How and when to talk to kids about money

PUBLISHED : Tuesday, 07 April, 2015, 6:01am
UPDATED : Monday, 13 June, 2016, 12:45pm

We fret about teaching our kids how to use the potty, why they should eat vegetables and why good manners matter. But money is one topic that slides by many parents because it's hard. However, it's probably one of the most important things we can teach our children.

How many of us have suddenly realised that our school-aged child doesn't understand the Xbox they're asking for will put a ding in the monthly budget? Or that the dollar you gave them to put into the basket at church is a commitment to trying to make the world a bit better? Or that the hours you sit trying to figure out summer schedules also include time spent trying to decide whether the camp is worth it, or whether that money would be better spent elsewhere?

So when do you start this talk? And how?

When?

"Your kids are going to start talking about money before you start talking to them about it," says Ron Lieber, author of the book The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money.

Don't wait for them to learn about money at school, Lieber says.

"It's essential enough that we want to own it in our household, and particularly important to seize the reins on money," he says, because there are direct connections between talking about money and teaching values. "I don't think we should outsource that."

How?

Deborah Gilboa, a family physician who focuses on parenting and youth development, says she started talking about money with her four boys when they started asking for stuff.

The key, she says, is to show children what's actually happening. We all use debit cards now to buy everything. It's good to try to use cash sometimes and explain that "we trade this money stuff to get" something in return, she says. When children see you pay with hard cash, they may be able to better visualise the easy-come-easy-go truth adults talk about.

But the fact is, they won't really learn about money until they have some of their own and feel the disappointment when it's gone. Or when they experience the joy of working hard to save it so they can buy something they really wanted.

Gilboa and Lieber are proponents of giving children an allowance from a young age and having them divide the money into three lots: One each to spend, save and donate.

The jars are a stand-in for a grown-up budget, Lieber says. Most of us spend a good chunk of what we make, but "if we're behaving ourselves" and saving at least 10 per cent and have a little left over for charity, we are able to represent the values we want to imprint on our children.

Gilboa's system is to put 10 per cent of the allowance into the donation jar, and divide the rest between a spend jar and a save/invest jar. You can talk about what to do with the money to donate, finding a cause your child cares about. Use this to teach him about the greater good.

They can use the money from the spend jar as they desire, including, she says, for "something you wouldn't want them to buy".

Finally, the save/invest jar is for the larger items on their wish list that they can't afford right away. This jar is a big step toward teaching a child what it means to pinch pennies and spend wisely.

Should allowance be connected to chores?

Chores should be used to teach youngsters how to help out, Gilboa says. If you connect chores and money, "then it's a job, and you can quit... You have to do [chores] because you're a member of the family and that's what we do."

Use chores as a lesson about work ethic and allowance as a means to teach kids how to save themselves from financial ruin when they are older.

The Washington Post