Teaching kids about finances isn’t easy in the best of times. But these days, many parents face a bigger dilemma: How do you talk to your children about money when you don’t have much of it?
It takes courage to admit that money is tight, but it’s also an important learning experience for children. No matter your financial situation, these tips can make the conversation easier:
- Be Honest. If you’ve lost work or income to the pandemic, it’s okay to say so. Kids are more resilient than we give them credit for. A calm and relaxed conversation – without going into unnecessary detail – gives them a chance to ask questions and handle the situation in a healthy way. Use a positive tone, but don’t sugarcoat it: Be realistic about what your family can expect in the coming months.
- Explain the “Why.” Car insurance. Mortgage payments. Utility bills. College savings. These are big expenses for your household – but from the perspective of a youngster, they may as well not exist. For that reason, it’s important to have some transparency in your household budget: It gives your children a chance to understand the “invisible” costs of day-to-day living.
A simple way to do this is to address the why behind your financial decisions. If you decide to set the air conditioning a few degrees higher, show your kids a power bill. From their perspective, the amount you pay every month seems huge – and it gives them a sense of the real expense associated with leaving lights on and keeping the house cool.
- Lead by Example. Children take their cues from the adults in their life. If your kids see you constantly swiping a card or making impulse buys, those are the habits they will model as adults. But if they see you shopping deals, clipping coupons, planning out your grocery list and saving receipts, they will understand that money has value.Right now, most families are spending less and living more frugally – so it’s an ideal time to make sure you’re sharing the right lessons. Explain that you can’t spend as much and discuss why and how your budget will change moving forward. You can also talk about ways your family can have fun without spending money, like visiting the library, playing outdoors, or making arts and crafts projects with materials already in the house.
- Find Teachable Moments. As a parent, your first impulse may be to distract kids from the stressful topic of finances. Instead, think of talking about healthy money habits as a learning experience. Hands-on activities – from working together to plan a grocery list to opening your teen’s first checking account – can help your kids feel more confident and in control about money.If you haven’t yet done so, now is a good time to introduce the idea of an emergency fund. Some expenses can’t be predicted, so setting aside money in case of the unexpected is a must, not a maybe. Depending on your kids’ age, this can open the door to a conversation about needs versus wants, or the importance of avoiding debt and building credit.
Money has generally been one of those topics (like politics and religion) that families never discuss. It’s not an easy conversation to have – but understanding personal finances is an important part of growing up. By being honest with your kids and sharing good habits today, you will prepare them for a brighter, more financially secure future.