Guess which topic most parents say is easier to explain to their kids than the birds and the bees, death or politics?
You guessed it: Money. A whopping 77 percent of parents can talk more easily about finances with their kids than they can other challenging topics.
That’s good news on the financial front. It means money isn’t a taboo topic in most U.S. families, according to a new survey by Wakefield Research for Junior Achievement and the Jackson Charitable Foundation. The Children’s Financial Literacy Survey included 500 children, aged seven to 10, and their parents.
Other key survey findings:
- 77 percent of parents believe the best place for kids to learn personal finance basics is at home. Good thing, since only five U.S. states (Alabama, Missouri, Tennessee, Utah and Virginia) require high school students to take one personal finance course in order to graduate, says Champlain College’s Center for Financial Literacy. Eleven states plus the District of Columbia have zero personal finance requirements in their high school curricula.
- Parents think kids should learn about money as young as age five, and by age eight, on average. Many kids begin to start understanding the connection between numbers and money in kindergarten (“Five pennies is the same as a five-cent nickel.”). By age eight, kids may understand that money is exchanged for goods and services (i.e. to buy stuff).
- 92 percent of parents save money—for emergencies, college tuition, and retirement. Good on you, parents! You’ve got the most important savings goals covered. Of course, we don’t know how much the surveyed parents are saving. But hey, any savings amount is a good thing.
- 82 percent of kids earn allowances from parents for doing chores, getting good grades, doing homework and doing good deeds. Learn more about the pros and cons of connecting allowance to these accomplishments.
Of course, all is not rosy when it comes to kids and money. Many of the young survey respondents showed they have a lot left to learn about finances. But hey, the oldest kids surveyed were only 10. They’ve got time:
- 33 percent of the kids surveyed haven’t yet been taught how to get or earn money. Uh oh. Is that a sign that it’s time to talk about extra summer chores for pay, parents?
- 41 percent of kids don’t know how to spend money. Even kids as young as 10 can begin making some simple spending decisions. How about having your kid help pick a birthday gift (with a maximum dollar amount) for a friend? Or choose how to spend their souvenir money during your summer vacation?
- 47 percent of kids haven’t learned how to give money to help people. An easy fix: Many parents use the “three-jar system,” (or some version of it.). They require their kids to split their allowances three ways: Spending, saving and donating. This way, giving money to others becomes an automatic habit. Be sure to let your kids help decide where their donations will go.
- When asked why they think people put money in a bank, only slightly more than half (53 percent) of kids said “saving it so they won’t spend it.” First, banks and credit unions are almost invisible to kids, since parents don’t physically visit branches anymore. You could make a point to drop into your bank or credit union occasionally, or look online for kid-friendly videos like “Roles of a Bank” from CashVille Kidz.Just as important, though, is explaining to your kids how banks, budget categories and savings accounts make it easier for them to separate their spending money from savings.
- Only 25 percent of kids surveyed know you can earn interest on savings. Interest can seem like a tricky topic to explain to kids, for sure. How about sharing this “Schoolhouse Rock” classic to help make the concept clear?
For more about the survey, along with other kids, work and money topics, visit Junior Achievement’s website.
(photo courtesy © Paul Hamilton cc2.0)
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)