If you want your children to be financially smart adults, then you have to talk to them about money – warts and all.

“OK, but why do we need to talk to our children about money when they’re, well, kids?  Why not wait until they are older, like late teens?”

There are a lot of reasons but let’s look at a few.  Firstly, technology has meant that when they’re teens (even pre-teens), they are more likely to be using money cards or phone apps than cash and children (under 10 as a rule) do not understand the connection between the two.

Children don’t know that the cash you take out of the ATM is your earned money.  It isn’t a magical hole in the wall that deals out cash to us all (although, if you do find one, let us know!).  Likewise, when you swipe your debit or credit card at a store.  So, it is up to you, as their parents, to teach them.

Secondly, the world is changing and there will be much more responsibility on this younger generation to ‘pay their own way’.  For example, when they reach retirement age, it is unlikely that the Govt will continue to fund their superannuation payments.  The public hospital waiting lists may mean that medical insurance becomes the norm in the future for a larger range of treatments than currently is the case.

And let’s not forget this one: living with debt is the norm and teenagers need to understand how to make good financial decisions around their career choices and the ability to repay student loans.

For many parents, talking with their children about money is difficult.  Often, we don’t know where to start, or we’re concerned bout what our children will tell others about our financial situation.  If you and your spouse don’t talk about money or if your parents didn’t talk to you about money, then it is even more difficult for you to talk to your children about money.

talk to your children

Silence around money is also something that many of us learned from our parents.

As parents, you will know that children’s questions can be straight to the point and candid, and questions around money are no exception.  The playground is often a typical source for many curly questions, for example, little ‘Johnnie’ may say to your little ‘Suzie’, “my family is rich.”  So, your little Suzie may come home and say, “are we as rich as Johnnie’s family?”

When your child does ask a question about money, you want to be honest.  Before we launch into your answer, simply say in an encouraging and not suspicious tone, “Why do you ask?”

By asking your child, “why do you ask?” gives you some time to determine where the question is coming from, so you know the context, this also gives us time to think about our answer.

Another source of these seemingly awkward money questions arises from fear or anxiety.  These are likely to have come from an overheard argument between parents, or a fragment of a conversation.

Here are a few questions you may be asked.

“Are we poor?”

This question may come up when children have been told ‘No’, and they see a friend with whatever it was you said No to.  A good answer to this one is, “people who are poor don’t have everything they need, like food, clothing, a roof over their heads and medicine, we have all that so we aren’t poor.”

“Are we rich?”  A group of children may have come to the conclusion that a friend is rich because they have lots of toys, a big room and nice clothes.  Once you know why they are asking (why do you ask?), try and define the term, and include other non-monetary words.

“Why can’t I have it if I’m going to pay for it with my own money?”  It’s your house, so your rules.  If you didn’t want to be quite so authoritarian, you can give a more detailed reason which they may or may not agree with.

When talking to you children about money, you need to be age appropriate.  You aren’t going to go through your household expenditure with your 4-year-old, but you might with your 16 year old.  The main thing is to be honest and don’t make money scary.

The American journalist, Ron Lieber, has written a best seller called The Opposite of Spoiled.  The book is all about how, when and why to talk to kids about money, whether they are three years old or teenagers.  Written in a warm, accessible voice, grounded in real-world experience and stories from families with a range of incomes, The Opposite of Spoiled is both a practical guidebook and a values-based philosophy.  His book is available on Amazon has well as several other outlets.

In order for you to help your children learn about money, make sure that you are happy with your own financial strategies.

If you’re unsure how to go about talking to your children about money, talk to us, we’re happy to help you get you started or drop us an email or click on this link to find a day and time that suits you to have a chat with us – it’s completely free!