All parents want their children to be successful and financially stable. But how many parents actually talk to their kids about finance and equip them with the tools children need to make smart decisions about money in the future?
According to the Parents, Kids & Money Survey conducted in 2009 by Baltimore-based financial services firm T. Rowe Price, about 60 percent of parents feel that financial discussions do not happen early enough. More than half of parents worry that they could be doing more to prepare their children to be financially competent by the time they turn 18. The study of 500-plus parents also revealed that parents, on average, grade themselves a B- when it comes to their own total understanding of basic saving and investing concepts such as setting goals, the importance of saving, smart spending, inflation and diversification. Many parents want to impart sound financial values to their children. However, parents do not always have the tools or feel knowledgeable enough to teach their kids about being savvy when it comes to money.
Children around the age of 5 begin to ask questions about money as they start grasping financial concepts. Parents can use everyday occurrences like a trip to the grocery store as a way to teach children about money. Taking time to explain the family grocery budget to kids helps them comprehend basic saving and spending concepts.
As the economy changes, financial discussions should also change. Use the economic downturn as a teachable moment. Be open and honest with your children during tough economic times. When the household spending budget is modified, it is important for parents to have an age-appropriate conversation with their children about the reasoning behind the adjustments.
Additional Tips for Talking to Your Kids About Money
- Make the conversation fun. Engage your children in a way they relate to or understand. As you discuss financial concepts, consider playing interactive financial games. Playing educational games with your children allows you to simultaneously entertain and inform your kids. While you are playing with your children, highlight the lessons being taught and build upon them by providing everyday examples that support the learning.
- Take advantage of teachable moments. Regular occurrences including buying groceries, getting money as a present and going shopping are ideal moments to impart basic financial lessons. According to the Parents, Kids & Money Survey, nearly half of parents neglect to use the occasion of receiving money as a gift as a teachable moment, and the majority of parents do not always capitalize on shopping or grocery store trips as opportunities to have a discussion about finances. Yet, these are opportune times to talk to your kids about money.
- Set a savings goal. Get your kids excited about saving by setting an attainable goal, like purchasing a new toy, outfit or game by the end of the month. Grant your kids with a source of income, perhaps giving them an allowance or money for performing chores. Encourage children to see how saving a little bit at a time helps with purchasing large items that interest them. Instill that if kids want something, they have to work and plan for it.
- Get your kids a piggy bank or other savings vessel. Piggy banks assist in teaching kids about money. Eighty-five percent of parents report that their child has a piggy bank, and nearly all parents say that having one sets a good example about the importance of saving.
- Let your kids see their money in action. Whether it’s offering an allowance, figuring out what to do with your child’s birthday money or opening a checking or savings account, allow your children to see their money in action. Also give kids the authority to make independent financial decisions regarding spending and saving their money. Permitting your kids to watch these concepts play out is an effective lesson that has monumental benefits in the long run.
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