4 Tips for Talking to Your Kids About Money

Are you as uncomfortable talking to your own kids about money as you would be talking to your in-laws about it? It almost seems so, judging from the results of T. Rowe Price’s Parents, Kids & Money survey. In that study, 71% of parents were some degree of reluctant to talk to their kids about financial matters.

Maybe you’re holding back from money chats with your kids because you’re not confident you’ll say the “right” thing. If that’s you, relax. Most kids’ money questions are simpler than you think, says Rachel Cruze, co-author of Smart Money, Smart Kids, with her dad, Dave Ramsey.

Here are some strategies for handling family money conversations with a bit less stress.

1. Care but don’t scare.

Aim to be as honest with your kids as you can be about money. Just don’t freak them out with too much adult detail. Money conversations, like all talks with your kids, need to be age appropriate, says Cruze.

Not only should you talk differently to a 14-year-old than a 4-year-old, “some kids are just more mature and can handle a more intricate money conversation,” says Cruze. “However, other kids are in different stages of development, and you shouldn’t feel you have to open every detail of your financial life to them.”

2. Avoid the phrase “We can’t afford it” unless it’s really true.

Case in point: When your child asks for that extra package of cookies or an unplanned toy while you’re at the store. You probably can afford the item, but you don’t choose to do so. The better answer, says Cruze, is: “That’s not in our budget right now. We didn’t plan for it.”

The lesson to your kid is that money is finite. If you’ve already allocated your money to groceries, it’s not available for extra toys. One other idea: “’No’ can actually be a complete sentence,” adds Cruze. “You’re the parent. You don’t always have to explain any further.”

3. If money suddenly gets tight, don’t lie.

Maybe one parent has been laid off. Or perhaps you’ve made a proactive choice for one parent to quit and stay home. If you try to hide the fact that you’ve slashed your budget, your kids will suspect that something is up anyway, says Cruze. Your better bet is to set clear expectations about how you’ll handle having less money coming in.

For instance, you might say, “Because Dad’s hours were cut at work, we’re only going to eat out every couple of weeks, instead of every Friday.” Or “To save money, we won’t be going to many movies at theatres for a while. Let’s see what great movies we can get from the library.”

4. If your child asks “Are we rich?” or “How much money do you make?”, dig deeper.

A great response is: “Why do you ask?” In most cases, your child probably isn’t asking to see your W-2 form. They might be scared. They could be wondering if your family is financially secure because a friend’s family recently had money problems. “Reassure your child that you’re always going to take good care of them, no matter how much money is coming in,” Cruze says.

You also can tell your child that pretty much anyone who lives in America is wealthy, compared to many people in other parts of the world, suggests Cruze. “To have a house, food and car is considered ‘rich’ by many people’s standards,” she says.

(photo courtesy © State Farm cc2.0)

How To Talk Money Management With Your Kids

The money talk — not as scary as the birds and bees, but still a lot to think about. We get it and so do other parents. In fact, 49% of parents say they’re not sure how to explain money to their child.[1] Enter: Spring Break. It’s the perfect time to open the conversation, starting with budgeting. 

EXPLAIN WHY BUDGETING IS IMPORTANT

If you’re like 67%[2] of Americans, you keep a budget — nice! Time to get your kids on board. But how? You could start off by explaining why a budget matters, because chances are they’ll ask.

Conversation Starter: “When you make a budget, you know just what you’re spending, and how much you need to save for things you want, like those AirPods.”

EXPLAIN COMMON BUDGETING TERMS

Fixed Expenses and Variable Expenses — ring a bell? Maybe, maybe not. Either way, they’re important words to teach your kids about budgeting. Break it down into Spring Break terms, and they’ll get it.

Conversation Starter: “A Fixed Expense is one that doesn’t change. Like, our plane ticket. A variable Expense is one that does change. Like, meals. It can go up or down, depending on where we eat.”

EXPLAIN WHY SAVING MONEY IS IMPORTANT

Budgeting for Spring Break is one thing — saving for it is another. Instead of simply handing them money (and hoping they stash it away), show them the importance of earning and saving.

Conversation Starter: “Saving money lets you buy things that you might not have enough money for right now. When you add a little bit of money to savings over time, it helps make future purchases possible.” Tip: Name something you’re saving for, and how you plan on reaching your goal.

GIVE THEM THE GREENLIGHT

After you have the money talk with your kids (you’ve got this!), think about getting them a debit card — like Greenlight. Unlike a credit card, they can only spend what’s on it. (More on the differences between credit and debit here.) The best part: debit cards like Greenlight empower your kids to make smart money decisions, long after Spring Break ends.

With the Greenlight debit card and app, your kids can:

  • Set Savings Goals. Even staycations cost money. Teach them to save for it.
  • Learn to Make Trade-offs. Keychain or shark-tooth necklace? It’s their call.
  • Earn Allowance Through Chores. Greenlight kids who earn allowance save 26% more.

As they start learning about money management, you’ll be right there with them. The Greenlight app lets you:

  • Control Access to ATM’s. Are they taking too much out? Set limits.
  • Choose Stores. You decide where they can and can’t spend.
  • Get Real-Time Notifications and Monitor Their Spend Levels. Perfect if they’re vacationing without you.

GET SET FOR SPRING BREAK

Join Greenlight today and help your kids get a head start on budgeting for the break — and for life! Sign Up Now

[1] Investopedia.com [2] Debt.com

Why kids should understand the difference between debit and credit cards

Today, it’s not surprising that Americans have shifted from the traditional use of cash to more modern methods of payment like debit and credit cards. According to Fundera, 70% of consumers prefer using cards as a form of payment and 54% prefer using debit cards. 

Debit and credit cards provide convenience, more security than cash and are accepted nearly everywhere. It’s safe to say that while cash may not be going away, teaching children the basics of what credit and debit cards are now will prepare them to use cards responsibly in the future. 

Prepare them for the reality of credit cards

A credit card is a form of payment issued by a bank or business that allows the holder to purchase things on credit. When making purchases with a credit card, you promise to pay back the money you owe (plus any interest!) at a later date. 

When you carry a balance over month-to-month, the lender charges you interest on top of the amount you owe. Carried balances and interest can add up quickly and many families find themselves in a position where it’s tough to pay credit cards off.

In fact, 41% of America’s households have credit card debt. It’s important to introduce your kids to the concept of credit cards while they’re still in the nest – that way, they are prepared to carry one later in life. 

When it comes to teaching your kids, we recommend starting their money management adventures with a debit card. This protects them from overspending because they can spend only the money they have, and allows them to build healthy habits early before they enter the world of credit.

Teach them to manage money with a debit card

Debit cards provide more security than cash and fewer worries about debt than a credit card. A debit card is a form of payment that deducts money directly from a bank account to pay for a purchase. With debit cards, owners can have easy access to their available funds and can often also put money aside for something special using a savings account. 

Kids need to learn how to manage a debit card just like they need to learn how to drive. Whether your child runs their own lemonade stand during the summer, starts their first job or gets an allowance, a debit card can help kids learn to manage balances, save money, and more!

How Greenlight helps

Greenlight helps kids learn how to manage money and form strong healthy habits that will serve them as adults. According to Greenlight CEO Tim Sheehan, the reason Greenlight is a debit card is to “help kids learn to effectively manage the money they’ve earned, as opposed to spending money they may not have.”

Parents are the primary account holders and have the controls to choose where their children can use the card, manage chores and allowances, set parent-paid interest rates on savings, and more. Kids are able to monitor their balances, create saving goals, and learn how to make financially-smart decisions in a safe environment with their parents’ guidance. 

How parents send money using the Greenlight debit card.

Mistakes are just mistakes

With Greenlight, there is no chance for a child to overdraft or overspend since we decline any purchases greater than the child’s available balance. Mistakes are just mistakes! Parents get alerts when kids try to spend more than they have to spark conversations about budgeting and wise spending. 

Parents are able to allocate funds to their child’s “Spend Anywhere” account or choose specific stores where kids can spend and how much they can spend. They can even help their child create a savings goal and contribute money to meet that special goal. 

Ready to teach your child how to manage money responsibly?

Join Greenlight today to start adventures in personal finance with your kids!