It’s important to talk with your kids about money: as studies show, kids learn about money and how to manage it, wisely or not, from watching and listening to their parents.
Kimberly Palmer, author of SMART MOM, RICH MOM: How to Build Wealth While Raising a Family (AMACOM June 2016) and a mom of two, offers the following ideas for conversations that will help kids navigate our complicated financial world:
1) Mistakes You’ve Made with Money. Kids love to hear about their parents’ mistakes, and not just to smirk. It lets them know that it’s okay to be less than perfect. Potential examples to share include waiting to start a 401(k) account, getting into credit card debt, or wasting money on a splurge you regretted.
2) How You Earn Money and Use It. Thanks to direct-deposit, online shopping, and plastic, the exchange of goods and services for cash is almost invisible. Talking about how mom and dad work hard to earn a paycheck so we can turn around and use it to pay for our food, home, clothes, and car can make the virtual world of commerce a little more real.
3) How to Be a Media Critic. Kids are exposed to advertising everywhere: smartphone apps, websites, product placement within TV shows. As kids get older, point out differences between an ad and a show. Teach them to be skeptical of all the promises that advertising makes to get them (or their mom) to spend money.
4) Planning for Big Goals. When your kids start asking for expensive things, as kids tend to do, encourage them to draw a picture of what they want and consider ways the family could save to make that goal possible. Explain how you are making sacrifices to put money toward their future college education.
5) How to Use Credit Cards and Bank Accounts. To kids (and some adults), it’s not at all obvious that you should really try to pay off the full credit card balance each month as opposed to paying the required minimum. Explain why and let kids look over your shoulder as you manage your accounts and pay your bills.
6) Being Assertive (to Companies and Bosses). Let your kids overhear you calling a company to ask for a refund or to demand better service. Help your kids practice asking for more money, perhaps for their allowance or babysitting services, so they can learn the right words to use and get comfortable with the concept of negotiation before they get their first salary offer.
Adapted from Smart Mom, Rich Mom: How to Build Wealth While Raising a Family by Kimberly Palmer (AMACOM June 2016).
KIMBERLY PALMER, author of The Economy of You: Discover Your Inner Entrepreneur and Recession-Proof Your Life, was the senior money editor at US News & World Report for nine years. She is an adjunct professor at American University, where she teaches a course on mastering social media. She lives with her family, including two children, in the Washington, D.C., area.