Financial conversations are usually stressful and avoided. Your comfortability of the subject can depend on the household you grew up in. Regardless of exposure, it’s important to integrate financial responsibility into the education of the next generation.
Sometimes it's easier to spend money on your kids, instead of teaching them about the value of a dollar. Here are some suggestions on where to start:
Talk About It
According to a Policy Genius survey, 37% of parents have never discussed finances with their children. It’s hard to be sure of the exact reason why, but it’s likely from feeling that they’re not qualified to do so. It’s easier to believe a financial professional would know better than bringing up the subject on your own, but it’s unlikely that one would be available to speak to your child, let alone relate to them on their level. While you may not be a certified advisor, you still have real-life situations you can utilize to help begin the conversation about smart financial decisions.
The simplest place to start would be to initiate a discussion. There are many everyday scenarios that you can relate to adult situations, just keep an eye out for them!
One idea would be to come up with an in-home earning system. Think of things kids can do to help with chores, or behaviors they need to work on, and use positive reinforcement in the form of “house money” that they can use to trade in for some of their favorite treats or activities. You can even map out a system to keep things organized and keep it close by for reference.
For example: $1 for helping with the dishes, $.50 for clearing your plate after dinner, $.75 for feeding the cat in the morning. Get two birds with one stone, teach your kids about earning and lessen the housework load!
Cultivate Awareness of Spending
When your eyes are young and new, all things shiny and fun sound like a great idea. It’s not until they’re much further along in life that they realize how far a dollar can, or can’t, go. To help the kids from thinking you have a money tree in the backyard, keep a simple log of each transaction (in-house or in-economy), to see how quickly they add up.
You can help them by keeping a notebook on hand for them to record their spending, or if you want to keep it digital, create a spreadsheet and help them track electronically.
Help Set Saving Goals
Once an awareness of spending is achieved, you can then start working on saving vs. spending. Eventually, kids set their sights on big purchases, which will be the perfect time to use the transaction log to guide them to the realization that if they’d saved instead of spent in certain instances, they could’ve afforded the more expensive item sooner.
When the time comes for your child to work towards their first big purchase – perhaps they have their first job and are going to get their driver’s license soon and would like the independence of their own car – work with them towards their goal. Make a deal that any savings they have at the end of each month, you’ll match.
Hold Yourself Accountable
It’s important to practice what you preach, so if you’re going to be sharing financial advice with your kids, remember that they’re watching. Use this as an opportunity to set an example and reach some of your own saving goals. Your family is your team and if you can make finances fun instead of stressful, maybe you can set yourself up for success, too!
Topics: Wallet Wisdom