Explaining the birds and the bees was once the most awkward conversation you could ever have with your kids. But today, it might be even more awkward to talk about money.
In general, from elementary school through college, no one in the educational system prepares students for their financial future. So, it’s up to parents to provide the “talk” about everything from saving for the future. To set them up for success, they need smart, basic information about money itself. Set your reluctance to talk about money aside, and teach them the value of money early on.
Let your kids know that money is what you use to buy things. Keep it simple—let them know that you must work to get money, and when you’ve earned it, you can use it to spend, save and give. Focus on those three uses and then talk to them about money regularly, as if it were an ordinary aspect of life they should know about, which it is.
Along with showing kids what things cost, let them know that not all money should be spent. Some money should be saved for those future goals.
Saving money
The idea of saving money is a good one to impart early. I recommend parents start talking to kids about money at age 5. It helps kids think about setting goals, and the importance of preparation. But saving for a distant future might be challenging for kids to understand.
When your kids are young, help them get in the habit of saving by using a piggy bank or saving jar, and stressing simple stuff, like saving is good, and saving is something that you like to do. Then, pick a savings goal that isn’t too distant for them to reach, such as saving to buy a toy.
Donating to charity
From an early age, it’s also a good idea to separate the money you give your kids (or the money that they earn) into three categories: spending, saving and giving.
Along with their own personal needs, money can be used to benefit others who need it, whether it’s a kitten rescue organization, or for other kids who need money for food and clothes. Discuss with your kids what cause or group they’d like to support by giving. Help them find one that interests them. And, if your kids don’t have any money to donate, they can always donate their time to picking up trash and cleaning up parks. It’s invaluable to get your kids to start giving back at a young age so it becomes second nature.
And let your kids know from an early age that you value giving: generosity and kindness to others is an important part of earning and saving money. Like all good things, what you do comes back to you.
Leading by example
Along with what you tell your kids about money and saving, what you do with your money will be the example your kids see. It’s not a great message for your kids if you are constantly complaining about spending too much or indulging in shopping or dining you can’t afford. If you make smart saving and spending choices, they will, too.
Set your kids up to thrive financially by helping them understand basic finances. It may not seem like much but if they can start saving a portion of their allowance now, the odds of them being able to do the same with their first job increase dramatically.
Matthew Delaney is a wealth advisor and managing partner at JDH Wealth Management in Santa Rosa. He can be reached at (707) 542-1110. For more information, visit jdhwealth.com.
