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What You Need to Know About Talking to Your Kids About Money

Learning to save for what you want in life is a crucial life skill, but it’s one too few young people are learning. The first step to teaching your kids about money is talking about money. That’s why for financial literacy month, we’ll focus on helping young people develop good money habits.

Start the conversation early.

We should start talking to kids about money earlier than we think, and it’s not a one-time conversation. We need to constantly be modeling the behavior that we want them to adopt. It’s not enough to talk to kids about making smart spending choices and saving money for big purchases — we have to actually do that ourselves because they are constantly watching our every move and will reflect the behaviors we show them. No pressure.

Pro-tip: Start the conversation and activities early but in an age-appropriate way. Money is an abstract concept, and it’s our job to make it concrete.

For example, when we’re grocery shopping and deciding between two products, don’t keep the decision-making process in your head. Give your child a window into the choices you’re making by saying,”This brand is great, but it’s $0.10 more expensive. Should we buy the cheaper brand and try it?” By doing this you’re helping your child understand the trade-offs that you’re making with money on a daily basis.

Help them understand goals.

Because money is such an abstract concept, it’s our job to provide concrete ways for our kids to understand money. Use goal-setting activities to help with this. You can do this activity with your kids even before they are in kindergarten. As soon as they understand that we use money to pay for things, they are able to grasp this activity.

  1. Give your child a piece of paper and have them draw something that they’ll save to buy one year from today.
  2. If they are younger, help them understand the concept of time by asking them questions like what grade will they be in next year and how old will they be.
  3. Once they’ve drawn the picture of what they’ll save for, put it up on your refrigerator so they can have a constant reminder.

And remember to model the behavior you want your child to adopt. The perfect way to do that is by doing this activity yourself.

Adopt a conditional allowance.

Create a conditional allowance that actually works and is relatively easy to implement by starting your child on an allowance around age eight. At this age, they’ve probably realized that there are certain things in life you are paying for and you’ve seen a pattern of what they are constantly asking for.

For example, if your child is asking for a candy bar every time you go grocery shopping, let them know that this is an expense that they’ll now take over and manage themselves.

When they get an allowance, let them know that once the money is gone, it’s gone. Then help them understand the choices in their spending behaviors. They can continue to use the entire allowance to buy a candy bar every trip, or they can save it for something else they want like a toy that will last longer. Have them set a goal, then they can save more of that allowance toward the goal that they’ve set.

Teach gratitude.

One thing that we don’t want to do is give our kids everything they need, only to have them never really appreciate anything.

To combat this, we can teach our children gratitude. One specific way to do this is through writing thank you notes. Writing these notes helps children to stop, think, and reflect on how someone else has used their money to buy them something. Maybe give them a new set of thank you notes in their Christmas stocking or Easter baskets each year, with the expectation that they would write thoughtful notes whenever they were given a gift.

Embrace mistakes.

When you’re teaching kids about money there are bound to be bumps and hiccups along the way. They may have spent all of their allowance on candy only to realize that they don’t have money for the thing that they really need.

Instead of teaching kids to avoid or hide mistakes, what’s important is how you teach your kids to respond to their mistakes. Rather than pretending that you’ve always made perfect choices with money, share your mistakes and how you worked through them. This dialogue will help them feel comfortable coming to you the next time they’ve made a mistake.

Discuss choices.

How can we discuss different spending between families? If you raise your kids with fewer toys, fewer birthday presents, and maybe a smaller allowance than his friends, how should you handle the questions they will undoubtedly bring home about why their friends get more (or less) than they do?

Rather than jumping into a discussion about how some people have more money and some people have less, frame it in terms of choices. For example, if your child wants to know why their friend is going away on vacation but your family is staying home, you could tell them that you’ve decided to stay home and appreciate what’s in your town rather than traveling somewhere else.

The choices that you’ve made with money aren’t better or worse, they’re just different.

Create smarty-pants savers by bringing your kids to the credit union to open a Kids Savings Account and encourage them to start saving today. Make sure to follow along all month as we post more resources to help you raise financially wise kids.

Have you found any fun ways to teach your kids about money?

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