Parents often shy away from talking about money with their children because they think it’s taboo or that their children won’t understand. But, the truth is, kids will learn about money from someone. Don’t let it be from an out-of-control social media influencer. No, money isn’t a taboo subject, and no, kids don’t need to be sheltered from financial matters.
How To Talk About Money
Here are a few simple steps you can follow to talk to your kids about money that will make it easier for you and better for them.
How do you eat an elephant? One bite at a time. Don’t feel pressure to start talking stocks with your 6-year-old, unless, of course, that’s where they’re at in their money education. It also doesn’t have to be a drawn-out homeschool lesson complete with whiteboards and diagrams.
Simply make an effort to explain situations you encounter every day that involve money i.e. what swiping a credit card actually means or why you shop at a certain grocery store for some items and at a different one for others, or when it makes sense to buy new shoes and when it doesn’t.
Children pick up on more than we give them credit for. They can tell when you’re stressed about money or when experiences involving money cause tension, but that doesn’t mean they should make up their own story as to why. Depending on your child’s age, be honest about the financial choices you’re making and always include a “why” but keep it positive.
For instance, if you’re trying to cook more at home rather than eating out, explain that you’re saving money so they can go on the school trip next week, or enjoy a big birthday party next month.
Talk Values, Not Figures
Money has meaning for all of us whether it means we can foot the bill at our favorite restaurant or take a vacation to spend quality time with our family. Having a conversation about values will not only give your children a healthier view of money but also teach them why it’s important to save and when it makes sense to spend.
Talking about values will also allow you to easily integrate the importance of giving and open doors for larger conversations about who or what your family supports.
Let Them Practice
Part of the process of learning about money is actually having it. Whether you give your kid an allowance or help them set up a lemonade stand every weekend, nothing will teach them the value of money like actually having some in their pocket. When they do, you can help guide them through what to do with it and present the pros and cons of each option such as saving up for something on their wish list, giving a portion to a cause they support or investing it for their future.
Accounts You Can Open for Your Kids to Teach them about investing
Investing can be intimidating at any age, which is why it is an important topic to cover when you talk to your kids about money. “Time in market” is one of the greatest ways to experience success with investing so the earlier they invest, the better off they will be. You don’t (and probably shouldn’t, in most cases) leave it completely up to them, though. You can open up one of these investing accounts for your kids and help them learn as they go.
A Custodial Account
A custodial account is a type of bank or brokerage account that any parent can open for their child. The parent is the custodian of the account until the child comes of age and the child is the beneficiary, but you don’t have to wait until your child is of age to include them in the decisions. Together, you can decide what to invest in, watch it grow, and have meaningful conversations about what it all means along the way.
A 529 Account
A 529 account is an account parents can open for their child’s education i.e. high school, college, and/or trade school. One of its key advantages is that earnings grow tax-free. You can (and should) open this account as early as you like so the potential for the money you invest to grow is great. As you continue to contribute to the 529 account and watch it grow, you’ll have ample opportunities to discuss education options with your child, the expense of different options, and how your family plans to afford the expense.
Saving bonds are another type of investment you can teach your kids about early on. They can open up a world of conversation; you can discuss treasury securities, government debt, inflation, interest rates, and delayed gratification. That last one is important. Savings bonds can also be given as gifts, so you can establish a tradition of giving them to your kid on a birthday or holiday each year. The savings bonds can then be redeemed down the line (up to 30 years later) for the amount you paid for them plus interest.
Have The Talk
At the end of the day, you can only control so much, but if you wished you learned more about money earlier in life, don’t you hope you can help set your kid up for greater success? You don’t need to share your biggest money mistakes or where your money goes down to the dime, but you’d be surprised how much your child can learn just from making money a regular part of the conversation. Go on, talk about it. Taboo, who?