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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)

What Dave Ramsey Says You Should Teach Your Kids about Money

Dave Ramsey is an American financial author, radio host, television personality, and motivational speaker focused on encouraging good money management skills for all ages. But, he didn’t start out this way.

Dave made plenty of money when he was young, but poor money management decisions resulted in significant debt. As a result, he lost everything he saved and was embarrassed to ask for help. Dave was determined to figure out how money works and to better manage his situation. He read every book available, interviewed older wealthy individuals, and more. Ultimately, he realized that the world wasn’t out to get him. As it turns out, it was his own decisions that ruined him financially.

After moving back into real estate and bailing himself out of financial distress, Dave realized he wanted to help others with all the knowledge he had gained. He began Ramsey Solutions in 1992 to “counsel folks hurting from the results of financial stress.” Dave wrote several books on the subject and eventually started a radio call-in show that airs nationally.

As you can imagine, Dave has several tips for your kids to learn early. Check out just a few of these below!

See “9 Ways to Teach Your Kids About Money” here

Elementary School Age

  1. Use a clear jar for saving. There are a lot of piggy banks that are pretty cool looking! Try to find one that is also clear so your child can see their money growing. This should be a fun thing for you and your child to sit down and discuss. Watching three quarters turn into 8 quarters is a big deal! This will also encourage saving.
  1. Show them that stuff costs money. It’s one thing to have money and another to understand what it actually means. The next time you take your child to the store, have them bring some physical money with them from their piggy bank. When they find something they want to purchase, have them hand their money to the cashier. This will be far more meaningful than a simple lecture about money because they will visually witness the result.

Tweens

  1. Teach them opportunity cost. Your kids need to learn that when they decide to purchase something, it generally means they can’t purchase something else. So, if they want to purchase a video game, show them that they won’t have enough money to pay for the new pair of shoes they want as well. Tradeoffs are critical, and can easily be taught in this manner.
  1. The importance of giving. Once your kids start making or saving money, take time to discuss the importance of giving to others in need. If they are passionate about animals for example, help them pick a shelter they can either give money or time to help out. Your kids will see that giving helps others, but that they will also feel good about it as well.

Teenagers

  1. Work for money. Your children will have a lot of free time during breaks, summers, and more. Helping them find a summer job at their local ice cream shop for example is a great way to show how working will provide them the additional money they seek.
  1. Teach them the danger of credit cards. As soon as your teen turns 18, they are going to want a credit card and will receive mail from banks trying to provide it to them with “attractive” promotions. Teach them why debt is dangerous and how to protect themselves.

These are just a few of the tips you can use to teach your kids how to manage their money. Its best to start as early as possible promoting positive money management skills because it will be a critical asset for your kids as they grow up.

See “Money-Smart Kids: The Top Tips Every Parent Should Know” here