Monday, February 20, 2012

Let's Talk about Money! 4 Tips for Starting the Conversation with Your Child

She Who Talks with Hands
Image via paulhami on flikr
Would you ever hand your car keys to a teen that has never driven?  Would you hand a book to a 4 year old child and expect her to learn to read it by herself?  I am guessing that most folks would answer "No" to both of those questions.  When teaching a child or a teen new skills, there has to be some parental interaction and guidelines.

The same thing applies to teaching a child or teen about money management.  If you just hand your child a wad of money, they will learn very little about responsible money management.  There has to be ongoing conversations and consistent guidelines (regardless of whether your child gets an allowance or not) in order for your child to become financially literate.  I was thrilled to find two articles recently that covered this topic.

  • Dan Kadlec tackled the topic of allowance, specifically whether giving an allowance teaches kids anything.  He reviews the viewpoint of Lewis Mandell, an "esteemed educator and early proponent of teaching kids about money in the classroom," who has recently voiced his opinion against allowance. At the end of the article, Dan emphasizes the importance of parental involvement and setting guidelines.
  • There is a great post by Wealthquest that lists 5 ways to simplify teaching your teens great money skills.  One of the things that I like best about this list is that the tips are actionable and emphasize talking, planning and capturing the interest of your teen.

A 2011 ING Direct survey showed that more parents are prepared to talk about drugs and alcohol with their kids than are prepared to talk with them about money.  Really?  Come on, folks... money simply can not be a taboo topic.  We can not assume that our kids know the basics of money.

4 Tips for Starting the Money Conversation with your Child or Teen:

  1. Use common, everyday events.  We make countless financial decisions everyday.  Should we go out for lunch?  Should I buy those shoes?  Do I want to pay for this with my cash or my credit card?  How long would I have to work to earn the money to pay for this?  Is it worth paying $3 more to get the name brand item?  We are often in such a hurry that we just keep these though processes to ourselves.  Try voicing your thoughts and engaging your child or teen in a conversation.
  2. Ask questions about what they are going to do with their allowance or earnings.  Is there an item that they are saving for?  Are there events coming up that they need to reserve money for, such as a ballgame or movie with friends?  Talking about this can help them develop a plan and avoid impulse purchases.
  3. Let teens sit with you while you pay bills.  You don't have to tell them how much you make or how much you have saved in the bank.  It is, however, good for them to have an idea of what it takes to make your household run.  Knowing the amount of the monthly electricity bill or cable TV bill might encourage them to help be more thrifty.
  4. Involve kids and teens in budgeting.  Tell them the amount you have set aside for a vacation or monthly entertainment and let them help plan the events.  Or, tell them how much you have budgeted for a dinner and let them help plan the menu.
So...let's start chatting!  What ideas do you have for starting the money talk with your children?


  1. "Let teens sit with you while you pay bills" - how much of your financial picture do you allow your kids to see? I wouldn't want my (future) kids to be embarrassed or to brag... or to do anything weird at all, heh. What do the guidelines look like on that topic?

    1. This is one of those topics that will be different for every family. It depends on the age & maturity level of the child and the comfort level of the parents. We share more with our 18 year old than we do with our younger children because she is at a point in her life where she can handle it and understand the decisions we make.

      I would suggest starting with small parts of the budget, for example the specific areas of the budget that are relevant to them, like band costs, vacation budget/bills, etc. You want them to have a realistic financial picture before they go off to college, but you also don't want to hit them with too much too soon.

  2. The best thing I have seen about teaching teens about money is getting them a job. When it is theirs and limited they seem to pay closer attention.

    1. They are usually much more careful and thoughtful when spending their own money than they are when spending Mom & Dad's money!

  3. Lewis Mandell sounds like a bit of an idiot. He seems to indicate in the article that because kids won't have a chance to practice financial literacy after learning about it in school, it shouldn't be taught in school. about calculus? Who uses that right after it is taught. Come on!

  4. That's a great comparison and it's so true that young people do not gain the experience from their parents. Parents need to take an active role in educating their parents, not only because the school system is lacking, but because they have a lot of experience that can teach their children.

  5. Whenever my daughter (9) gets money, whether from allowance, b-day---she always puts it in her piggy bank. She gets so excited about saving money, I guess I've done something right. :-)