Why is it that when the words “children” and “finances” are mentioned in the same sentence, parents brace themselves like they are about to hear the punchline to a really bad joke? Well, it may be because children and finances are often characterized as two major topics that can cause stress and frustration.
This stress and frustration may be a roadblock, preventing parents from having an open dialogue about finances. Being a financially smart family is so important.
We want to tear down that roadblock and give you a road map to help you, your teens, and even young children develop great financial habits. When every member of your family understands basic finances and sets financial goals together, everyone feels more financially confident and accomplished.
Even doing something simple like money saving DIY activities together teaches them that saving can be fun and satisfying.
An American Psychological Association survey questioned parents on their relationship with their children and finances. The results revealed that only 37% talk often with their family members about the subject of finances.
Why is it that the vast majority of parents don’t talk about finances with their kids? Maybe most don’t know at what age to begin. Maybe they don’t know what to say. Or maybe they think talking about finances as a family isn’t important
Whatever the reason, you may find yourself as a parent in one of these three categories, needing an extra push to establish some basic familial financial habits. For you and all your children, let’s take a look at some ways to help everyone under the same roof get a better handle on the family finances without feeling the need to be an accounting professional.
Financial Tips for Young Kids: Show How Far Their Dollars Go
Do you often find yourself with your kids at the store having to say “no” to the many toys and candy bars that they have pulled off the shelf? Maybe you want to reward your kids with a little something, but they don’t always understand why that $40 limited edition Lego set may not be in the budget.
That’s because they are used to you being the gatekeeper of their spending. Instead, teach them how to be the gatekeeper of their own spending by giving them a bit of financial freedom under your supervision.
Financial freedom for an elementary- or middle-school-aged child should be exercised through simple, intentional actions. It can be as simple as giving them a small amount of money with the intention of letting them have the final say in how they spend it.
This simple action encourages thoughtfulness and awareness about the cost of something they want, which helps them feel a sense of financial freedom while still under your supervision.
Example: Say you want to reward your child by giving them $5 to spend at the store however they would like. Point them over to the dollar section or by the checkout, making note of the price tags that are displayed. Weigh the options of getting several small things versus one larger item.
They will feel empowered by the challenge of seeing how far their dollar can stretch. This sort of freedom helps them develop the habit of thoughtful spending, and it keeps Mom and Dad from always having to say, “No!”
Practical Goal: Take your child to a store of their choosing at the end of the week (if they’ve earned it) and give them a set amount of cash to spend however they would like. Help them weigh their options and select something that they are happy about.
Financial Tips for Teenagers: Responsibility Comes with Freedom
It’s time to make the pivot from the gatekeeper of all of your teenager’s expenses to a partner in their expenses. Teens are now at that stage of life where they are capable of earning a bit of income, and they need some extra help learning how to manage it.
Whether you and your spouse decide to give them a bit of weekly allowance or encourage a summer job, teens are entering the arena of earnings and need help with spending. It is important to establish basic habits now to help them feel confident in their spending habits in the future.
One of the most valuable skills that can help teens feel more confident with their money is helping them develop financial observational skills. This includes being aware of how much things cost, keeping track of where their money goes, and planning on how to save towards something they want.
This sounds basic, but these observational skills can help them become more thoughtful in their spending. The simple act of slowing down and thinking about how they should use their money will instill confidence and prevent impulsiveness.
Plus, you’ll be able to set financial boundaries with your teens while still giving them freedom to do what they want with their money.
Here is a list of different things you could do to help your teens become more financially observant and responsible.
#1 – Create a Savings Plan for Something Expensive
If your teen has their heart set on buying a more expensive item, brainstorm ways to make it happen. Help them make a savings plan or even suggest splitting the cost with you. Remember, you are their partner; you are there to encourage them, not control them.
#2 – Think of Their Money as a Budget, Not a Limit
Each week, take a few minutes at dinner to ask your teen about what they’ve spent that week. This will help them start thinking of money as a budget, not a limit. Ask them if they were happy with how they spent their money or if they wish they had used their money in a different way. All answers are great for learning.
#3 – Start Off with an Allowance at First
If your teen does not yet have any sort of income, consider giving them an allowance each month—an allowance that is contingent on something that you and your teen decide together. There is a sense of satisfaction that comes from earning money and choosing how to spend it that teens should begin to experience.
Practical Goal: Read these three examples together with your teen. Talk through how these examples can establish good spending habits, then select at least one of the examples to implement in the following week together.
Financial Tips for Parents: Take Charge of Your Finances and Give Wisdom
As parents, you and your spouse are in charge of leading financial conversations. Including your children in certain financial decisions can help you and your children be on the same page when it comes to money.
It’s not necessary for them to be aware of all financial decisions between you and your spouse. Kids and teens won’t understand high level concepts yet, but you can help your kids be more conscious of money when they have a say in casual, familial financial decisions.
A familial financial decision could be something like comparison shopping for family car insurance plans, but think of ways to involve the kids in that process that is appropriate for their level.
The first step to create an open dialogue with your children is to help them understand how their financial actions make a difference. When your kids feel like their voices are being heard and taken seriously, they will be more likely to actually want to talk about financial matters.
Just talking about how to spend your Saturday night together, weighing options and assessing price points of different activities, can help them better understand why sometimes the decision to do something is “no” and other times “yes.” Familial financial unity begins with frequent, honest discussions.
Example: Let’s say that you and your family decide to save up for a family vacation. Each member of the family decides how they are going to help contribute to this family goal.
Your youngest one may choose to eat at home instead of getting that after-school Happy Meal. Your teenager may volunteer to babysit the younger kids longer once a week so that a parent can get a few more hours in at their part-time job.
The parents can include a vacation savings allotment in the family budget as a way to slowly work up to the goal. With everyone playing a part in the goal, each family member can feel like they are contributing to the vacation.
Goal: Pick a family activity that appeals to everyone, figure out the estimated cost, then list out ways that everyone would be capable of contributing. Each week, check in on everyone’s progress to see how close you and your family are to that specific goal.
Now call your family together and set your goals in motion!
Written exclusively for Merriman.com by Madison Smith
Madison Smith is a personal and home finance expert at BestCompany.com. She works to help others make positive financial strides in their lives by providing expert insight on anything from credit card debt to home-buying tips.