I get a lot of questions from my clients about how/when they should talk to their kids about money. Every child and family is different, but I think the focus should be the same for all parents. You want to make sure your children have the foundation they need to make smart financial decisions as they transition into adulthood and beyond.
When is a good age to start talking about money with my kids?
There is no perfect age to start the conversation, but your kids are going to learn about money from someone, and with today’s prevalence of social media you want to provide some guidance before they learn from an out-of-control celebrity or a spend-happy “influencer.” I encourage you to avoid making money a taboo subject in your household, your kids do not need to be sheltered from money, it’s a very real part of everyone’s life.
Bear in mind that you will need to start slowly with younger children and progress the conversations when they reach their teen years. Educating your kids can help them make better decisions when they start managing money for themselves, and help them avoid many of the pitfalls that inexperience may get them into.
How much should I share with my kids about my personal finances?
You may not feel comfortable telling your kids your salary or how much debt you have, but avoiding the conversation completely is not a good idea. It is important for them to understand why members of your family work and what the money earned provides for your household. You don’t have to be specific about amounts earned and spent, educating them is the important part.
One lesson every child should learn as early as possible is the value of saving for a large purchase. Bringing your children into the decision to save and then explaining the process can be a great learning opportunity. Let’s say you decide you would like to buy a swing set (or other large purchase) for your children, you might be tempted to surprise them with it, but a better idea would be to bring them into the saving and buying process.
Take them shopping with you and tell them you are going to start saving monthly for the purchase, and let them decide which swing set they want and how long they are willing to wait for it. Then, visually track the amount you have saved each month somewhere obvious (like on the refrigerator) and demonstrate the act of saving buy actively avoiding costly expenses for a few months.
This may seem a little sneaky (especially if you already have the money for the purchase), but it is an easy way to get your children involved in the finances and understand the saving process.
Won’t my kids learn about money and finances in school?
Possibly, but in my experience both personally and professionally, whatever they learn it is not enough. Many schools have shifted their focus to preparing children for standardized tests and personal finance is not part of the testing. Understanding a mortgage, credit card debt and managing income so you can spend and save is rarely taught in schools and a young adult cannot have too much knowledge about these topics.
What if I am embarrassed to talk about my money mistakes with my kids?
You may be dealing with some of your mistakes with money, and not quite ready to share that information with your children. If you have young children there may be little benefit to sharing your issues. When it comes to teenage children, part of the transition into adulthood is for children to recognize that their parents are flawed human beings, and discussing your past mistakes and what you are doing to rectify the problem is a big step in that direction.
Sharing your experiences may help them avoid the same mistakes in the future, and may encourage them to come to you if they have financial problems before they get out of hand. We always want better lives for our children and learning from our mistakes can make a big difference.
I recommend doing some research yourself, there are many great books and articles about the topic. Your financial advisor should also be able to help you identify age appropriate discussions you can have with your children. Remember, the point is to make sure your children develop a healthy view of money and have the foundation they need to make smart financial decisions as they transition into adulthood and beyond.
Daniel P. Lash, CFP®, AIF® is a partner at VLP Financial Advisors, he believes that strategic planning is the key to creating, protecting, and growing wealth.
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