Talking to kids about the birds and the bees is awkward and hard. But what about money? A report by the National Financial Educators Council recently found the average youth financial literacy score to be just 58% (source). [Your kids can take the test here if you are interested]. Another study by Capital One found 52% of teens want to learn more about how to manage their money (source).
Right now most of our financial literacy education comes from our parents. It’s not standard in children’s education. Talking to your kids frequently about money is one of the best ways for them to learn how to handle their own finances as they become adults.
Here are a few tips to talk to your children about money:
Make it part of everyday conversation. You’re at the store and have a budget to stick to. Share with them how and why you came to your budget as you are shopping. Are your kids begging for a trip? Sit down with them and have them help make a plan to save for the trip as a family. Review basic bank statements with them so they can learn how to read financial information. Try inserting conversations about money into your everyday conversations and you won’t have to schedule time to have the ‘financial talk.’ Plus, it will be more effective if your kids can learn as they grow.
Be as open as you can about family finances. There are some topics that won’t be appropriate for all ages, we understand. But try to be open about finances rather than having those discussions behind closed doors. If times are tough, don’t fake it for the kids. Have a family savings meeting to discuss how you can all cut back. If you just received a raise or maybe an inheritance, talk with the kids about how you should invest it as a family. Decide as a family how you want to give to charities, etc. Being open about finances will help set kids up for financial success and make them more willing to talk about financial issues in the future.
Start early and invest in them. Even preschoolers can understand a piggy bank. Start explaining the basics when they are young and build on the conversation as they grow. Take them to the bank to open their first savings account and then help them decide how much to save and how much to spend. If your little one asks for a new bike, instead of just buying it for them, set a savings goal. Participating in the process helps kids understand the true cost of things and life in general. As they get older, invite them to come to a meeting with your financial advisor to learn how to manage investments. Starting early makes the conversations easier and allows you to build on them as your children get older.
Talking to your kids about money can be awkward and hard at first, but as the old adage goes, “Practice makes perfect,” or at least less awkward. Remember, sharing your financial experiences can greatly influence the financial future of your kids. So… talk!
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