Skill Level Intermediate
- Here's the problem with personal finance, by its very nature, it's personal, singular, solo, you get it. But humans are generally not solo creatures, so our finances are often intermingled with others, and that's especially true when you're a parent. While some cultures have openness around money built into family conversations, many don't. Western cultures in particular have been infused with feelings of guilt and shame when it comes to money, and of a need for privacy when it comes to discussing it.
In fact, many parents find that it's easier to tell their children that it's rude to ask about money, then it is to answer awkward questions like, how much money do we have? The result of this deflection, we now have generations of people who don't have frameworks or vocabulary to talk about money challenges or opportunities. So how do we break the cycle? First, don't answer the money question with absolutes. When your child money asks how much money you have, try saying that you have enough.
Also, reassure your kids that they'll have their needs covered. You want them to know that they won't be deprived. On the other hand, when it comes to the wants, those should be up for discussion. You don't want your kids to get everything they ask for. They should know that there's limits, otherwise if you don't, you risk ruining their understanding of the value of money. Second, don't talk about what you're worth, or how much money you have in the bank. Instead, consider communicating in terms that they can relate to.
Try talking in goal-based terms. Tell them how much you aim to save each month, and agree on a goal for that savings. A new car, a vacation, this simple exercise can help keep a family on track, and build fantastic savings motives for kids. Also, make sure you bring your kids into spending decisions by including them in budget planning. Give them a say in things that affect them, so that they can understand how much is available for food, clothing, and entertainment spending for the month.
If there's a reasonable cap on spending, your kids can start to measure the cost of eating out, versus cooking at home, or going to a movie versus renting one at home. And this builds a fundamental understanding of the value of money. But ultimately, it's everyday behaviors, not grand gestures that make for lasting change. Be open to ongoing conversations versus stressing out whenever money comes up. And before lurching into complicated explanations, say, why do you ask? They may be asking a different question to the one that you're answering.
Another big benefit of bringing money to the forefront, is that kids tend to have a much better radar for what's growing in momentum than adults do, which can lead to great investment ideas. Even if you don't have kids of your own, ask anyone under 18 what brands, products, entertainment, are popular amongst their friends. You'll get a very clear insight into a way of thinking that's usually different from your own. Sometimes the best investment ideas come from unlikely places. At home, try to change the dinner table conversation to include finance.
Try talking about what companies deserve your money, or debate whether your entertainment money is better spent on a movie or a PlayStation game. When you do this, you can rewire the spending impulses that marketers are so good at planting in children, and you may learn a few investment tips at the same time. Talking about money doesn't need to be fun, but neither should it be scary. It's never too late to start with new financial habits at home. Good luck.