Money exists at the heart of society, yet conversations about finances are often hard to have. The social taboo around money can extend to parents, who might struggle to teach their children about finances - or have open conversations on the subject. Despite this, it’s important to teach kids about money to ensure that they’re equipped with the skills they need to manage their own finances when they exit the nest.
In addition, if kids learn from a younger age that conversations around finances can be handled confidently and without shame, the taboo will begin to gradually break down as they go on to share their wisdom with younger generations.
Below we’ve compiled our tips on where to start as a parent, to have honest, informative and easy conversations about money with children.
Getting the level of honesty right
The initial step to providing your children with financial education is to start a conversation about money. This means sharing information about your own personal finances and your family’s, which sets an example that money is something that can be talked about without shame.
However, it’s important to set boundaries with what you’re comfortable sharing - since overfamiliarity can also be damaging. For example, you may not be comfortable sharing your salary. In cases like these, it’s important not to avoid the topic, but instead share wisdom such as what a salary means, and why someone might not want to share theirs. This is also something that will depend on the age of your child – use your judgement to decide what’s appropriate.
Teach by showing
The best way to teach someone a skill is to show them the skill in practice before letting them try it themselves. This is also the case with teaching finances to kids, by demonstrating the use of money, and skills such as budgeting in the real world with family finances. While it’s not suitable to involve a young child in complex processes such as mortgage payments, you can choose an appropriate activity. The supermarket can be a good place to start. Try breaking your budget down into a smaller, simple amount – it can be for just one meal – and decide together what you can and can’t afford.
It's equally important here to maintain an honest narrative around this kind of budgeting. For example, instead of saying you can't afford an item, explain that while you might be able to afford it, you're choosing not to buy it because it doesn't fit within the set budget. This will help your child understand budgeting and to make smart decisions about their money based on their financial ability.
Learn by doing
Allowing your kids to make their own financial decisions can be a great way for them to understand first-hand how to manage their money. Giving them a small amount of money to spend on treats like toys and sweets will help them understand processes such as saving up for a bigger item. It’s also a good chance to let them earn their pocket money, by doing chores or a beginner’s enterprise like a bake sale or lemonade stand.
One of the key aspects of giving children control of their own finances is giving them space to fail – and as a result, learn from their mistakes. It can be difficult to watch a child feel remorse for a purchase they regret, and it’s equally tempting to swoop in and give them the money back. However, this paints a disjointed picture of what it means to have money and make purchasing decisions.
However you choose to teach your child about money, it’s important you treat the conversation with respect and honesty, while maintaining the boundaries within your relationship. It’s also a good idea to consider the resources available to you. Check with your children’s teachers if financial education is coming up in the curriculum, or browse alternative resources like apps such as GoHenry.
