Talking to Your Kids About Finances
Fifth Third Bank helps you talk to you kids about smart budgeting and coping with tough times
Fifth Third Bank’s Senior Vice President of Community Affairs Byna Elliott has taught her kids the power of a dollar. They might only be 6 and 10, but that’s old enough to know Mom and Dad aren’t made out of money.
“What I do personally, when we go on trips, I actually give the kids a budget. I say ‘You have $100, so is this how you want to spend your money?' It becomes 'Do I want to do this versus this?'"
The strategy is so effective, Elliott says even her 6-year-old son can make solid financial family decisions.
“He will say ‘No, that’s not one of our choices’ because that’s what we talk about. You realize how much they take for granted without a good understanding of how things really work,” says Elliott.
That’s just one of the benefits of making money matters a talking point with your kids, according to Elliott.
“I think it gives them a sense of ownership,” says Elliott. “It makes it seem more like a partnership and it reduces the stress level on everyone.”
Talking to kids about money is best done in “bite-sized” chunks and by age groups, she says. Basic knowledge for kids between 1 and 8 years old is enough. Around 10, they can start budgeting their own allowance. Once they’re teenagers, parents should take an afternoon to show their kids just how much money comes in and goes out of the household.
Looking for more tips on how to clue kids in when it comes to cash. Here’s Fifth Third’s top 10 for having the “economy talk.”
1. Remember that kids live in a black and white world. It’s a common reaction for people to joke about their economic predicament. Unfortunately, kids don’t often understand the difference between a joke and reality and may literally think your family will end up on the streets even though you mean it in jest.
2. Be honest. Give your children a basic understanding of your financial situation, but only provide them the amount of information appropriate for their age. Reassure them that while you may need to cut back in places, you’ll still be able to provide for their needs.
3. Different ages require different approaches. While younger children are mostly looking for reassurance, teenagers are likely talking about the economy in school and need a greater level of detail from you. Take a proactive approach and ask them if they have questions about how events in the news are affecting your family.
4. Add context to financial conversations. Showing older kids your monthly bills can help them gain a better understanding of your situation and identify ways they can contribute. Seeing the actual bills and how you pay them is a good way to bring financial discussions to life.
5. Allow your kids to help. Doing so gives your children some sense of control of the family’s situation. Encourage your kids to help you find ways to cut costs or possibly save money. Even young children are looking for ways they can pitch in.
6. Use this as an opportunity to teach. If asked how much something costs, don’t take the easy way out by saying, “a lot” or “too much.” Go a step further and teach your kids the importance of money by illustrating how much allowance must be saved or hours worked to purchase what they want. Additionally, older family members may be able to share reassuring experiences from previous economic downturns.
7. Give kids a chance to manage money. A great way to build your children’s financial foundation is to open savings accounts in their name. They’ll be able to see the value of savings as the account grows and will feel empowered by contributing to and managing the account.
8. It’s O.K. to say no. Telling your children that they can’t have something isn’t neglectful parenting. In fact, it’s the opposite. Setting limits or saying no reinforces the concept of delayed gratification.
9. Look for signs of stress. If you notice changes in your children’s appetites or sleep patterns, among other things, they might be feeling the effects of your financial stress. Help them to manage and reduce stress and consider getting professional counseling if needed. Many companies offer employee assistance programs that can direct you to the help you’re seeking.
10. Set a good example. If you’re doing a good job taking care of yourself and managing stress, chances are your kids will too.