Parents are often reluctant to speak about money with their children either because they assume it's something they don't need right now or because the subject will be too difficult for them to grasp. But money is something that should be discussed as early as possible in life as it will give your children a good financial foundation and may help the family dynamic in many ways.
Your children will be able to understand some of your purchasing decisions better, for instance, and may be less likely to throw tantrums if things don’t go their way. They will also learn how to be financially responsible and independent from an early age.
Let’s take a look at some of the reasons why it’s good to talk to children about money and how to do it properly.
4 Reasons Why it’s Good to Talk to Children About Money
They’ll Learn an Essential Life Skill
Being financially literate is one of the most important skills anyone can have. By teaching your children how to manage money and its real value, you'll instantly give them a better chance at succeeding in life, or at least avoiding major pitfalls.
How many people would have a much better credit score today if their parents taught them how to build and maintain credit when they were younger? This is something a lot of adults learn only after they've made bad decisions, and few things in life can hold someone back as much as having bad credit. And the worst in all of this is that the rules of credit are incredibly simple.
Any child in their early teens should be able to understand basic finance principles like credit and budgeting, and virtually any child that is old enough to count can start learning how to save. As they get older, you can start teaching them about investing, taxes, and building a business. By the time they’ve become adults, you’ll have given them all the tools necessary to thrive in this world and enjoy a much easier life.
They Will Be More Understanding
You need to let your children in on the affairs of the house. This is the only way for them to understand the impact of certain events or decisions. If they don’t know how much you spend on things like groceries, energy, or fuel for the car, then they might not be able to understand why you can’t afford to buy certain things or why you have to change your habits when costs suddenly rise.
A child who doesn’t understand money will also have a harder time understanding the effects of job loss. A child that does, on the other hand, will understand why the family has to change its habits and might even be able to give suggestions on how they can cut costs. All of this will help them deal with future adversity and help them when they become adults as well.
Safeguard their Financial Future
The sooner your child understands money, the sooner they’ll be able to build the foundations of their financial future. If you teach them about things like compound interest now, for instance, then they'll be able to truly unlock its potential and have a significant advantage over those who only learn about it later in their lives.
Do not assume that they won’t be able to understand either. If they’re in their teens, this is something that you could teach them through videos and by using various tools you can find online. So, try to introduce the subject as possible, and try to be as concrete as possible in your examples to push them to follow through.
You Will Teach them the Value of Work
Teaching your children about money will teach them about the value of work. Children often get twisted messages when you tell them ‘no’, and it's often because they simply don't know where the money comes from.
How many of us thought that our parents were much richer than they were when we were young? That’s because a lot of us did not understand how wages work, and how much time our parents had to work to afford the things we liked.
If you teach your child how much work you had to put in to buy them that PlayStation or neat laptop they have always wanted, they will be more realistic in their demands and they will become more reasonable. You can also expect him to have a lot more respect for what you do for them and the family.
How to Talk About Money with Children the Right Way
Now that you know why talking about money early with your children is important, let's take a look at how to do it properly.
The most important thing to remember when you speak about money with your children is to start slowly. Things like saving, counting, spending, and earning money are something you can instil in them at a very early age. If you give incentives, like offering to pay the difference for a toy or gadget they want if they can manage to save up to a certain amount, it will push your children to become financially responsible and teach them the rewards of hard work and saving.
You should also try to teach your children by example and take them shopping with you. Challenge them to make the best decisions when looking at different products and teach them how to be savvy shoppers. Let them know which items are taxable and which ones are not, and let them look at the invoice when you’re done so they can see how much you actually spent. All of this will allow your children to internalise very important principles and understand the true worth of money.
You should also try to involve your children in financial discussions more, even if you think they're too complex for them. If you're thinking about refinancing your home, for instance, let them in and ask questions. This could allow them to learn about things like home ownership and financing, among others.
You should also take the opportunity to teach your children about things like income inequality and the importance of giving back. A lot of children have difficulty understanding why some people have so much while others have so little, and you cannot explain this to a child without teaching them about some of the basic rules of economics.
Educating your children about money and the poverty issues that are going on in your community could also push them to want to do their part later on, or to be more open if you decide to help someone in need. They might be more cooperative and open if you decide to help the foster care system, or they might even propose it. They might also decide to become foster parents later on.
Teaching your children about money will allow you to teach them about the world, politics, and history too. All of this could turn them into more well-rounded citizens.
Teaching children about money should be a priority for all parents, and you shouldn’t let the apparent complexity of the subject stop you from doing it. Start with some basic concepts and work your way up. Don’t try to pressure them, however, and only broach the subject if you feel they’re ready and interested.
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