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Financial Tip of the Week - Talking with Your Kids about Money

Source: Military Community and Family Policy (MC&FP) Weekly eNewsletter

In some families, talking about money can be a very uncomfortable conversation.  Many parents don’t know how to approach the topic of money, and some avoid it altogether. By starting the discussion early, you can make it easier to talk about this tough topic later, when your child is making larger purchases, thinking about getting a job, or beginning financial planning for college.

Every Day Steps:
Practice Smart Spending:
Talk with your children about how you make spending choices based on more than just affordability. Use language like “We’re not going to spend our money that way because…” or “It’s not a good value because…,” rather than just saying, “It’s too expensive,” which may give the impression that you would buy it if you could afford it.

Do: Bring your kids with you to the bank. If you’re making a deposit in a savings account, talk about the importance of saving “for a rainy day.”

Create Learning Opportunities: If you’re refinancing your mortgage, you have an opportunity discuss the concept of interest and the importance of paying off loan balances quickly. When you’re taking out a car loan, talk about how loans allow you to pay for things that you don’t have the money for, but you end up paying more in the long run.

Honesty as the Best Policy: If you are facing financial difficulty, be honest with your children. You don’t need to worry them with all the details, but it is helpful for them to learn that money isn’t magical — it doesn’t just appear when you need it.

Stress Wants vs. Needs: Many kids — especially young ones — have difficulty differentiating between wants and needs. When your child says she “needs” something, ask if she really needs it, or if she just wants it. Make sure your child understands the difference, and start paying attention to what you’re saying and the example you’re setting — for example, do you really need an expensive cup of coffee to get you through the morning?

Keep an Open Dialogue: When you’re out shopping, talk with your kids about why you make the purchases you do. Are you influenced by advertising? Pricing? The quality of the product?  How do you choose one product over another? Help your child start thinking carefully about making purchases.

Highlight the Positive: Many financially savvy practices, such as buying secondhand, donating old clothes to a thrift store, and reusing and recycling goods, are also good for the environment. Point out that not only are you saving money by doing these things, but you’re also taking action to help preserve the environment.

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