Today’s guest post comes from Kate Nesi who writes about how to be open with your children about money. And this is a topic near and dear to my heart.
Like most, my parents were very secretive about their finances. I didn’t like it at all. For example, I had no idea what a good salary was or how much the mortgage cost.
I’m the opposite with my children. I tell them everything; they even know what our net worth is. The older one was blown away when I told her. The younger one? Here you go:
Take it away Kate!
It appears that talking about personal finance is still a taboo subject. I would venture to say that’s why we flock to blogs that openly discuss financial numbers, since it’s something we’re not getting in our daily discussions with friends and family. I’ve approached these conversations with them, but it typically gets awkward and they walk away. Isn’t frugal living and financial independence a passion of everybody’s?
One area I find compelling is how little we share our finances among our immediate families. Not only do many hide their expenses from their spouses, but many parents tend to completely shy away from any discussion of finances with their children. Parents want to give to their children without the concept of explaining where money is coming from, or even worse, going into debt to make their children happy.
A coworker of mine recently told me that she and her husband couldn’t fathom telling their kids that their annual Disney World vacation wasn’t going to happen. Instead, they put it on their credit card to pay another day as in years past. This way, their kids could have that experience and wouldn’t know that their parents faced serious financial straits and mountains of debt. But hey, the kids will always remember Disney when they foreclose on their house, right?
My husband Chris, and I were fortunate to have had gone through one of two major financial breakdowns at the time our oldest son, Monkey, was born in 2012. At that time, we could easily open up about our monetary issues, goals, and needs right in front of him and work through it openly.
Now that we have two children (Monkey is 5 and Crab is 2), we are very open about discussing finances and how we choose to spend our money. We discuss our budgets, dreams, and goals right along with our children and include them in the process.
What age is best?
I feel that there isn’t too early of a time to be open with your children about financial needs, goals, or why you live a certain way. Obviously, they’ll be able to learn different concepts at varying ages, but share what is appropriate for their level of understanding.
Where does money come from?
Monkey used to be babysat by a family friend that seemingly had an endless supply of money in retirement. This friend would take go to an ATM to take out cash on a regular basis, then take Monkey to a store to use the cash for whatever toy he asked for. She spoiled him, but in the end, it helped us teach him a good lesson about money.
Monkey believed that you just rolled up to an ATM and cash came out, not understanding that the money had to come in from somewhere in the first place. Through our conversations about those events, he learned that we go to work to make money, which enters a bank, from which we can withdraw cash or pay bills. It just doesn’t appear out of machines. All of this at the tender age of 4.
Talk Regularly about Money
While we openly talk about investing or other goals in front of our children, I know that they don’t fully comprehend compound interest or other levels of financial speak. Heck, sometimes even Chris doesn’t.
What we strive to do is not make it a boring or stressful activity, but an active part of our lifestyle and conversations. Not being open about money is a huge barrier to trust and wellness within a marriage, and that’s one thing we want to help our children learn about.
In addition, when you have open and honest conversations about money removing arguments from the equation it opens the opportunity to talk about future dreams and to grow together as a family. If Chris and I had to save our conversations for when the children weren’t around, we’d probably discuss money about 2 times per year!
Manage Your Bills/Income in Front of Them
I openly work on our financial spreadsheets and manage our bills when our children are awake. Bills are not hidden away for another day or when they go to bed.
While I’m entering expenses or making transfers to savings, Monkey usually asks to see the numbers. I show him what we’re working with, where the money goes, and then the number that is left. It’s no secret that I use software to organize our finances and he’ll eventually learn how to do the same for himself.
Highlight Your Good Habits
Our children are well aware that we make lists for food shopping, clothes purchases and wish lists for bigger items or fun gift ideas. They both have a wish list that they regularly add to and remove items from. This way, they are able to get the “item” off their minds and on to a wish list. They can then then look at it with fresh eyes when it comes time to spend any of their money.
At 2 years old, Crab doesn’t fully understand it all, but it’s setting him on a good path for delayed gratification instead of the gimme mindset.
Highlighting your good money habits helps children learn from your choices and possibly push aside those not-so-good choices. Getting them involved in list making or other good habits ingrains good behavior naturally.
Teach them About Discounts
Monkey is well aware of coupons or discounts when shopping. I remind him that we don’t like to pay full price, and there are always bargains to be found for the things we need or want.
On a recent shopping trip, he was given a $10 bill for his first day of kindergarten from a distant relative. We decided together he’d like to save half of it in his piggy bank and spend the other half on Play-doh. We went to the craft store as I told him I had a coupon!
He looked through prices to see what would be a $10 item at 55% off to cover sales tax. After he selected the item, we went to purchase it and found out the coupon would not work for the Play-doh (I was unaware otherwise I would’ve steered him in a new direction).
At checkout, I said it was above his budget so we’d have to reconsider our options, much to the stares of the women around me. He said okay and we left the store with nothing. On the way out, we decided to stop by the dollar store and he picked out two packs of his favorite gum for $2. Then when we left, he said he had, even more money to add to his piggy bank (a whole $3 more).
That might sound like a cheap parent to you, but to me, I look at it as an experience in delayed gratification. He was unable to cover the cost of the original item he wanted, so instead of paying for it for him, he learned that he can always just walk away.
Don’t be Afraid to Say “No” and Explain Why
We are also not shy when it comes to Monkey asking for extravagant things. Recently, he’s been asking for a $2,500 Kirby Vacuum (he has a passion for vacuums https://youtu.be/qatScdrWDWg). We explain that there are budgets for holidays, gift giving, and even vacuum purchases. We aren’t afraid to say “No,” or put the item on a wish list to consider later.
Mr. 1500 note: I think it’s hilarious that a child has a passion for vacuum cleaners!
Mrs. 1500 note: I wish ours did…
With regards to the Kirby, we explained why we would not be purchasing the vacuum; nor will Santa show up with it. Santa clearly works off a budget, too. He already has told me that if there’s no Kirby, he’ll just enjoy what other gifts he is given.
Openness with Finances = Openness in Other Areas
I feel that many shy away from discussing finances with children so they paint a rosy picture of the world around them. We don’t want to burden them with our adult problems, but I feel that from being open, they can learn and sometimes offer great ideas.
There have been countless times I’ve shared a financial concern with Monkey and he’ll say, “Mom, why don’t you try this…” and he actually has a great idea and usually saves us money in the long run. Don’t get me started on food shopping lists! He is all over the fact that if something isn’t on the list we should wait to buy it until next time!
Children will sense if there is tension within the household, and study after study shows that most tension in family life comes from issues with money. The number one reason for divorce is related to financial matters. Being open and getting on the same page with a spouse or with your family; working together toward a common goal, will set you in a different direction.
Our goal is to be open with our children at the appropriate times with clear, non-stressful communication about money, our choices, and what is available to them within our family financial picture. While we discuss money often, we are also mindful that life is more than just money. The people and relationships you care most about are most important.
Talk to your children about your financial situation in a way that is comfortable for you. Don’t be afraid to tell your child that something isn’t within the budget right now, or that they may have to work in order to receive the item. The more you share in a non-traumatic and calm manner, the more they’ll absorb and it will become second nature for them. “Mom, do we have a coupon for that?”
If our parents were more open about how to handle money or shared these things with us, Chris and I might already be on FIRE. Instead, we’re behind the curve, but quickly catching up! Join me over on my blog or the Lifelong Learning Podcast to learn more about our financial journey or whatever I’m learning about in life!
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