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How to help your kids develop a healthy relationship with money

How to help your kids develop a healthy relationship with money

August 23, 2018

Back to School Sale!

How to help your kids develop a healthy relationship with money

“Back to School Sale!”

I still recall how those four soul-crushing words would send shivers up my spine. Summer was the best part of the year for me, filled with limitless possibilities, adventure, and freedom. But, as all good things must end, the closing days of August brought unbearable heat and, with it, those incessant commercials seemingly designed to taunt me and haunt me. Thirty-plus years later, I still cringe. So as Labor Day and the end of summer come barreling at us like a freight train, I thought it would be a good time to turn our attention to education and helping our children develop good money habits.

Money is often a difficult topic for families to discuss. There are perceived stigmas attached to both not having enough and with having more than enough. Kids are incredibly perceptive, and we are influencing their money attitudes whether we intend to or not. You likely picked up some of your own money habits from your parents, probably without even realizing it. To help our kids develop a healthy relationship with money, it’s critical we are intentional about the lessons we teach them. In this piece, I will give you some ideas you can use at home to begin this process.

For the littlest ones, teaching them the value of our coins and bills is a fun place to start. Use half an egg carton as a cash register and fill it with a variety of coins, explaining to your child the value of each. Children tend to correlate value with size, so teaching them a dime is worth more than a nickel is important. Help them understand the different combinations of coins you can use to make an equivalent value, such as 25 pennies equaling one quarter. This cash register game can evolve into playing store, where you assign a value to items in your house and the kids can “buy” them from you, which will help them learn to connect money with value. Soon they can be the shopkeeper and make change for your purchases.

For older children, it’s a good idea to begin connecting money with what it costs to live, as well as with your family’s value system. Create a spending plan for your family and share it with your kids. Start with your income, show how you save for goals like retirement and their future education costs. Break your expenses down between wants and needs and discuss the difference between the two. After your needs are paid for, show them what’s left over for wants and how you decide to spend these discretionary dollars. If you feel that this is too much information, start with one category of spending, such as food.

They’ll learn by knowing how much family money is allocated towards food, how you spend it and how you shop. You can bring them with you to the grocery store and include them in your shopping, showing them how to make comparisons and informed buying decisions. Have them gather menus from local restaurants and compare the costs of eating out with cooking at home. How much information you decide to share with them is up to you, but I think it’s always important to talk about your discretionary dollars, as this creates an important connection between money and values. If your family is charitable, tell them how much you give and why.  Sharing with your kids how you prioritize your wants will help them understand their own wants. Why did you buy a pair of True Religion jeans rather than a pair at Old Navy? Was it because they were of better quality? To fit in and impress others? To make you feel better about yourself? Why did you buy expensive tickets to Hamilton? All these conversations can help kids make important connections and understand the role of money in their lives.

As kids earn their own money, whether from an allowance, chores or a job, help them create their own budget. Periodic reviews of the budget can help them gain additional perspective. Don’t worry too much if they make mistakes or decisions you disagree with; this is all part of the learning process. Instill in them the value of saving for future big-ticket purchases. Encouraging them to save 10% is a great lesson that can develop into a long-lasting habit.

As your kids get older, include them in more of the financial process. Help them understand what it costs to live and how it’s important to have a career which supports the family’s lifestyle. Have your teenage kids create a storyboard of what they want their life to look like. Where would they like to live? What kind of car would they like? What do they want to do in their free time? Do they want kids? Then help them understand the costs of their desired lifestyle, and be sure to add in all the things they didn’t think about, such as insurance, utilities, taxes etc. This conversation can be connected to college decisions, such as how much debt to take on and the financial implications of various careers.

By teaching your children about money from an early age, you can help them develop healthy financial habits that will last a lifetime. Too often we don’t talk with kids about money, and what they internalize is that the topic is taboo, something stressful or even shameful. The last thing you want is your child assuming the fetal position in horror every time they think about money, as I do every time I hear those dreaded four words…. “Back to School Sale!”