Keep It Simple When Talking to Kids About Money
When I talk about teaching kids about money, I often get this response from nervous parents or curious reporters: How can adults teach their kids about money if they're not very good at managing it themselves?
It's true that adults often have a lot to learn. For instance, in recent surveys by Econ4U, 53% of those responding didn't know what the Dow Jones industrial average was; 52% couldn't describe the advantages of a Roth IRA; 43% couldn't identify a FICO score as the most important factor in getting a loan; and 64% didn't have enough savings to pay their bills for six months if they lost their job.
But to mark Financial Literacy Month, let me offer parents some words of encouragement: No matter how little you think you know about money, you still know more than your kids.
They're not going to ask you how TARP funds are being distributed or even for a rundown of your family's balance sheet. They're likely to ask far simpler financial questions: "Why can't you get money out of the bank machine so we can go to McDonald's for lunch?" "Do you have 20 bucks so I can go to the mall with my friends?" "Can I have [fill in the blank]?"
I love to tell the anecdote about my own son, then a freshman in high school, who was surprised to learn that you could deposit cash (and not just checks) in a bank. And even college students really do think that as long as you have checks in the checkbook there must be money in the account.
So when discussing money with your kids, remember these principles: Keep it age-appropriate, and above all keep it simple.
To answer the previous questions, for example, you might tell your preschooler that a bank ATM is like a piggy bank for you; just as his piggy bank is sometimes empty, so is yours until you deposit more money. Tell your middle-school student that mall money comes out of her allowance. Tell a child of any age that he or she can't have a [fill in the blank] because it doesn't fit into your budget right now. (See more money lessons by age group.)
In fact, the current economic situation is a prime teachable moment. Nearly 80% of teens polled by Junior Achievement said their parents are talking about the economy more than they used to.
And kids are listening. What they crave most now is reassurance. They want to know that despite what they see on TV, your family is going to be all right, with food on the table and a roof over your head (see Talking to Young Kids About the Financial Crisis and Talking to Teens About the Financial Crisis).
If kids do ask a question that puzzles you or makes you uncomfortable, consider it a nudge to get your own house in order.
Next: A crash course in financial literacy for the whole family
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