It can be especially difficult to broach the subject of finances with kids. After all, tens of millions of people have lost their jobs, and even those who are still employed may have seen their income take a hit, or have needed to tighten their household budget.
While it’s tempting to sweep money conversations under the rug, “it’s important to talk to your children about money, even when things are not good,” Megan McCoy, Ph.D., professor of personal financial planning at Kansas State University, tells Thrive. For one thing, talking about money gives you an opportunity to “alleviate your children’s fears that may be unwarranted,” she says.
Of course, there’s a difference between acknowledging the financial elephant in the room and oversharing about your difficulties. “Be honest with kids, at the same time being careful not to foster anxiety,” Lee Baker, a certified financial planner, president of Apex Financial Services, and a member of CNBC’s Financial Advisor Council, tells Thrive. “Frank, open discussions are key to raising fiscally responsible adults, but you have to strike a balance. You don’t want children to feel they are a burden, or the cause of any hardship.”
These expert-backed tips can help strike that balance and navigate these money talks with less stress and more confidence:
Make it age-appropriate
A money conversation with a young child or pre-teen should be a lot different than a discussion with one who is about to go off to college. “Always calibrate your money chats to the age of your child,” says Baker. “If they’re as young as 9 or 10, and you’re struggling to tell them you got laid off, you can simply explain that sometimes people lose their jobs, and that’s the time when the government provides some money.” If they’re older, you can have a more nuanced conversation, discussing things like unemployment benefits.
Avoid scarcity language
When parents use words like “broke” or “desperate” to describe their situation, that could increase feelings of anxiety in their children, says Baker. Also, “Be careful not to perpetuate patterns and beliefs you may have inherited,” he adds. “There are money ‘scripts’ that we may have learned at a young age,” he says, “like ‘there’s never enough,’ and ‘money doesn’t grow on trees,’ that money is ‘bad,’ or that you don’t deserve to make a lot of it. Those scripts can carry over into adulthood.” Being mindful not to pass on those beliefs can go a long way to protecting the financial well-being of your children for the long term.
It’s not just the language you use, but your emotional state that matters. Before embarking on a conversation about financial difficulties, “process any of your own grief and anxieties around money,” says McCoy. That way you can be calm and empathetic in relation to your kids’ fears and anxieties,” says McCoy.
Talk about money goals
It’s never too early to help your kids see the real value of saving money, so “talk to them about your financial goals,” says McCoy, who is already having these conversations with her 3- and 6-year-old kids and her husband. “The other day I gave my 6-year-old daughter a list of things she could do around the house to earn money. And then we had a beautiful discussion about why we need to save for a rainy day.”
McCoy also suggests describing to your kids the thought processes around big purchases, like a car. For example, “This is important to me to buy, and I know that I’ve saved enough.”
Teach them about budgeting
“Our research shows that college kids’ financial health is atrocious,” says McCoy, “and it’s probably because we never give them a chance to practice with money. We’d never let our kids drive a car without practicing first with an adult. In the same way, they need to practice managing money before they’re off on their own.” One way to give them practice is to involve them in making a budget. “Tracking spending and creating a plan with your kids is a key to financial health,” notes McCoy.
What’s the right age to do this? “By 9 or 10, kids have the basic math skills to understand budgeting,” says Baker, who advises discussing the food budget for a week, planning meals, then going grocery shopping together (online grocery shopping works, too). “If your kids have been getting an allowance,” he says, “get them to plan how they will spend their weekly $10, so they can learn how to make choices.”
Encourage kids to save
Get this: “Saving appears to be hereditary,” says McCoy. “If you are not a saver, most likely your kids won’t save, either. So break that pattern,” she says.
Baker and his wife, Veronica, an accountant, taught their two children to save when they were toddlers. “We gave our older daughter an allowance of a dollar when she was 3 because she loved books, so we encouraged her to save for them and anything else she wanted. She loved the feeling of independence!” Children enjoy saving their money in a piggy bank or a jar, he says. “It teaches kids delayed gratification — that if you want something, the healthy way may be to wait a bit so you can afford to buy it.”
Model good money habits
The best way for children to learn is by example, says Baker, “because they pay closer attention to your actions than to your words.” That means not buying things that you don’t really need, or showing how you prioritize charitable giving.
Baker has always encouraged his own daughters to give some of their allowance to charity or to their church. “Teaching children to give helps them appreciate what they have. If you are fortunate enough — particularly in times like these — to be in a position where you’re not missing any meals, and that the lights are on, by giving you are showing your kids a way to express compassion.”