How to Teach and Talk to Kids About Money
I shared last week that my daughter turned 2 and as a parent I've become very conscious of what I say, do and how I react to situations. Research has shown that between the ages of 0-6, children unconsciously soak up everything around them. If you follow the Montessori method, you'll hear this described as the "absorbent mind".
It's important to keep this mind especially when it comes to money. Money conversations must start at home. Parents and guardians must accept the responsibility of exposing their kids to money concepts before media and peers influence that money mindset. If there’s fear, secrecy or anger in the money conversations now, that can get carried over to adulthood.
As adults we carry what our caregivers pass down to us so it’s super important to reflect on our own money mindset and how/what we want to pass down to our kids.
It's hard to talk about money when there is no money.
Limited income means needing to stretch those hard earned dollars. We often times move away from money conversations because we don't want kids to worry about the family's financial situation. It's not necessary to share all of the details of the family's finances, however, here is an opportunity to teach children about needs vs. wants. Help them understand what a need vs. a want is and show them how to prioritize these things. This is a skill that requires practice. Learning this early on can mean they can grow into adults who fully understand what their needs and wants are.
Talking about money does not make money hungry kids.
When you speak about money, observe the words you use. Language plays a role in how children perceive money to be. If there's contant talk of money being evil or money not buying happiness or the subject of money being discussed in whispers, this can easily be internalized as kids get older. Money is just a tool. It can be a tool for change. It can be a tool to help you buy peace of mind. It can help you buy necessities.
Watch your actions.
Kids observe and absorb. If we don't want them to spend money on frivolous things, then we have to be conscious of what we spend our money on. If we see them being wasteful, let's observe if we are doing those same things. Half eaten food, unused clothing, or excessive clutter can signal to kids that these things are OK. I recommend completing a waste audit every once in a while to see where your money is going. Have your kids help with this so they can also see where money is going.
On the flip to this too is to teach them where money is coming from. Explaining why mom and dad need to work or how they are able to afford certain things can help children learn that money does not grow on trees and cannot be wasted easily.
Don't condition your kids to spend.
Online shopping can make it very easy to give into every want. Space out purchases. Institute a waiting period before buying. It's important to be conscious of how we react to the things that arrive at our doorstep. Opening boxes can make it seem like we are receiving a present and research has shown that there's a rush of dopamine (feel good neurotransmitter) that gets released. This is why shopping can become addictive and we have to be weary of training young brains to crave this feeling early on. Let's not train kids to use spending and shopping as a solution to every problem.
Watch what their watching.
With personal devices, social media and just the constant flow of content, it's easy to be influeced by others. It's critical to spend time watching what your kids our watching. It may be necessary to step in and explain why some families have more and some families have less. We want to raise kids that are empathetic to the world around them. Wealth and income inequality is growing and there's definitely going to be questions that arise when our kids see these differences.
Presence over Presence.
One last important thing to keep in mind is that your kids don’t need a lot to be happy. Studies show that most kids really just want an adult to comfort them, listen to them, play with them and be present for them. Studies show that having a healthy relationship with a parent early on “reduce social isolation and promote connectedness.” Having a supportive presence from parents and other caregivers have shown to prevent children from experiencing traumatic events, also known as Adverse Childhood Experiences (ACEs). “Research shows that ACEs, like child abuse and neglect, actually disrupt the development of a child’s growing brain.” (preventchildabuse.org)
We as caregivers pass on what we learned from our caregivers and it’s very possible that we pass down habits and actions that may focus too much on money and not enough on relationship building. We may think money and gifts are what kids need, but research shows otherwise. We have to be weary of using money as a way to control our kids or make up for the neglect which can have negative consequences down the future.
Instead of going into debt to buy things for your children, focus on using that money to buy yourself time in the present. Then use that time to connect and build strong, healthy relationships with your children.
Here are other things you can help teach your kids about money:
The cost of basics - have them help you shop for groceries or other household essentials, have them help you tally up the utility bill so they know how much water, Wi-Fi and electricity costs
The cost of borrowing - for older kids, it may be good to review interest rates, how to read a credit card statement, the mortgage, or a future car loan
The cost of education - review the costs of colleges around the area, the difference in costs between in-state and out-of-state
The cost of waiting - make a list of needs vs. wants, review the list often, help them research and compare prices or find coupons
The cost of business - encourage entrepreneurship, help them sell things they no longer need, help then find ways to earn money for their use
Here are other resources on the blog to help you talk money with your kids.
Gifting Stock Instead of Toys: Do's and Dont's (share with aunts/uncles)
How To Prepare Your Kids to Have a Solid Money Foundation Post Pandemic (this includes guest posts from financial educators who specialize in teaching kids money)
How to Teach and Talk to Kids About Money