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Talking to Your Kids about Money

June 12, 2018

Talking to Your Kids about Money

Recently I received an email from my son’s teacher about why his dad was in prison. Let me restart this story, my fiancé served in a prison ministry this past weekend and throughout the week leading up to it we just talked about him going to prison not paying attention to the little ears who were listening. Turns out, my son took it for what it was and told all of his friends that when his dad got out of prison he was going to buy him a dirt bike. I received an email from a very concerned teacher about John’s dad in prison, stating that many of his classmates were pretty worried. Kids say the darndest things don’t they?!

Kids also have a lot of questions:

  • Why can’t I go to John’s house?
  • Why can’t I have ice cream for breakfast?
  • Susie’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, or in our case, because John’s dad is in prison;” and “because it’s unhealthy;” and, “we can’t have a horse in the subdivision.” 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 these kinds of questions in the middle of the mall, it can be embarrassing. Resulting in answers like ‘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 about finances is you (because their dorm mate, 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 financial 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 Jenny’s mom doesn’t need to know about your liquid assets. However, this kind of response also stops 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.

We suggest when these kind of situations arise, to begin by getting a little more context. Ask them, “What makes you ask that question?” is a great follow-up for 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 John asked me today, “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 Marvel toys on the top shelf of the toy store.

Start small. 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 checks, and other day-to-day financial chores. Their interest in finance may die 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. And, 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 better 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.

Your financial planner for instance is a great resource. They can help you find clarity in your finances, which you can pass on to your kids.

ZIGs Personal Approach

Need some personal tips on talking to your kids about money? Give us a call at Zichterman Investment Group. We have the tools and the ideas to create a foundation for constructive conversations about money, no matter your child’s age!

Views expressed are not necessarily those of Raymond James & Associates and are subject to change without notice. Information contained herein was received from sources believed to be reliable, but accuracy is not guaranteed. Information provided is general in nature. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.

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