“That fancy bicycle is out of budget right now!”
“We will get you a new school bag next year.”
“That toy is very costly. Please use it carefully.”
We all may have heard something similar from our parents at some point or the other during our childhood. It’s also very likely that you would have told the same to your children too. Statements like these often help children understand the importance of money from a very young age. They, however, may not understand the complexities and nuances of money management, such as — ‘How do people make spending decisions?’ or ‘How does the bank work?’, etc.
Very few parents consciously teach their children about money or other financial aspects of life. Most others may try to avoid the topic, until their children are big enough, as a result of not understanding where to begin teaching such a vast topic.
Well, we are here to help! Today, we will explore the general rules for parents to follow while talking to their children about money. These are just some tips to get the conversation started at home about the family values pertaining to money.
A book, Make Your Kid A Money Genius (Even If You’re Not): A Parents’ Guide for Kids 3 to 23, by Beth Kobliner lists a few guidelines that parents need to follow while talking to their young children about money. She is a personal finance commentator and journalist. She was selected by President Obama to serve on the President’s Advisory Council on Financial Capability for Young Americans, dedicated to increasing the financial know-how of kids of all ages and economic backgrounds.
Start as early as possible
Conversations around money do not happen in a vacuum. They almost always have a specific context. Parents can use these everyday experiences such as playing with play money or cards, withdrawing money from the ATM, etc, in order to teach children about basic financial concepts. The child may not understand the concept, but surely knows that it is something important – something even the adults care about.
Keep it age-appropriate
Parents can tailor the truth about money or their finances in an age-appropriate way. For example, parents who are on a strict budget may explain to their children that they need to eat at home more frequently as it costs less than eating out or that they will not be buying toys or new clothes for the next couple of months. However, there is no need to get into the details of the financial troubles. While being truthful about money conditions at home is a good habit, it needs to be coupled with reassurance that the family will be okay. Do remember that the key is to not frighten the children, but to educate them.
Children tend to tune out lectures they receive daily from their elders —be it parents, teachers, grandparents, siblings, etc. One way of telling children about the consequences of financial indiscipline is through stories. Parents could tell them real-life instances in the form of stories with fictional characters. Children are likely to remember these stories of both financial discipline and blunder and learn from them.
Talk in numbers, show them bar graphs
Money invariably is a numbers game. While talking to children about money, parents should talk in numbers. Parents can make use of online calculators to tell them how putting away 10 rupees every month in a retirement account when they turn 18 can turn into a massive amount when they get old. Parents can show young children bar graphs of their investments vs returns. Even if young children do not understand the numbers, they will understand that the returns bar is much higher than the investment bar. That’s more than enough at the age of six or seven.
Discretion is important
To some degree, every one of us has made bad financial decisions or struggled with money management. However, there is no need to tell children about the financial mistakes that you have committed. If the child asks, do not lie but give out the only necessary information. Do remember that the child may tend to glorify your financial blunders or regrets. For example: “My parents emptied their savings account for a road trip, they are fine now. If I do the same, I will be fine too,” attitude is likely to emerge from these disclosures. Being cautious about sharing your financial past with your child is advised.
Parents need to avoid comparing their money choices with that of other family members or neighbours. Try to avoid making assumptions or drawing conclusions about others’ financial situations. Children observe and learn from their parents. Do not criticize your partner’s financial decisions in front of the child, and keep a united front. Consciously try to avoid these pitfalls in front of the children to instil financial discipline.
Children need to understand how to manage money. Talking to them about budgets, investments, and spending decisions will only teach them to be responsible adults and make their life a little easier in the long run.
Have you ever had a money talk with your child? How did it go? Do you agree with these tips? Do share your experience with us in the comment section below, or drop a line at [email protected].
Kobliner, B. (2017). Make Your Kid A Money Genius (Even If You’re Not): A Parents’ Guide for Kids 3 to 23. India: Simon & Schuster.
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