Following the post-COVID stimulus hangover in 2022, the bull market has continued to run. One of the key factors was the Federal Reserve’s decision to
The Tough Stuff: How to Talk to Your Children About Money and Finances
Published Date : July 28, 2022
July 28, 2022
No one said being a parent would be easy. In his book The Opposite of Spoiled, The New York Times money columnist Ron Lieber notes that while parents want the best for their children, when it comes to discussing financial issues, things can get tough. Talking to your children about money and finances is one of the most nuanced topics parents can encounter. It often feels taboo and some parents do not feel equipped to tackle the topic. But with a little finesse, patience, and a proactive approach, talking to your kids about finances does not have to be so daunting.
First, understand that there is no set age to start financial conversations with your children. Clinical psychologist Dr. David Anderson suggests opening this conversation with your kids when they reach the second or third grade. This is roughly the time when children’s math skills reach the point where they can do simple arithmetic and grasp basic concepts of spending and saving.
Financial counselor Jen Hemphill recommends including young children in price conversations in the grocery store or while school shopping. When children have the opportunity to learn about the value of life’s goods and services when they are young, they will have a better overarching understanding of how to wisely spend and save their money. Promote the value of earning money—and saving at least part of it—by creating opportunities for your children to earn small amounts of cash by doing chores or getting an after-school job.
Offering an allowance can be a straightforward way of opening the financial conversation with your children. While there are times—birthdays, holidays—when children are simply gifted money, allowances should be tied to a specific behavior.
If giving an allowance is not of interest, you can still work money into daily life by talking through your own financial transactions as they transpire. You may prompt your children to make budget-based purchase decisions, too. Explain that they have a certain amount of money to spend, so they can either purchase two less expensive or one more expensive item for the same amount or money.
Because children learn behaviors from their parents, it stands to reason that they will watch and mimic the spending habits they observe in the home. A 2022 study by CNBC and Momentive of 1,149 parents found that 83% of respondents believe it is their responsibility to educate their children about financial literacy; however, 31% say they do not have conversations with their children about household finances. There are many reasons for this, of course, but even if you don’t feel secure in your own financial habits, it remains your responsibility to educate your children.
Many of us shy from financial discussions, but the truth is that when you start early and regularly speak about money and financial matters with your children, they will only benefit from your candor and be able to make more successful financial decisions in their futures. Speak with your Wealth Manager for more help and ideas on teaching your children about finances.
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