I have long advocated having financial conversations with your kids. It’s important to give your kids an idea of how to appropriately manage money, and talk to them about how you handle your finances — as well as what you wish you had done differently.
However, it might be difficult to talk with kids about money. In fact, it remains one of the taboos of our society. Chances are, though, that your children want you to talk to them about money, and give them advice they can trust. The Millennial Money Study from Fidelity takes a look at some of the realities of kids and money, and should provide you with some food for thought if you’ve been reluctant to talk to your kids about money.
Your Kids Trust You For Financial Information
The Fidelity study found that 33 percent of millennials identify their parents as the most trusted source financial information. Additionally, 59 percent of millennials think that their parents are good financial role models. While that 33 percent number might not seem like a ringing endorsement, it still represents the highest rating. Millennials are more likely to trust their parents when it comes to money than they are to trust financial gurus and others. Indeed, the next highest trusted source for financial information is “no one,” at 23 percent.
It’s also telling that many millennials recognize their parents as good financial role models. Clearly, there is a chance that your children see what you are doing with money, and admire you for it. This means that you are probably having more of an impact than you think. Your kids trust you to know what to do with money, so it makes sense that you should do what you can to help them make the best possible decisions with their finances.
You Should Talk More With Your Kids
Study after study shows that parents should talk with their kids about important subjects if they want to have an impact. This includes money topics. Unfortunately, according to Fidelity’s study, 49 percent of millennials say that they haven’t received financial advice from their parents. This is a problem. Most kids aren’t going to get financial help from school curricula, so you need to make sure that you are providing good advice.
You can start to talk to your kids about money when they are young if you want to transition naturally to a situation in which they can come to you for advice. Here are some tips to start talking about money more with your kids:
Talk about money in your home: My husband and I often have money discussions where our son can hear us. We talk about pros and cons of different purchases, and we also talk about saving up for certain items. We make it a point to ensure that money isn’t a taboo topic in our home.
Help your child make money decisions: When my son first started managing his allowance, my husband started helping him comparison shop. The looked online for things he wanted, and compared prices, helping him look for the best bargains. We also help him understand the importance of setting aside money for the future, as well as making smart spending choices now.
Talk about money mistakes: While it’s hard to talk about money mistakes with our children, it can be instructive. We talk with our son about our past money mistakes. Additionally, we make it a point to let him make mistakes, and talk about them afterward. If our son is determined on a course of action, we let him go through with it, but when he has remorse later, we discuss it with him, and talk about alternatives that would have been better.
Encourage investing: As your child gets older, make sure to talk about investing, and help him or her make good decisions.
If you establish a rapport early on, and if your kids know they can come to you with money questions, they will be more likely to learn to manage money effectively, and make better choices with their money.