When a child is born, no parent ever thinks to themselves, “I sure hope he/she grows up with no sense of personal financial responsibility.” I’ve never met a parent who didn’t want his or her children to be in a better position than they were, whether that be financially, emotionally, or otherwise. Given the economic climate our kids are growing up in today, it’s the job of moms (and dads!) to impart money lessons that will prepare them for the real world of career changes, bills, student loans and credit.
Yet few parents teach their children about money actively – even among the entrepreneurs I know. The list of excuses is long: “I don’t want to burden my child with the topic; they have the rest of their adult lives to worry about money,” or “I don’t know enough about finances to teach them,” and even, “My parents never taught me about money and I figured it out eventually.”
Here’s the problem: Whether or not you actively teach your kids about money, they’re learning from the world around them. Want to take the reins and teach them proactively, or let your actions and the world’s examples concerning money be their teacher? Here are 7 straightforward tips for teaching your children about money (as early as they can read):
1. Change your mindset: it’s not taboo
Many of us were raised to believe that you don’t talk about money, even with your family. I’m here to tell you that the one place you should talk about money is in your home. Just like you don’t want your kids learning about sex or drugs (other “taboo” topics) from others, you should make it your intention for them to learn about money from you. By talking comfortably about money at home from an early age, your child will feel open to asking questions, and in turn, afford you opportunities to impart important financial lessons.
2. Don’t let your fears or self-imposed limitations hold you back
Typically, we’re stunted when we face a fear that we recognize as something important. The fear of talking with your kids about money is no different. Whether or not you consider yourself a financial guru, you know more than your child does about money. It’s not necessary for you to teach topics at a high level that may be above your head. However, it is critical to teach your kids about the basics: the value of a dollar, saving, investing, giving back, earning and financial goals. Don’t allow your reservations about your own inadequacies when it comes to money hamper your child’s ability to get a leg up on his or her financial future.
3. Keep it age appropriate
Once your child is old enough to learn to read, she is old enough to learn the value of a dollar. When you hand your child lunch money or buy her a new backpack, she is receiving messages about money. Use these everyday occurrences as teachable moments. No need to talk about tax brackets, stocks, interest or retirement accounts with your little ones. Set the foundation, and those lessons will be better understood when age-appropriate.
4. Make it fun!
Many adults say that money is their biggest cause of stress. Do your best to keep this message out of your conversations with your kids. Don’t taint their ability to see money positively; frame it as a tool, not a stressor. Take time as a family to decorate piggy banks together, which can be envelopes, shoeboxes, jars, coffee cans, or actual banks. Or, create a colorful community allowance chart that is displayed proudly in your kitchen to keep the conversation going each day.
5. Create structure and be consistent
The sooner you can teach your children about the value of a dollar and the importance of saving, the better off he will be in the long run. Create a structured way to do this. One way is through an allowance system in which earnings are derived from a set list of chores with dollar-value allocations. In order for your child to take control of his earning potential, let him know how you arrive at his potential weekly or monthly earnings. Base the maximum earnings on your child’s monetary needs. A sample formula is to use the child’s age or grade in school multiplied by a set dollar amount: for example, $5 x 3rd grade = $15/month. Based on your pre-determined earning amounts per chore, deduct for any chores not completed. Tally and pay at fixed intervals.
6. Use visuals whenever possible
The community chore chart on the fridge is one great way to hold everyone accountable, in addition to keeping the conversation fluid. The potential for your child to seek positive reinforcement grows as more excitement develops around this focal point. Fun piggy banks are another daily reminder of the lessons being taught. Having two piggy banks for young kids is ideal, so as to begin teaching the difference between short- and long-term savings. Physically separating the money will be a helpful visual tool.
7. Don’t try to perfect the plan
While it may be tempting to try to create a “perfect” plan, series of lessons or allowance structures, don’t get caught up. The most important thing is to begin talking to and teaching your children about money in a positive way. The longer you wait to make your plan perfect, the more messages your child will learn inadvertently, and you may later need to un-teach. You can always change or tweak your system as you go, but it’s most important to get started. As they say, time is money.
Darrah Brustein is the co-founder of Equitable Payments, a merchant services brokerage, and founder of Atlanta Under 40, a monthly networking event for young professionals. Darrah recently authored Finance Whiz Kids, a series of kids book that teach the basics of financial education.