Teach Your Kids About Money EarlyBy: Robert J Semrad | Posted On: September 5, 2016
Money is a tough thing for a lot of people to talk about. We are told from an early age that it’s not polite to ask people about money, and even discussing it within a financial transaction is tricky. “If you have to ask it’s too expensive,” and “Never let someone know what you’re willing to pay,” are just some of the mixed messages everyone gets about money. For kids, it’s even more confusing.
Kids lack the background knowledge adults have accumulated over time. Money is to them whatever their parents or guardians say (or show them) it is. Knowing how to frame a child’s reference to money as well as setting a good example are important ways to develop their respect for money and keep them out of future debt.
One important part of talking to your kids about money is demystifying it for them. Whether you have a lot or a little money, talking about it plainly and without emotion is a good first step. First and foremost, use the right words and avoid euphemisms when talking about money, credit cards, and earnings. Work with them to understand how to count money and talk about where it comes from. As a Chicago bankruptcy attorney, I can tell you the most important part of this is to develop clear messages about borrowing.
“If you have to ask it’s too expensive,” and “Never let someone know what you’re willing to pay,” are just some of the mixed messages everyone gets about money. For kids, it’s even more confusing.
Little ones will have fun counting dimes and nickels and figuring out how many of them make up a dollar. Activities like this help build an awareness of money. When possible, help them count out money to give to a cashier or put in the collection plate at church. Developing a sense of where money belongs in daily transactions will help set the foundation for future lessons.
As they get older, an allowance or small set of responsibilities can help them remember these formative lessons, “Wow, I just got $20 for mowing the neighbor’s lawn. My new game costs $20.” Now mowing the lawn and buying a game are linked as cause-and-effect. Games or any other “stuff” doesn’t just appear out of thin air.
As they get older still, you can add lessons about opportunity cost. For example, “If I got $20 to mow the lawn and my game costs $20, what do I do if I want to see a movie this weekend that costs $15?” Borrowing the $15 from you means that next mowing gig is only going to net $5 – that’s a huge lesson to a 12-year-old. As your kids develop more responsibilities, get money for holidays, and even begin to think about college help them think through current and future spending.
Recently, Mila Kunis spoke out in favor of these lessons for her kids by saying it’s clear in their house that she and husband Ashton Kutcher have money, but that it’s not bestowed upon the kids as a birthright. Although she caught some heat for joking around about it, she did explain that teaching her kids how to appreciate money is a priority. The criticism of her choice just goes to show how emotionally charged talking about money can be.
At any age, reinforce the value of money by incorporating some giving behaviors in your child’s responsibilities. When they have more than they need to do the things they want, chat with them about saving and about giving. Author and New York Times columnist Ron Lieber outlines some effective saving, spending, investing and saving strategies in his book, The Opposite of Spoiled. In an NPR interview, he talks about the strategies in his book and the surveys at this link demonstrate just how different everyone approaches the subject of an allowance.
My opinion is, if you can do only one thing to help your kids understand – don’t transfer emotional feelings about money to them, if you can help it. They will get enough of that from their friends, school, the Internet, etc.
There is a way to help your kids assign value to money early so that they don’t lose those lessons later in life. Developing a healthy context and adding a few harmless lessons in planning, spending and saving will go a long way to helping your kids stay out of our office.