Teaching your kids about financial literacy is really important. But being money-savvy isn’t just about knowing how to count coins in kindergarten, or understanding how credit cards work in the 12th grade.
Sure, your kids will eventually learn how to read a bank statement and calculate compound interest, but money is about more than that. There’s so much to teach your kids beyond the mechanics of how finances work.
I’m talking about values. When I meet with clients, our conversations center around their money story: how they view money, what examples their parents set for them, what their goals are, and how their feelings about money might get in the way of meeting those goals.
You model powerful messages about money whether or not you realize it. So how do you raise grounded, compassionate kids with a healthy view of how to handle their finances?
It’s starts with a conversation with yourself.
What Do You Value?
It’s hard to pass down important lessons if you have no idea what you want to teach in the first place.
Take some time to explore what money means to you. Is it a reward for hard work? A tool to spend on things or experiences? Something that never seems to stay in your bank account for long? Do you love money? Do you fear it? What are your spending and saving habits? Are your current habits working for you?
If you have a spouse or partner, hopefully you’ve had many money talks with them over the years. Discuss the lessons you’d like to pass down to your kids. Getting on the same page with your spouse or partner is really important. After all, kids can sense when their parents don’t agree about something — so they know which parent will cave first and give them a higher allowance.
If you haven’t worked with a financial planner before, it might be a good time to start. Having kids is a big life change that involves many financial decisions. A financial planner can help you articulate your money values (in addition to walking you through things like saving for college costs).
Talk Early and Often
Talking about money with your kids is like talking about sex. No one looks forward to discussing it, but you have to!
Your kids will notice from a very young age that different families live different lifestyles. As they get older, they’ll only notice it more — and get mad at you for saying “no” to something expensive that their friends are allowed to have.
So discuss money frequently. When your kid wonders why they live in a nice house while their best friend lives in a small apartment, or why your family doesn’t go to Disney World every year like your neighbor does, don’t awkwardly change the subject. Lean into the discomfort and talk to your kids about how different families have different situations. Talk about how deciding to spend your money on one thing means you might not be able to afford something else. Talk about how adults earn money through work, and how they decide what to spend and what to save.
While you don’t have to share everything about your family’s finances with your kids (especially young ones, who might blab your personal information to all their friends!), being honest is a good move.
As your kids get older, you can share more specific information with them. Talk about how much your monthly bills cost, or how much you’re setting aside each month so you can replace your old car in two years. Teach them about budgeting and long-term savings goals. Encourage them to save up for something big, too!
Don’t Coddle. Empower!
It’s not easy to sit back as your kid makes a mistake, but one of the biggest money lessons you can teach your kids is how to bounce back after making a not-so-great choice. So let your kids blow their allowance and then regret it. Don’t bail them out, either!
These experiences will teach them how to determine what they value, and over time they’ll begin to match their spending and saving habits to those values. It’s much easier for them to make money mistakes at a younger age, when they have you to fall back on, than when they’re older and have homes, careers, and families of their own.
Set Expectations With Your Extended Family
You’re trying to teach your kids about saving and opportunity cost … and along come well-meaning relatives who want to buy your kids all of the toys.
It’s one of the top holiday season family fights I hear about from friends with kids. How do you set some boundaries with your extended family so the lessons you teach year-round don’t come undone in one day?
Holidays do offer a good lesson in delayed gratification for kids. If they want something expensive, you can offer them the choice between saving up for it themselves, or putting it on their wishlist for their birthday or the next gift-giving holiday. They learn patience either through saving up money, or through waiting a few weeks or months to receive the item as a gift.
What about relatives who want to spoil your kids rotten? Don’t totally deny them the joy of giving gifts, but you can talk to them about what works for your household. Maybe you don’t have room for a ceiling-high stuffed animal, you want help saving for college, or you worry about your relative spending their limited income on expensive gifts.
Ultimately you can’t control what other people buy for your kids, but you can certainly try to steer family in a certain direction by talking to them honestly about it.
Today’s Lessons Will Pay Off
By helping your children develop their money values from an early age, you’re setting them up to become adults who can articulate their values and make financial choices with confidence. I know it’s tempting to just let kids be kids, but by being more transparent with them about how your family spends and saves money, you’re teaching them to do this in their own homes in the future.