Don’t Forget to Talk to Your Kids About Money

Dont Forget to Talk to Your Kids About Money - Header ImageIn a world filled with “oversharing,” it can still be tough to talk about money – especially with your kids.

But learning how to manage money is a critical skill for kids to master before they get out in the world and encounter credit card offers, student loans, and tricky loans (not to mention 401(k)s, budgeting, and the realities of life in general).

So make sure to talk to your kids about money now, while they’re still a relatively captive audience. Here are 3 simple ways to get started.

“We can’t afford it” is out.

This phrase has probably been doled out in almost every household – typically in response to requests for things like shoes with 3-digit price tags, mysteriously expensive dolls that look like all other dolls, or sports-team activities that rival the cost of all-inclusive vacations.

So, in many ways, it’s accurate – but it’s also confusing.

Kids don’t understand the nuances of our finances by themselves.

For us, “we can’t afford it” might be shorthand for “this is not a priority and doesn’t make sense on any level,” but for them it could be heard as “we are too poor to buy this.”

That confusion multiplies when they see us spending money in other ways, like going to a nice dinner or taking that (mercifully) all-inclusive vacation.

So replace the phrase with something else: “That’s not in our budget” is a good one, as is “That’s not a priority.”

If your child really wants to find out how to add the item into the budget, it’s a good time to bring up skills like saving, prioritizing, or – if your child is old enough – making the mistake of spending all their clothing money on one pair of shoes and living with the consequences.

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From recent college grads saddled with debt to wide ranging concerns about financial competence among consumers, there’s spreading worry that kids aren’t prepared for money management and decision-making.

“Let’s talk about our finances” is in.

One way to educate your kids about money is to invite them into the conversation. Talk about your tax refund, your monthly expenses, and your plans for your raise. If you use financial planning software, show them your accounts and share what you’re thinking about.

Obviously, tailor the sophistication level and topic of conversation to the maturity of your child – some are able to grasp more complicated issues, while others may feel stressed if things go over their heads. This may also be a good time to bring up the idea of family privacy. After all, open communication makes sense within families, not with everyone.

But by sharing and demystifying financial planning issues, you open the door to future communication and questions. You’ll also help them see the actions that are required to balance a family’s finances – a hands-on education that no amount of talking can convey.

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Create money projects

Kids are generally good at shopping and great at internet research. Why not utilize those skills?                                                      

Whether it’s a family vacation, a holiday shopping plan, or the windfall of a tax refund, solicit input from your children on what to do with a specific budget. You might have to hear out a number of outlandish ideas, but let their imaginations run wild at first.

From there, you can start to direct the decision-making process. Again, this will show, rather than tell, how to make budgeting decisions – and contributing to the initial brainstorming will encourage a degree of interest in the process.

Answer questions and stay engaged

As your children grow, you may encounter some challenging questions about why you do things a certain way or how you came to identify your priorities. Kids being kids, some of those questions may sound rude or accusatory.

But keep your cool and answer openly and honestly.

These moments are enormous educational opportunities, and by sharing your decision-making process you’re providing your children with important insights into how one can think about money issues. Whether your children follow in your footsteps or ultimately choose a different approach is up to them – but by sharing your experience and your insights you’re giving your child an enormous stepping stone in the process.

Learn more!

Helping kids gain financial mastery is an important part of life in the modern world – so why not take a methodical approach? Download our free guide to financial education for kids of all ages. We don’t just cover dollars and cents, but the character skills and habits that make for better money management.

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From recent college grads saddled with debt to wide ranging concerns about financial competence among consumers, there’s spreading worry that kids aren’t prepared for money management and decision-making.

Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

Dont Forget to Talk to Your Kids About Money - Infographic

Important disclosures

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.

Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.