Kids and money. For most of us this probably brings up memories of spending the majority of your allowance on candy. Or that really proud parent moment when your kid threw a fit in Target because you wouldn’t purchase them a $45 Lego set...No? Just me?
A 2013 University of Cambridge study showed that kids learn most of their money habits by age 7. So how do we teach kids to make good financial decisions?
Money Grows On Trees
Let’s start with one simple premise: kids literally think money appears out of thin air. Why shouldn’t they? Think about it - they don’t see you work (unless you work at home) and your boss probably doesn’t pay you in cash. Most people don’t carry gangster wads of cash around with them to run errands.
What your kids see is, essentially, this: you walk around the store with a shopping cart arbitrarily putting things in the cart. You walk up to the cash register, hand the cashier your debit card and then you get to take all of the stuff home. It’s practically magic. And most importantly, it looks free.
How do we clear up this confusion and bring our kids into the real world? It starts with you and it’s surprisingly simple but first, a few things to keep in mind. To start with, we have to understand that kids are, and should be, curious. Then, we have to commit to openly talking about money with our kids (within limits). Finally, we want to establish healthy ground rules which means we need to avoid shaming our children around their money choices, and instead let them live with the consequences.
Teaching Kids About Money: Kids Are Curious
Let’s start with the most important thing to keep in mind - kids are curious. Kids will ask you questions adults in polite conversation would not ask you. Instead of spitting your wine out and responding with “that’s rude” or “we don’t talk about that” which would shame them; respond with “why do you ask?” A lot of times kids’ money questions come from simple curiosity, though they can also stem from a place of fear. We do not want to teach our kids that we can’t talk about money. As a parent, you want your children to come to you with their biggest questions. Not only that but, let’s be frank, asking them “why do you ask” also buys you a little time before you answer to formulate a response.
With that being said, you don’t need to tell your children every detail of your financial lives. Children don’t need specific details, but rather a framework on how to think about money. It’s OK to speak in generalities.
For example, in response to a question about how much money you make you could reply “we have enough money to buy the things we need and to save some money for the future.” Or if your current position is not as comfortable you might say “we may not be able to buy all of the things that we want right now but we can buy the things that we need.”
Teaching Kids About Money: Talk, Talk, Talk
The next thing parents need to do is commit to talking about money with our kids in everyday situations. When you go to the grocery store, take your kids and talk about your grocery budget and your grocery list. Give your child a chance to make some choices. For example for older kids you could say “this week we can either buy strawberries or we can buy apples. If we buy the apples we will have money left over to buy a container of ice cream. What would you choose?”
Here’s the important part: let them choose. And now the hard part: Don’t comment on their choice. Don’t try to talk them out of it or ask them to think about something else. Let them choose and then live with their choice. (Hint: never offer a choice you can’t live with.)
For very young kids (kindergarten and younger), it would be better to talk through your decision instead of asking them to make it. Tell them, in simple terms, how you are making the decision and why. Show kids how to shop for items on sale by looking for sale tags and to price compare.
Children in my area start learning how to name different types of money in kindergarten. Keep your expectations low when they are young. You will do most of the talking, but encourage them actively participate by pointing things out to them or if you are in the pasta section ask them if they see any sale tags. Show them two pasta boxes and how they hold the same amount of pasta but one is on sale for $1 and the other costs $1.50.
What About My Teen?
This can be easily replicated with older kids and clothes/shoes/electronics shopping. I highly recommend that you let children take control on some areas of spending. For example, if you are going to buy them a new pair of shoes you could start by discussing what it is they need (dress shoes, tennis shoes, cleats, etc.). Then tell them what your have budgeted for that purchase and give them the cash. Go with them to the store and let them spend the money on whatever shoes they pick. If they pick something more expensive then they will need to come up with additional money. If they find something cheaper then let them keep the change to save or spend however they like.
Teaching Kids About Money: No Blame, No Shame
Finally, the last thing to keep in mind is “no blame, no shame.” Do not introduce blame and shame into your kids’ relationship with money. This means keeping your cool even when you’re feeling pretty hot about your kids’ consumerist dreams. Do not blame them for wanting an expensive toy, a new phone or lacrosse stick.
Instead, empathize with them. “I can see why you like that. That phone looks really nice.” Stop there. Don’t say anything else. If Suzie’s Mom has purchased the new iPhone for her just because it’s Wednesday, respond with “That’s nice.” Your child might wonder why you won’t buy them a new iPhone. You could respond with “we choose to use our money for other things. If you want to save up for a new phone I will be happy to help you get started.”
You Can Do This!
Pretty straightforward, right? Teaching your kids about money is not as daunting as it might seem at first. If you keep these three things in mind you will be on the right path!
Talk, talk, talk about money
No blame, no shame
What questions do your kids have about money? Do your kids get an allowance? Send me an email or post your comments below.