When I was growing up in Iowa, we didn’t talk about money in my family. My parents valued teaching my siblings and me about saving, budgeting and earning money, but conversations about our family’s economic situation and financial decisions were rare. This was typical at the time — especially in the Midwest, so to my friends and me, money was shrouded in some level of secrecy. Later, when my family hit a rough patch during the farm crisis, we began having more open conversations about money. And while those talks were very difficult at first, it was a relief to understand more about our family’s finances.
Apparently, times haven’t changed much when it comes to family money talks. Recent research by the American Institute of CPAs indicates that money remains among the lowest priorities in conversations between parents and their children. In fact, parents are much more likely to have prioritized discussions about pretty much everything else before money. The number who say they’ve discussed manners (95%), eating habits (87%), grades (87%) and the dangers of drugs and alcohol (84%) is significantly higher than the number who say they’ve talked about money (81%). They’re also waiting to have these discussions until their kids are older — 10 on average — which can cause them to miss out on many opportunities during their child’s formative years.
Talking about money with your kids can be difficult for many different reasons — especially if your finances seem very personal and private, or if you have anxiety about bills yourself. But discussing money in a calm and open way is crucial to helping your child learn about and become comfortable with finances before they’re expected to manage their own. While you certainly don’t need to provide detailed information about your income or net worth to your children, it can be very effective to include them in meaningful financial discussions — even at an early age. Having regular family conversations about money will help them learn about financial concepts like saving and budgeting, develop financial decision-making skills and form a healthy relationship with money.
Consider the following five suggestions for making these conversations easier:
Start with easy topics. Not all financial conversations have to be complex or heavy. You can begin talking to your children on a regular basis about simple concepts like how much their favorite items cost and the concept of working for cash. You can also discuss your household budget and basic bills, or share how you make some simple financial decisions — for example, choosing to go to a certain gas station where you might get a lower per-gallon price.
Find teachable moments in everyday life. Bring up the topic of money while shopping at the grocery store or when considering purchases that have meaning to your children, like toys or school-related purchases. Let them make some choices based on price or value comparisons. For example, you might let them choose between two types of cereals with different prices or a movie rather than a video game, and ask them what factored into their decision. Explain some of your financial values — such as your thoughts about quality, bargains, spending or saving — as you go about your routine business.
Share relevant information. While you may not want to reveal certain kinds of financial information, consider sharing with your kids what is relevant to them. Simply showing them the cell phone or cable bill and explaining how the company determines what you owe may be a good way to start. If you have a college savings account established for them, consider sharing the statement and tracking progress together over time. These are easy ways to start a conversation, so allow your children to ask questions or engage them by asking questions of them like whether they think you’re getting a nice value or how much money they think something will cost.
Include them in select family financial decisions. As your children get older and begin to better understand financial concepts, consider including them in some family financial decisions. Enlist their help on planning a budget for a vacation, electronics purchases or even the selection of a family vehicle. Participating in these types of choices can give them some experience in decision-making and help them gain experience and confidence in handling money. If you’d like to go one step further, ask them to save some of their own money toward a particular goal that relates to these larger decisions — like buying a souvenir during vacation.
Walk the talk. Talking openly is important, but equally critical is your own behavior with money. Kids uncannily know the difference between lecturing and teaching or sharing — if they see you running up credit card bills while warning against debt, they’ll roll their eyes — or worse, mimic the bad habit. Be consistent about practicing what you preach and your children will benefit from your being a financial role model.
Familiarizing your children with money and the decisions and trade-offs that come with it can make all the difference in how they approach their finances when they begin to earn and spend it on their own in the future.
Tell us (in the comments below) about how you teach your kids about money and what age you began the discussion.
De Baca is vice president of wealth strategies at Ameriprise Financial.