Monday, August 22, 2011

How to talk with your kids about Money

“Money doesn’t grow on trees.” This saying may seem obvious, although today’s youth seem to think
the opposite. Who can blame them though – unlike the baby boomers the new generation of youth have grown up in a time of economic prosperity and are used to being coddled by their parents. In 2011
alone, over 85 percent of college graduates will be moving back home (Huffington Post).

Recently, the recent economic situation has shown us that anything can happen at any given moment
and we (and our children) need to be prepared. Though it may not be possible to teach a pre-schooler
the complexities behind 401Ks and credit cards, it is possible to start teaching children the importance
of money at an early age. Chicago Healers Practitioner Julie Murphy Casserly (CLU, ChFC, CFP) stresses the importance of instilling good money habits in children as early as possible and offers easy
conversation topics to address the issue at every age.

Yes, money patterns begin to formulate during the pre-school years. You can start talking to your child about money when they are 2 or 3 by explaining that everything costs money – from the food they
eat, the clothes they wear, to the house they live in. These talks need to go beyond the necessities too. Explain that new toys, accessories or video games are things your family can live without. Introduce
new toys to them a few at a time, rather than showering them with an over-abundance of playthings.
This will help them get used to the fact that they don’t need a heap of toys to be happy.

By the time your child is 6 or 7 years old you can start teaching them about prioritizing their money.
For example, when you are at the toy store, instead of letting them pick anything off the shelf, try
giving your child five dollars and letting them choose something that fits within this price tag. For
parents who buy their children anything and everything, the child will expect this treatment later on in
life, giving them a sense of entitlement. Ask yourself, is this the reality I want for my child 15 years
from now?

This is also the point in time to show your child that money is the result of hard work. Work out a plan with a family friend or neighbor where your child will do housework or yard work for $5-$10 cash. Then give them the power to choose how they want to spend or save their hard-earned money.

High School
At this time, it is critical to create a financial collaboration with your son or daughter. Encourage them
to get a part-time job to help pay for their car insurance, their gas or portions of the monthly car payment. Children should be held accountable for sharing some of these costs with their parents. Once they get that paycheck, establish guidelines on how it should be dispersed — 1/3 goes towards that car payment, 1/3 goes towards their future college fund and 1/3 can be spent on whatever they choose.

During this age, it’s also important to highlight the importance of living a quality of life, rather than the quality of things that you own. Help your children understand that material things like a brand new car when they turn 16, are often a source of immediate happiness, but sooner or later, this happiness fades and they will be left searching for deeper self-fulfillment.

Your child is an adult now. Have an adult conversation with them about their finances and make sure
they understand how credit works. Tell them about your experiences with credit card use – the good,
bad and the ugly. Once kids are on their own, temptations will always arise and children in this age
bracket will more than likely consider opening a credit card to fund some of these temptations. Explain how credit cards can bring a false sense of financial reality. They make us less conscious of where our money is flowing and how much we are spending. Talk about how the constant struggle to earn cash to
pay off debt can take a physical and emotional toll.


  1. Great tips! Thanks for posting.

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  2. Early financial education to the kids is really important for them to decide on their own. Great tips you shared.