Talking To Your Kids About Money

15 August 2011

girl with piggy bankDo you do it? Talk about money that is. How you handle the subject of finances around your children will form the basis of their own understanding in the future. You might think that there's just one approach really - money is money. If need money you earn it, if you want something you buy it, if you can't afford it you save up.

Are we teaching this to our children?

A survey last year by US research firm MacGraw-Hill found that one third of Reception age children were interested in knowing more about money, and what it is. That jumps to 80 percent by the time they're in Year 3.

And yet, many of us feel more comfortable talking to our children about sex than about the family budget.


What is Money?

Just like the big 'sex' chat, the time to start talking about money is when they ask. Don't be tempted to fudge this, or brush them off. If it is an inconvenient moment - and children have a knack for asking the BIG questions just at the wrong time - set a specific time to talk there and then. And then stick to it.

The question might be framed in a lot of different ways. How much do you earn? How much does something cost to buy? Where does money go and where does it come from?

Jack, a dad to four, is self employed in the building trade. "I've made time to talk to each of the kids about where money comes from and where it goes. Usually by the time each has reached around the age of six to eight they've asked about it. I've sat down and talked about how much income we have in the house, and about how much has to go to pay tax, and National Insurance. I made a 'money' pie out of wood, with segments for everything so they can see how the family budget works, how we take out money for food, and rent."

I thought this was pretty cool, although I don't have the know-how to make anything like that. Perhaps toy money can be used to get the same concept across.

presentsGiving in

According to the experts, if you can establish a good dialogue about how money works in your house it really helps a lot with issue number two. When the child really wants a toy, item of clothing, day out, and other special treats.  How do you tell them that you can't afford that so that they understand, and also so that they're not scared.

That's important too. Children take on a lot more anxiety on our behalf than at times we realise. Because they're good at living in the moment, having a good laugh, playing with their friends and seemingly enjoying themselves we forget that unlike adults, they can also live in this other life where they've internalised huge problems.

When Sarah's six year old daughter wanted a Baby Bjorn doll like her best friend, Sarah found it hard to explain why she couldn't have one. Faced with this situation, especially where the item is only a few pounds over our budget, many parents think well, can it hurt just this one time?

However, if our children understand that there's a limited amount in the family budget (see above) then you've set the groundwork for talking to them about ways you can help them achieve the goal of a better skateboard, or a fancier doll. Or, in the case of my son, the Playmobil Tyrannosaurus Playset.

He's been desperate for that for quite a while now. So we set up a savings chart for him. Twice now he's got quite close to his goal, only to choose to spend his money on something else. Such as a Batman costume (the most recent acquisition). I don't mind, at least I hope I shouldn't mind! It is his money, and if he chooses to wait longer to buy one item, so he can buy something else right now that's up to him. He's still learning to save, and learning how to manage his money.

Which brings me to point three.

Let them make financial mistakes

You've taught your child about money, you've helped them understand how they can earn it for themselves, manage their own small finances, and save for bigger items. You've also got to let them make mistakes with that cash too, even if it means wasting their (ultimately yours) money.

The reasoning behind this one is that if you let your ten year old spend their £20 on a hyped up toy that turns out to be utter rubbish and a big disappointment now, they (hopefully) won't make the same mistake when they're an adult and are spending £2,000.

children boardroomMoney management

As far as I can work out then, having spent the better part of a week reading every online article on the subject, and talking to every parent I know (as well as drawing on my own experience), it all boils down to three things. As a parent  talk to them about money as soon as they are ready, be honest about the family budget, and let them manage their own cash. Even if they use it to buy magic beans.

I worry now that this is too simplistic. Have I missed something? Possibly the fact that this is all a lot easier to write than it is to put into practice. Maybe I'll be able to tell you more when my son is grown up. What has been your experience? Are you happy with how money savvy you've brought up your own children?

TOPICS:   Banking   News and Recalls

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