Whether you like it or not, it is an undisputed fact that money is an essential part of living in today’s capitalist society. Its influence can be felt everywhere—from the bills that need to be paid at the end of the month to the new toy that your child has on their Christmas wish list. For some families, money can be a sensitive subject. A 2019 BECU survey found that 72 percent of parents avoid discussing financial matters with their children, with 82 percent of them attributing it to fear. However, money talks can provide an important foundation for children’s financial understanding. By having these conversations early on, you are able to set your child up for financial success in the future.
Here are different ways you can introduce the concept of money at each stage of your child’s development:
Preschool and Kindergarten (Ages 3-5)
At these early ages, children are constantly observing the world around them and taking in information. Children at the age of 3 are able to gain a basic understanding of the concept of money, even though they might not fully grasp what it represents. As such, parents should help expand that initial understanding by demonstrating how money is used in exchange for goods. Children learn by example, so it would be helpful to bring your child along next time you go grocery shopping. Then, you can explain what the prices on items mean and how that connects to the amount of money that is used to pay for those items. This is also a great opportunity to help your child brush up on mathematical principles—like counting—using cash and change.
Elementary School (Ages 6-10)
Studies have shown that children have already developed their own money habits by the age of 7, which is why it is critical to start talking about money even earlier than that. For preschoolers and kindergarteners, parents focus on exposing them to scenarios where money is involved; for elementary school students, parents introduce various financial concepts and apply them in real life examples. Concepts can include earning, spending, saving, borrowing, and sharing. Explaining these concepts is the first step, and should be followed up with an application of the concept. For instance, if you were to teach your child about spending, you could provide your child with $5 to spend the next time you go to the store. Your child will need to look at prices and determine what they can afford before making the physical exchange between money and goods. Another example that teaches children about saving would be to provide your child with something to store money in, like a piggy bank or jar. Instruct your child to deposit their money there and after a set amount of time, they can go back and see how much money they have saved up.
Middle School (Ages 11-13)
By this stage, children will already have a solid understanding of financial concepts and would need to build upon it; so, parents should aim to continually provide resources and opportunities for them to either learn more or apply their knowledge. Giving your child an allowance can help teach them how to handle their own money; however, it is important to emphasize the idea that money does not grow on trees, but instead needs to be earned. An allowance can be rewarded when your child completes household chores, gets good grades, etc. This is also a time to start introducing more complex topics like budgeting, income and taxes, and investing. You can do this by including them in family conversations about money, like when you are creating the monthly budget or filing taxes during tax season.
High School (Ages 14-18)
The majority of high schools do not offer financial literacy courses, leaving it up to parents to fill in those gaps. High schoolers will already be familiar with most financial concepts, so the focus would be to provide them with the independence to start managing their own money. With their savings, they should consider opening a personal account—either checking or savings. This will help familiarize them with the banking system and give them ownership over their finances. Along those same lines, you might even think about giving them a credit card to use. There are multiple student credit cards available; you could also add your child as an authorized user on your credit card if you believe they are not yet ready to handle their own line of credit. A credit card is a big responsibility, so make sure your child understands things like fees and interest, credit limits, building credit, and consequences of late payments, before giving them one. Once they become of working age, many teens get jobs during the summer or school year (if their schedule allows). A job might not make sense for every high schooler, so your child should be well-equipped to balance one if they decide they want to start working. This is also the period of time you should be discussing the cost of college and how it will be paid for, as well as about how they can start preparing for retirement by investing.
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Talking to your kids about money can foster an environment where they feel comfortable asking questions. Thus, it is important to keep lines of communication open to help support their financial knowledge. It is also important to remember that financial circumstances differ between families because what works for one family may not work for yours. Finances can be a stressful ordeal, but financial literacy is a skill that children need to have. Money affects every part of our lives, and as such, It is never too early to start having money talks.