Heading into spring, the economy is slowly picking up and there is a sense of cautious optimism. But families everywhere are still dealing with uncertainty. Millions are out of work, while many of those who do have jobs are feeling financially fragile. Meanwhile, rates of depression and anxiety have surged during the pandemic, and children can be affected, too, when they see how stressed their parents are.
Broaching the subject of money at home isn’t easy at the best of times, but studies have found that our finances and emotional health are inextricably linked. It’s crucial to bring the subject out into the open, Kimberly Watkins, an assistant professor of consumer sciences at the University of Alabama, tells Thrive. “I think a big reason why parents avoid discussing money with their kids is fear of not knowing enough about money,” she says. “This is actually a good time to learn with your kids and make it a fun family activity.”
Parents have an opportunity to step up as financial role models, even in small ways. “Children are going to learn about money, either positively or negatively, by osmosis. So even if you don’t teach them anything, they see how you behave,” Sharon M. Danes, emeritus professor in family social science at the University of Minnesota, tells Thrive. She points out that parents can have a powerful positive impact on their kids by teaching them financial literacy. “It’s a great foundation for life because you’re preparing your children to become productive, independent and successful citizens, equipped to deal with challenges.”
These expert-backed tips will help you coach your kids about money and lower financial stress for the whole family.
Talk to each other about finances
In a family with two parents, “it’s helpful if you have a unified front and approach,” says Danes. “It’s unlikely both parents will agree on everything to do with finances because we all have our own set of values, often established during childhood.” But it is important for parents to discuss what they are going to teach their kids about saving and spending so they don’t feel confused, she says.
Talk to your kids about money
Most people grow up in homes where their families don’t talk about money, Watkins says. “There’s still a stigma about the topic, which can invoke negative emotions for those who may have anxieties about money.” But having conversations about money is necessary, she says, so kids aren’t blindsided by finances as adults. “We have to talk about these things if we want to break the cycle,” says Watkins, who has 5-year-old twins. “You can explain that even though you may be having difficulties right now, they are safe.” Great resources for parents, she says, include this Money as You Grow program and Beth Kobliner’s best seller, How to Make Your Kid a Money Genius (Even if You’re Not).
Encourage your kids to save
Giving your young child a piggy bank may sound obvious, but it really helps children to learn the value of saving, Danes says. “Young kids don’t understand about putting the money in the bank. To them it feels like giving it away, but if they have a jar they can see it accumulate,” she says, so it’s concrete. When they’re tweens, you can go to the bank with them and help them open their own account.
Teach your kids to save for something special they want, like a computer game or expensive sneakers, rather than spending all their birthday money in one go. “Delayed gratification is linked to your ability to save, rather than making rash purchases,” says Watkins. She adds that it’s a hard concept for children to grasp, but it’s an important life skill. “When my kids ask for a treat, I will make them wait before I give it to them, and then the next time, I will have them wait a minute longer. We’re at the point where they’ll come back and ask for the treat without the meltdowns!”
Danes recommends involving children in a family savings plan. “A young child might agree to cut down on treats, and a 14-year-old might earn money by babysitting or dog walking,” she suggests. Parents should also share how they are going to save, she says. “Write down what you’ve all agreed to on a piece of paper and put it on the refrigerator so everybody keeps their commitments.”
Invite kids to participate
Getting your kids involved in daily household financial management and budgeting will foster good habits, says Watkins. “Let them have a say in family meal planning, so they feel like they are making a contribution.” When you are paying bills, explain what you’re doing, she says. “This will help them understand how to balance needs (like food) and wants (toys) when you have limited funds.” Watkins also encourages family shopping trips. “You could show them how buying generic brands of cereal or buying clothes on sale can save money.” For younger children she recommends that parents use cash when possible so they can actually see the money being spent. For older children, “explain how a debit card works.”
Make money fun
If you are creative, “kids will enjoy learning about money and they’ll be less likely to develop a negative attitude towards finances,” says Watkins, who suggests reading money-themed books together from a very early age, like Moneybunnies.
“Teach your young kids to tell the difference between different coins and do some adding and subtracting,” Danes suggests. “For example, if you’re buying an ice cream or toy, give your child some money, let them figure out how much change they should get, and that they do in fact get the correct amount back.”
Teach kids about borrowing
You can start with the basics at a young age, says Danes. “By borrowing a library book, children learn that the book doesn’t belong to them and if they don’t return it in good condition, and on time, there are consequences; it costs money.” Later in their teens you could also consider getting them credit cards with a low limit. “It’s good for kids to develop responsibilities. If they overspend, they’ll learn that actions have consequences.”
Teach them to give back
“Make sure your child is a willing giver,” says Watkins. “Right now, my 5-year-old, who has the biggest heart, is not willing to give her money away. We’ve decided to not force her because we don’t want there to be a negative association with charitable giving. When your child is ready, talk with them about causes they care about, and let them choose where their money goes.”
If you regularly give money to charity, says Danes, “you could encourage your older children to contribute too, by taking a percentage of what they’ve saved from their allowance or savings account.”
And finally… don’t feel guilty
“Don’t worry about getting everything right,” says Watkins. “We all make mistakes. Forgive yourself for any financial mistakes you might have made and do your best from now on.” Share the lessons you learned from those mistakes. Your children will thank you one day.