One of my favorite hobbies is scuba diving, and the first lesson in scuba diving is about ear pressure: “Equalize early and equalize often.”
As a certified public accountant and a parent of 6-year-old twin boys, I take the same approach to talking to my children about money. Start early and do it often!
When it comes to talking to your kids about money and finances, you don’t need to carve out time for long, serious discussions. Take small opportunities when they present themselves. For example, when my boys ask what I do at work, I say, “I help people with their money.” This usually leads to discussions about what taxes are and how being careful with your money is important. I, like most parents, will not claim to be an expert on parenting, but there are some key points parents can use to open the conversation about money with their children, from preschoolers to young adults.
Focus on value, but don’t forget that raw dollars do matter. Small, routine discussions relating hard work to our values in life come about regularly in our household, whether it pertains to my long hours during tax season or the boys asking to spend money at the arcade. Tying hard work to providing for the enjoyable things in life never stops.
Sometimes children need to hear hard dollar amounts so they gain an understanding of the power of savings and the importance of costs. They need to know dollars as a point of reference, and that does not happen overnight. It is a gradual process of learning through childhood while they’re not responsible for their full cost of living.
Gradually, those lessons of monetary value and true cost build over the years. Then, one day, when it’s time for them to be on their own, they’ll be more aware and fiscally responsible teenagers and young adults.
The goal is for kids to understand the value of money, but they also need lessons in debt conservation. This can start young, before they’re wanting to take out an expensive loan for their first car or become eligible to apply for their own credit cards.
It is well known that too much debt isn’t healthy for anyone, but teaching kids what debt is and what it can cost can be tricky. Let them experience a bit of debt while they’re young so they understand the cost versus the benefit. Start small with something they really want, but charge them a little interest. After the loan and interest are repaid, show them how, if they had waited and saved, they could have kept that interest.