Teach Your Kids about Money

The first step to teaching your kids about money is talking about money.

an illustrated owl wearing glasses, text: Be Wise. Save.

Do you know how to talk about money?

Kids learn a lot by watching you, so being open and honest about money is the first step.

“The most effective way to teach is by having frequent discussions and don’t ever lecture,” said Ted Beck, president and chief executive of the National Endowment for Financial Education, in a recent Wall Street Journal article. “Look for teachable moments and always be willing to answer questions.”

Unfortunately, this can also be the hardest.

A 2015 T. Rowe Price survey found that 72% of parents experienced at least some reluctance to talk to their kids about financial matters, and 18% were either very or extremely reluctant. The most common reasons given were that the parents didn’t want them to worry about financial matters or thought they were too young to understand.

But on his blog, the personal-finance guru and radio host Dave Ramsey encourages parents to be more open with their kids about money, even their failures. Parents’ biggest regrets are often not saving enough or going into too much debt, wrote Ramsey. Being honest about that in an age-appropriate way, he stated, can be a powerful lesson.

So how to start the talk?

  • Ask questions. If you’re going out to eat, talk about the price difference between the options, and ask them which they would choose. If they pick the more expensive one, talk through what you might have to give up later in the week.
  • Make them part of your budgeting. If you’re doing any kind of financial planning for the year or working on your monthly budget, explain how you make your money choices and get input from your kids.
  • Let them help track your saving goals. No one watches you more closely than your kids, so they’re great accountability partners!
  • Open a savings account for them. This is the best way to help them to learn to save for what they find important. A lifetime of good savings habits can start now!

As you talk with your kids, you can decide how much detail you want them to know about your money. If you’re uncomfortable revealing too much, you can make your talk more about general plans and leave out specific dollar amounts. However you involve them makes money more real.

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