Mommas, don’t let your babies grow up to pay interest!

How to talk to your kids about money

Remember when your parents taught you to tie your shoes, ride a bike, cross your t’s and dot your i’s? And as you got older, about being responsible, getting good grades, and how babies are really made? Have you got that nostalgic feeling yet? Now think back again.

Do you remember when your mother sat you down and talked to you about spending habits and how to practice common sense with your credit card? When she showed you the difference between gross and net income? Or when your teachers discussed the fact that when you borrow $250,000 at 5.2% over 25 years, that you’d end up paying over $445,000 back to your financial institution?

No?

Oh that’s right. You were never taught such ‘private’ things! That education likely came from the credit card company in the lobby of your college or university, teaching you the ins and outs of financial freedom while offering you that first taste of plastic. Uh-oh.

The fact of the matter is that most kids simply learn that it’s fun to spend money, and even more fun when it’s not theirs. Here’s how to stop that thinking from proliferating, by talking to your kids now.

For the little ones

Don’t worry. We are not suggesting you sit down and explain your mortgage statement to your four-year old. We know you want them to play princess and space cowboy for as long as they can. There are, however, things you can do.

Here are some tips on teaching kids between the ages of 5 and 12 about money:

1. Shop as a family. Give younger children decision-making power over a share of the grocery budget. For example, give them some discretion with their lunches (with nutritional boundaries, of course) by allowing them to choose lunch items and helping them make sure it fits within their budget. You don’t have to do this every week, but a few lessons in the aisles of your local market can stick with a child for life.
2. Do as you say. Put the entire family on a cash allowance for discretionary spending, grown-ups included. Let your child see you spend real money; stop using the plastic for your wants. Let them watch you make choices: will it be a latté a few times a week this month or that lavender sweater you’ve been eyeing?

Small adults (think tweens)

For older kids, you can be much more generous with the information you share. Now don’t get scared. We don’t recommend your adult-in-waiting choose your investment portfolio. (It sure would be a good idea if they knew what an investment portfolio was though!)

Here are some tips on teaching tweens and teens about money:

1. Talk about income and salaries - yours. Now is the time to help your child gain context around money. It’s not the end of the world to tell them how much you make. Just remember that it might seem like a lottery win to them, so be sure that along with discussing income, you discuss how much the life they live costs. You need to give them the gift of perspective now, or it could be a very expensive lesson later on.
2. Talk about income and salaries - theirs. By 12 or13 years old, most kids are starting to get an idea of what they’d like to do for a career. Help them research both the cost of the related education, as well as possible income opportunities that may be available in that field. Of course, they might change their minds a million times. Don’t worry. Since you taught them how to research their future, they can repeat it over and over again until they find the field of work that resonates most with them.
3. Tell them the truth. Your teens should know how much you need to save for retirement, and more importantly, how long that money will last. Every year, have a family financial planning session. Furthermore, have your children sit in on a portion of your annual reviews with your advisor. Encourage your child to ask questions during the meeting. They need to start hearing terms like RRSP and TFSA. In this way, ‘financial speak’ won’t be a foreign language when they are 40 (and not 14) years old.

Let them be doctors and lawyers?

Seriously, let them be whatever they want. Why? Because when we possess power over our money – no matter the exact income - we choose the life we want.

Start off by giving your children the gift of watching you live your financial truth. Your children shouldn’t pick careers based on money, but they should understand that aspect of their future so they can make sound choices.

And with that, might we make a suggestion to do today...

Sit down with your child and ask them how they feel about money, and then just listen. Their response might surprise you. What you may realize is that our children need to be armed with more than good grades when they embark into the world on their own.

And as parents, take heed: life is not all about leveraging, it’s not all about borrowing, and it’s certainly not all about the pursuit of more. We have a very important job: let’s not let our babies grow up to pay so much interest!

This article is published with the permission of the author, Stephanie Holmes-Winton, personal finance expert on debt and cash flow management. Stephanie is a Halifax-based advisor, author, speaker, radio columnist and the President & CEO of The Money Finder, Financial and Investment Solutions Inc. She is on a mission to see Canadians make meaningful changes in their spending habits and personal financial philosophies, ensuring they live the lives they long for using the financial power they already have (yet rarely access). You can reach her at sholmes@themoneyfinder.ca or check out more of her work at themoneyfinder.ca, advisor.ca or advisordefusingdebt.wordpress.com

CLICK HERE TO BUY STEPHANIE’S LATEST BOOK $PENT – and find out how to make your money mind-set work for you (to find out your money mind-set, take this quiz!).

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