Smart Ways to Talk About Money With Your Kids

If you aren't sure about how to start the discussion, these tips will help.

As sure as the cherry trees blossom in DC, April brings a shower of surveys about kids and money to mark National Financial Literacy Month. This year’s crop includes a wealth of data worth commenting on, which I’ll cover in several posts.

Let’s start with the basics: Families are still conflicted about discussing money. In the 2015 Parents, Kids and Money survey from T. Rowe Price, 82% of parents said they think they are setting a good financial example for their children. But only 46% of kids say their parents are doing extremely or very well at teaching them about money and finances. Further, 72% of parents say they are at least somewhat reluctant to talk to their kids about financial matters.

What parents need is a confidence boost. One of my recurring themes is that parents have power: You have more influence with your kids than their peers or the media. And even if you feel a little insecure about your knowledge of finance or your money management skills, you always know more than your kids (see our story How Parents Can Be Financial Role Models).

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Still feel awkward? Here’s how to proceed:

Take it small step by small step. Money discussions with your children can be impromptu, and should always be age-appropriate -- think shopping at the grocery store, helping the kids open a savings account, playing money games such as Monopoly and the Game of Life, giving the kids an allowance to manage on their own, or encouraging your budding entrepreneur who wants to set up a stand selling cold drinks or handmade bracelets (see our story How Parents Can Teach Kids About Money).

Don’t be concerned that your children will worry. In the T. Rowe Price survey, the most common reason parents cited for their reluctance to talk to their children about money is that they don’t want the kids to be anxious. But if your family really does have money issues, your kids will pick up on it. In fact, 61% of the children surveyed, who were ages 8 to 14, said their parents worry about money. And it’s easy for them to imagine that things are worse than they are -- or think that they are somehow at fault. What they interpret as a money “worry” may simply be a discussion of whether you should buy a new car or fix the old one.

Be candid with your kids. You don’t have to give them a dollars-and-cents accounting of your finances (see our story When Your Kids Ask How Much Money You Make). Nor should you overwhelm them with information that they can’t process. But rather than keep them in the dark, it’s better to find out what they’re thinking so you can answer their questions matter-of-factly and allay any fears. If you’ve lost your job, for example, you can tell them that you’ll be able to collect unemployment benefits and explain how you plan to look for a new job.

It’s also important to clear up any misconceptions. In the 2015 Teens & Personal Finance survey, sponsored by Junior Achievement and the Allstate Foundation, 48% of teens ages 13 to 18 said they expect their parents to pay their college tuition -- but only 16% of parents said they plan to pay their child’s college costs. If financing college is going to be a family affair, then all the members of the family, including the kids, need to be aware of how much they’re expected to contribute.

Close the gender gap. In the Teens & Personal Finance survey, girls were more likely than boys to say that their parents don’t talk to them about managing money and paying for college. And boys were more likely than girls to report that their parents help them keep track of money. Girls need financial skills as much as boys do, and you’re not doing your daughters any favors by trying to shelter them.

Don’t try to fool your children. They know what you’re up to. In the T. Rowe Price survey, 40% of kids said that their parents practice a “do as I say, not as I do” philosophy, and 68% suspect their parents have told them they can’t afford something when they really can. If you don’t want to buy your kids something, tell them why you think it’s not a good purchase or why you’d prefer to spend your money on something else. That’s a valuable lesson in making choices -- which is, after all, what managing money is all about.

Next: Should You Give Your Child a Credit Card?

Janet Bodnar

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.