicate question in the middle of the mall, it can be embarrassing. This can result in closed answers (‘none of your business’ or ‘because I said so’) which shut down conversations quickly, leaving your child in the dark about finances.
Transparency About Money
It’s important to be open with kids about money sooner than later, because one day they’ll have to decide how much to spend on rent, whether they should take a loan out for a car, and if they should spend their last few dollars on a six pack to bring to the party.
The best person to teach your kids financial literacy is you (because their classmate, Brad, will tell them to splurge on that six pack). Introducing your kids to the idea of money while they’re still young gives you the chance to instill some sense of financial wisdom into their lives before they meet Brad, with his bad financial advice.
And your influence can ultimately help to set them up for future financial success.
Commit to Talking to Your Kids About Money
When your child starts asking blunt questions about delicate matters in front of their friends, their friend’s parents, or everyone at the mall, it’s hard to answer in a useful way. A knee jerk, non-answer like, “we have enough money” is easiest. After all, little Ivy’s mom doesn’t need to know about your liquid assets. But, this closed answer also shuts down an important conversation at a moment when your child is most interested.
That’s why it’s important to make the commitment to be open about money beforehand, so when you hear the question coming, you can listen with the intent of answering with their future in mind.
The approach recommended by Ron Lieber, the author of, “The Opposite of Spoiled: Raising Kids Who are Grounded, Generous, and Smart About Money”, is to begin by getting a little more context.
“What makes you ask the question?” is a great follow-up response to your child that will help you get context, and give you a minute to gather your thoughts.
Talk Value, Not Numbers
Your child is probably incredibly bright, but no matter how smart, children are rarely equipped to deal with the full answer to most of their money questions.
If Jake asks, “How much money do you make, Mom?” Answering, “$65,000 a year,” will probably not help. To him, that’s a mountain of money he couldn’t spend even if he bought all the really expensive lego sets on the top shelf of the toy store.
Start small, and with context. The family budget is a great place to start. Help them to understand how money flows through the household, and all the decisions required to keep your money in balance.
Depending on the age and maturity of your children, you can include them in paying bills, writing cheques, and other day-to-day financial chores. Their interest may wane quickly, but even a brief exposure will help them begin to understand the real worth of money, and how all those little expenses add up.
Use Allowance as a Teaching Tool
An allowance is the perfect chance to teach your kids how to build good financial habits. Encourage good saving and giving habits in your child early on and these habits will become second nature to them.
Just like when they’re beginning to walk, you will watch them fall, and fall, and fall. That’s ok – it’s all part of the learning process. Give them a safe place to fail, a place where the fall may hurt, but won’t damage them.
They’ll be able to learn through experience, giving them a lived-in wisdom about financial matters. This way, when the stakes are high and failing will do more than just set them back until next week’s allowance, they’ll make sound financial decisions.
Parenting and Money
Like any parenting skill, teaching your children about money will be a learning experience for both child and parent. As you learn together, you’ll be able to tailor your approach to your family, and each child in particular.
And, if you need a little more advice, there are many great resources to help. Here are our favourites:
- “The Behavior Gap”, by Carl Richards
- “The Opposite of Spoiled”, by Rob Lieber
Your financial planner is another great resource. They can help you find clarity in your finances, which you can pass on to your kids.
Bayview’s Personal Approach
Need some personal tips on talking to your kids about money? Give us a call at Bayview Financial. We have the tools and the ideas to create a foundation for constructive conversations about money, no matter your child’s age!