Part of being a parent is deciding when, and how, to talk to your children about money. You want to prepare them to be financially savvy in the future and help them avoid making big financial mistakes in adulthood. But when is a good time to start?
The timing will depend on your own habits and preferences, as well as your child’s development. How you do this is more important than when.
Even when children are ages 3-5, you can begin laying the foundation by simply teaching them money is used to buy things you want, and it’s earned by working. Try pointing out the various people doing jobs in your neighborhood and explain that by doing those jobs, each person earns money.
A piggy bank to collect loose change — which can be saved for a special treat or taken to a bank in exchange for bills — is also a good starting point. This gives your child the opportunity to earn and spend money while introducing the idea of delayed gratification.
School-age children and preteens can learn about earning money with an allowance or by doing jobs around the house. This is a good time to encourage children to save their money for something they want, which will teach them to plan their spending. When they’re ready to make a purchase, take the opportunity to explain how to compare prices and features before buying.
Make it a family affair.
When appropriate, let your children listen in on family budget discussions. Answer any questions they have as honestly as you can. Consider using common family events — such as getting a pet, paying bills, or moving to a new home — as conversation starters. What will each situation require in terms of saving money or taking on new expenses?
Think out loud as you make shopping decisions. This can indirectly give your child insights into your spending process. Depending on how attentive the child is, you can use those moments to encourage participation by asking him or her to check the cupboard with you to see what’s missing, and then add those items to a shopping list.
At the same time, make a point of modeling responsible money habits. For instance, before going to the store to buy groceries, use your list to set a budget. Then stick to it, emphasizing the difference between things you want and things you need. When shopping, point out how some products cost less than others but are often just as good. Caution against impulse buying and “retail therapy” while encouraging reusing and recycling over replacing.
Help them establish healthy habits.
As your children get older and their earnings grow, help them open their own savings accounts. Then teach them to divide their money into three categories: spending, saving and donating. This third category may sound surprising, but it’s important to help children start thinking about their place in the world.
Teaching them about income inequality and poverty — that not everyone has the same amount of money or access to food, clothes, toys or even a home — can help them develop a sense of value around what really matters.
Regardless of your child’s age, it’s not always what you say but what you do that will be remembered most. Your everyday attitude toward money — how you spend and save on a regular basis — is what will stick with kids in the years to come. The more solid a foundation you can share with them, the more secure their financial future will be.