Children learn what they see. If you yell, they yell. If you eat a lot of sugar, they will eat a lot sugar, and if you model certain money behaviors, they will, too. It's important to model healthy money behaviors all through your child's life.
I’m sure it would not be hard for you to look back to your childhood and remember some aspect about your money upbringing that may have caused you stress. Too much keeping up with the Jones'? Too little money? Secret purchases? Maybe endless arguments about money and related self-worth? Pick one, there’s definitely at least one. Would it have been better if your parents actually talked to you about it?
We do not want to pass our money “bad” habits or hangups on to our kids nor do we want them to be paralyzed with fear or shame when it comes to their own finances when they are adults living on their own. (yes, that will happen eventually…). We want them to treat money for what it should be treated as: a tool to help us with our basic needs and some additional comforts.
Here are my 5 tips to modeling a healthy relationship to money and personal finance in your home:
- TALK ABOUT IT! – it’s okay to discuss money and finance between you and your partner and in front of your children as long as it is constructive. Talk about paying bills on time, SAVING for things you want, and watching your spending. SAY IT OUT LOUD! If the only money talk they hear is, "did you see that xyz got a new fancy car..." they are going to see acquiring things as the same as money, and they are not. Remember, money is a tool. Materialism is an attitude.
- VALUE OVER PRICE – discuss the value of something more than its price. “A bigger car let’s us all go camping with the dog.” Not, “we need a new SUV and it’s $60k and we can afford it if we stop eating food for one week each month.” If something is not a good price for what you get, discuss it with them and explain why.
- BUILD SECURITY – “mommy is transitioning her career to have more time at home and enjoy her job more. It’s going to require all of us to help. We will probably go out to eat less, but mommy will be home more.” Do not say, “mommy quit her job because she was miserable.” Your child will feel immediate fear and anxiety about money. If you have fear and anxiety about money or a job change related to money, they will, too. Know your finances so you can KNOW you will be fine if you change jobs. Being secure in knowing your household can handle the transition financially will be palpable to them.
- SHOW THEM HOW TO SAVE – If you want a certain item or vacation, talk about actively saving for it and also talk about forsaking instant fun in order to have something important in a few months’ time. This is also tied to item #2, Value. Tell them how excited you are to save for a great vacation or a remodeled bathroom.
- DO YOUR FINANCIAL TASKS IN FRONT OF THEM SOMETIMES – pay your bills, balance your checkbook, and discuss refinancing the house in front of them as long as it is not a fight. Let them see that it is normal to take care of your finances and discuss it and that both partners need to know and agree on financial issues.
I know that in some circles, discussing money is absolutely not done, but I will tell you that's a very Victorian attitude and more importantly it is destructive. Your kids will not know how to manage money, save or spend if you act as though money does not exist.
Their whole lives are more materialistic than ours were. They know money exists and if it is not discussed in a healthy way at home, they will view it with anxiety, fear or insecurity. You cannot ignore it. Own it and start the conversation yourself instead of having your kids figure it out alone.
All of the items listed above are things you can model for your kids regarding personal finance. In terms of direct guidance, my favorite tool for teaching personal finance is ALLOWANCE, and no I do not mean paying them to do chores.
I wrote an in depth article here about it. Modeling and direct guidance should help you raise children who are not afraid of managing their own finances, saving for things they want, and spending less than they earn.