Talking to kids about money

Jeff,

I have two very curious kids. They are coming of the age when they have questions about everything. Some are easy to answer, some are hilarious, and some… well… some of them are really tricky. The topic of money often comes up, and I wonder how I should go about answering financial questions. I’m stumped, and it makes me nervous. When should I start? How should I handle it?

Catherine T.
Collingwood, Ontario

Hi Catherine,

That’s a great question. Recently I read about a new book by Beth Kobliner titled “Make Your Kid a Money Genius (Even if You’re Not)”. During her research, Kobliner found that parents have more trouble talking about money with their kids than they do with the birds and the bees. She says part of the reason is that parents themselves are afraid they don’t know enough about money, or, they’re embarrassed to tell their kids about money mistakes that they have made.

So, don’t worry if you’re nervous – you’re not alone. Here at Consolidated Credit Canada, we field financial questions every day. Some are complicated, but some are basic. My guess is that some of this confusion lies in the fact that our parents didn’t talk to us about money. In fact, not many people talk about money at all; it’s almost as if it’s a taboo subject.

Well, now is your chance to turn the tide by speaking openly and honestly with your children about money. Parents are the most important teachers and role models out there. With that in mind, here are a few tips to help guide you:

Start early – This might surprise you, but Cambridge University has a study showing that children’s attitudes about money are already set by the age of seven. As a parent, you will want to strike while the iron is hot. Kobliner says that even by age three, children can grasp basic concepts of money. Ease your way into it when they are young.
Lead by example – Take your children shopping with you, and show them how you stretch your dollar. Point out discounts and let them pour over a weekly flyer and identify the deals. This will embed an early sense of financial responsibility.
Give them an allowance – Come up with a reasonable amount of money and pay your kids a regular allowance. It teaches a lot of responsibility. They need to keep track of it and not lose it, they need to make sure it lasts until the next “payday,” and it shows them the reality of costs. It’s an early gateway to budgeting.
Talk about credit – Adults have a hard time mentally connecting their credit cards to their real bank account, and it’s even harder for children. They see you hand over your plastic, not cash, and you almost magically receive your goods or services. Showing them your bill at the end of the month will bring some reality to the situation and watching you pay it will help your children link some important ideas about financial accountability.
Keep it up – Never stop sharing financial advice with your children. Don’t wait until grade 12 to start talking about the financial difficulties surrounding post-secondary education, and continue the discussion into loan repayment, housing costs, and retirement preparation.

Catherine, you need to realize that you are a great asset and mentor to your children. Experience is what your children are lacking, and it’s what you can share. Don’t be shy to share some of your financial follies; it’s better that they learn from your mistakes rather than making them on their own.

And if you’d like to brush up on personal finances, feel free to take a look at the multitude of educational materials that Consolidated Credit provides on our website.

Good luck!

Jeffrey Schwartz
Executive Director

Jeffrey Schwartz is the Executive Director of Consolidated Credit Canada and Former President of the Credit Association of Greater Toronto (CAGT).