By SARA RATHNER of NerdWallet
Kids notice everything, whether you think they’re paying attention or not. They repeat the curse words you blurt out when you step on a toy, and spill your embarrassing family secrets to their friends.
From a surprisingly early age, the kids in your life also notice money: who has it, who doesn’t, and how your household handles it compared to other people. They overhear arguments and pick up on stress. With every financial decision, you set an example. “You are a mirror and your kid is a sponge,” says Jordan Wexler, co-founder and CEO of EarlyBird, a registered investment advisory company where parents can open custodial and college savings accounts for their kids.
So, no pressure, but modeling positive money behavior for all the kids in your life is important, whether you’re a parent, relative or close family friend. It starts with figuring out your own approach to money, and then providing age-appropriate lessons.
ESTABLISH YOUR HOUSEHOLD VALUES
It’s hard to teach another person how to spend, save and donate money when you haven’t set your own goals and priorities. Maybe you want to set an annual budget for charitable giving, or you save slowly for upcoming expenses to avoid credit card debt. All of these decisions tie back to what you (and your spouse or partner if you have one) truly value.
Kelly Palmer, founder and chief wealth officer at The Wealthy Parent, a registered investment advisory company providing financial planning for new parents, recommends that families with a mother and father demonstrate that both parents, not just the dad, are financial decision-makers. “It’s important for children to see women involved in these conversations,” she says.
Being confident in your decisions makes it that much easier to explain your thinking to a child, and you can use your choices as a way to start thoughtful conversations with your kids.
INVOLVE KIDS AND PROVIDE CONTEXT
Trips to the store, calculating the tip at the end of a dinner out, planning your summer vacation — these are all opportunities to talk about money and values. But when you’re running errands in a rush, sometimes you just want to brush off your kid’s incessant questions and move on with your day.
You don’t have to have a deep money conversation in the candy aisle while convincing an irate child that chocolate isn’t on your shopping list. But you can always revisit the topic later, when things are calmer and the memory of the unbought chocolate isn’t as fresh.
Providing context helps kids understand why you’re making a specific choice — why you buy a certain brand of toothpaste even though it’s more expensive (sensitive gums), or why day camp is possible this summer but sleepaway camp isn’t (so you can also afford a family trip over winter break that year). Inviting kids into the push-and-pull of your daily money decisions shows them all the factors that are involved in making one seemingly simple money choice. When they’re adults, they can use those lessons in their own lives.
“One of the hardest things, and the easiest things, that we tell kids is ‘we can’t afford that,'” says Mary Bell Carlson, a certified financial planner who is president and founder of Financial Behavior Keynote Group, a speaking, consulting, and education firm providing thought leadership on financial behavior change. “It’s a missed opportunity to have a conversation about that.”
ACKNOWLEDGE THE COMPARISON TRAP
Kids notice when other people live differently. Their cousin has more toys, a friend from school lives in a bigger house, or a neighbor goes on vacation every summer. They might push back on your value system when they see others getting the things they want. “When they’re out in the wild, if you will, they’re going to be exposed to all sorts of emotions around money,” Palmer says.
When your child asks for something you weren’t prepared to pay for, don’t dismiss them, says Carlson, who has a doctorate in personal financial planning with an emphasis in financial therapy. Ask them about why they want that item or experience. Talk to them about the cost. Older kids might be willing to save up their allowance to contribute, which provides a great lesson in saving over time for a big purchase. The important thing is to show your kids that they can come to you with a money question and be taken seriously.
“At the end of the day, it’s really not about money. It’s about the emotional connection with your children,” Carlson says. “It’s about showing you care regardless of what you do or don’t have.”