Talking To Your Child About Financial Responsibility

As the cost of living goes up, many people have had to tighten their budget and really reconsider where their money is being spent. As parents, we always want the best for our children, and not being able to provide our children luxuries can be guilt-inducing for some parents. However, contrary to popular belief, doing what is best for our children does not mean you give them everything you did not have. It is not about buying the latest toys, taking trips to Disney, or always having money for ice cream. All this is fun, but it is not essential.

Doing what is best for our children means to prepare them for a life without their parents. Yes, it sounds harsh. But inevitably one day (hopefully in the very distant future), you will no longer be  around to provide for your children. The most lasting lesson is to help them be emotionally resilient, and to be able to adapt to financial changes.

Teaching children about the value of money and financial responsibility can start at a very young age. As soon as children can understand that coin, paper, or credit can be used in exchange for something else, they can begin learning at an age-appropriate level. As children get older, they can also be provided with some financial responsibility in the household so that they understand what the flow of money looks like on a monthly basis.

Here are some tips for how to introduce financial literacy to children at different stages. Remember that every child is different, so you can adapt these techniques to their own developmental level, regardless of age.

Pre-K- Early Elementary years: At this stage, kids enjoy pretend play and enjoy copying adults. You can bring some real money or toy money to a playground and “buy” their products. Children often love creating a pretend fruit stand or ice cream stand. Let them name a price and you can count out the coins and dollar bills in exchange for their “product”. This will teach them that each coin and bill has a value. You can also show them that perhaps you don’t have enough money for the price they gave. Don’t shut down the flow of play. Let them solve the problem. Maybe they reduce the price for you, or choose not to sell to you. This will allow them to understand more about boundaries, as well as having the ability to negotiate. Then switch positions and you be the seller. This will continue to teach them about the abstract concept of money.

If you can afford to do so, set up a piggy bank and help them start saving. Make it a fun sensory experience. You can have them clean the coins before placing them into the piggy bank. This will allow them to become familiar with the physical details of pennies, nickels, dimes, quarters, etc.

If you cannot afford to have them save money separately, then you can have them draw and color each type of coin. Perhaps they can make their own play money with paper. There are many ways to help them become familiar with the concept of money.

Upper Elementary years-Middle School: After a certain age, children can begin to see finances as a part of a much broader system. They can assist in finding the best bargain at the grocery store. They can help create a budget with you while shopping. They can help with clipping coupons. They can also further understand that the money they save, can directly impact whether or not they can purchase something that they really want. If you are part of a household where there is enough money to provide a child with an allowance, or money for tasks, then this is a great time to start introducing this concept. It will help them understand the sense of time and energy required to make money.

If your household cannot afford to do this, then you may still have delicate, but serious conversations with your children about how money needs to be allocated. Please note, they should not be made to feel burdened by your financial issues. But, they may surprise you with their level of understanding when talking about how to be moderate with spending. You can propose having them help you cook at home so that you can afford to eat out in a few weeks. This, again, can teach them about time and energy involved in money management. You can also provide them with alternatives, such as shopping at a thrift store for new clothes, rather than going to a mall. There are many ways to help them understand the intangible nature of saving and spending.

High School Years: Every family is different, but many high schoolers may already feel comfortable enough working a few hours a week as long as it does interfere with school work. Depending on how your child manages things, you may consider opening a joint bank account where you still have access to their income. This can help you make suggestions, or add money in if they are trying to save for a big purchase. What is important is that the child is able to see the numbers in action. Spending mindlessly can lead to bigger consequences. If you sit down with them every week or so and review the charges on an account in a non-judgmental manner, you can allow them to notice if they are spending too much money on food, or movies, or amazon orders. Oftentimes, having them make the realization themselves is better than lecturing them.

If your family relies on a teenager’s income to make ends meet, then there is even more reason to provide them with responsibility as well as respect. Teenagers who have this extra responsibility understandably mature faster than their peers, and for this reason, providing them a voice and taking their opinions into consideration is vital to preserve a healthy family relationship. Continuing to show them receipts and the bills that have been paid thanks to their help, can foster trust and collaboration.

If your family prefers not to allow a highschooler to work just yet, then there are still ways to keep financial literacy as a priority. There are videos and programs to teach the concepts of budgeting, saving, debt management, and investing. You can still include them in talks about the family budget each month. There are also games that involve some form of money management, and this can also help develop these skills.

Overall, the concept of financial responsibility and money management starts early! It is better to introduce the concept as they grow rather than giving children a crash course when they turn 18. If you can introduce responsibility gradually, this will also promote autonomy and hopefully reduce tensions as they get older.