How to talk to kids about money

piggy bank
Public Domain MaxPixel

Many adults wish they'd had more financial instruction from parents. It's never too late to start with your own kids.

Most Americans who are saving for retirement say they wish they'd had someone to teach them about how to handle money at a younger age. Basic lessons in saving, investing, how the stock market works, managing credit, paying off debt, and living within one's means would have been helpful discussions to have years earlier.

A Capital Group survey of over 1,000 parents has attempted to gauge how much financial education parents are giving their children nowadays, and it looks as though financial literacy is on the rise. Gen X and Millennial parents are more likely to talk to their kids about saving from a young age than Baby Boomer parents were. To quote Heather Lord, a senior VP at Capital Group,

"Thirty-nine percent of millennial parents said they would start telling children at age 12 or younger to start saving early, almost twice the level of baby boomer parents, at 22 percent."

After kids turn 12, younger parents move on to more complex topics, such as credit ratings, buying a vehicle, and staying out of debt. Most parents (69 percent) believe they've been somewhat successful with financial education, but only 19 percent describes it as "completely successful." Twenty-eight percent of baby boomer parents say they're still teaching their adult kids about money management.

The more financially unstable a parent's own childhood was, the more determined they are to educate; and most of these conversations are initiated by mothers, despite the fact that 79 percent of fathers are the household decision-makers when it comes to investments.

Lord's message to parents is that it doesn't matter how you go about teaching financial literacy; the most important thing is simply to do it.

"There are many ways to approach teaching children about financial topics, and there are countless books and online resources detailing these different approaches. However you decide to approach these conversations, start early. It will benefit your children.”

What are the lessons you should be teaching a young child?

Here are some suggestions, based on an article written by Trent Hamm for The Simple Dollar:

1. How to save: Do this by giving your kid a weekly allowance (Hamm recommends $0.50 x child's age) that gives them something to work with. Establish 3 containers for saving, investing, and spending and start by requiring a minimum amount to be placed in the former two.

2. Keeping track of money: Establish a log where the child records everything s/he spends. Teach them how to count money and talk about the regular cost of items, compared to sale prices.

3. How to spend wisely: Ensure the child knows how they'll spend their money before going to a store. Identify in advance things they actually want. This ties in with our view at TreeHugger that frugality is a principle that desperately needs reinstatement in our collective culture consciousness, and that frugality is environmentalism because it is an effective way to combat the rampant consumerism.

4. How to talk about money: Don't allow money to become a taboo topic at home. Speak openly about it. Let them hear you say you can't afford something, or that you can but won't buy it because it's not sensible.

5. Teach about credit: Start by getting a kid their own library card and making them responsible for late fees. Eventually, allow them to borrow small amounts of money from you and insisting on full repayment in subsequent weeks.

These are just a few of the many ways in which to approach teaching financial literacy. Don't stress out too much about doing it 'properly'; the mere fact that you're talking about it will be an immense benefit to your child and they will thank you for it someday.

How to talk to kids about money
Many adults wish they'd had more financial instruction from parents. It's never too late to start with your own kids.

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