Ask the Expert: When is it time to talk to my children about money?

When is it time to talk to my children about money?

It is a good idea to start educating your children about money when they are young. If they are old enough to ask for a toy or a bicycle, they are old enough to start learning financial lessons that can last them a lifetime.

Children need to learn the value of money. It’s not to say we want them to work for everything we give them, but rewarding a child when they act responsibly provides parents the opportunity to teach an important lesson, while providing a better understanding of their responsibility to the household.

When we shop, make on line purchases, or go to the market, our children think it’s natural for their parents to reach into their pocket or purse, and make money appear. It doesn’t even cross their minds as to what it took for that money to get there.

Teaching your child the value of money from an early age will contribute to their success later in life. It is important that they learn how quickly money disappears when it is wasted on non-essential items, how to spend their money and save it wisely, understand the habits of wealth and help them to make better choices in life.

You cannot rely upon “school” to train your children to be financially literate or how to manage money. The responsibility lies with the parents. The best financial lessons can be learned by just involving your children in your daily activities. Look for opportunities to talk about money, read books or articles about finances out loud, and play games that center around sending money wisely.

Try to utilize your daily routine to provide your children lessons in finances. When going to the bank, bring your children with you and show them how transactions work. Ask the bank manager to explain how the bank works, and how money generates interest. On paydays, discuss with your children how your paycheck is divided to pay for housing, food, clothing, utility bills, recreation and savings.

When shopping at the market, provide references to items that you “need” and items that you “want” using the different kinds of foods at the grocery to provide clear and relatable examples. Milk, bread, eggs, fruits and vegetables are a “need,” while soft drinks, snacks and expensive delicacies are a “want.” Explain the benefits of comparison shopping, coupons and purchasing generic or store brands that are equal quality.

Work with your children to set savings goals for something they really want. This will provide them a sense of accomplishment when they reach their goal, and perhaps, make them value the things they saved for. As your children grow, they can set goals for bigger “wants” and even put some money aside to save for a rainy day. Go for the little victories in the beginning.

As your children get older, explain the concept of a “budget” and how to balance their income and expenses, perhaps include a line item for savings. There are many simple ways to create a budget that will engage your children, and get them excited about saving.

When sitting down to pay your bills, have your children see what you are doing. Explain the many ways that bills can be paid, whether over the phone, by check, by electronic check or through ACH payments. Discuss how each of these methods of payment are received by the payee, and how they are taken from your account. Be sure to cover late penalties, emphasizing the importance of paying bills on time.

When using credit cards, explain that they are a method of taking a loan that needs to be repaid in a timely fashion. Share how each month a credit card statement is sent either by mail or electronically that needs to be paid from your bank account. Discuss the types of cards, like an ATM, a debit or a credit card.

Children should earn their money. Assign chores and appropriate a monetary value to them. Discuss ways they can budget their money, and encourage them to save for something special. Inspire and collaborate with them on ways to make additional money outside of their allowance, like a paper route or doing chores for trusted neighbors.

Whether you’ve got a 10-year-old stashing away a dollar or a teenager opening a savings or checking account, get your children in the habit of saving no matter how small the amount. The summer season is a good time to have them save towards something for the end of the season that will be a real treat.

Loose change can add up, so don’t let kids toss pennies or leave them lying on the ground. Have your children decorate a coffee can or jar, and have them place their loose change inside. This can teach them the concept of an emergency fund, which can help them as they grow into adulthood.

Children don’t miss much. If they don’t see you saving, they might wonder why they have to save. Share with them what you are saving towards so they can see the process of building towards a victory.

Credit card companies expend lots of effort on marketing to teenagers. And with the rise of app-related money systems, many children with smartphone access have even readier availability to the kinds of “time-saving” money traps that so often ensnare adults. Make sure your kids understand what credit pitfalls could lie ahead and keep them away from credit as long as possible.

Meet with your child at regular intervals to discuss their savings and emergency accounts, answer questions, and discuss money issues he or she might encounter. Especially if they are working a summer job, helping your children to see where their money is going each month of the summer will help them get financial clarity.

The earlier that young people learn to manage a budget, the easier things will be down the line. Younger ones can start learning by jotting their pluses and minuses down on a piece of paper, while older kids can be introduced to budgeting on software and apps.

When speaking with your children about money and finances, take the opportunity to explain the value of their personal information, and how online predators can negatively impact both their safety and financial future. Discuss the risks and benefits of sharing certain information. Then, as a family, make a list of rules for keeping personal information safe online.

Teaching children to be financially responsible can be one of the most important lessons you can provide. It is also important they understand how to deal with financial emergencies now and as they get older.

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