BY ELISABETH A. HALL, FINANCIAL PROFESSIONAL
Rising utility costs, ballooning gasoline prices, college tuitions and emergency expenses all add to the strain placed on a family’s tight budget. These expenses and more are causing many families to revise their budgets continually.
Children overhear financial discussions and casual statements spoken about saving for the next family vacation or a new car. They see prices on nearly every item in the stores and are aware that their parents work. Despite being aware that money is a part of life, many parents wonder just how much financial information should be shared with the kids.
Whether your family is pinching pennies or financially sound, do your children understand the concepts of saving and spending money? How much do your children know about your financial footing? Knowing when, where, and how to approach financial topics with your children will alleviate your children’s confusion and allow for a much more open and honest exchange between you and them.
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Age Appropriate
One of the most important first steps in discussing finances with your children is to be age-appropriate. Remember that $100 to a four year old is like $100,000 to an adult. Money values and denominations are difficult concepts for children to grasp, so using things that they can relate to easily will help. For example, if you’re currently experiencing a budget crunch, explain to your child that paying the telephone bill each month is like purchasing five Barbie dolls all at the same time. This type of connection will help your children start to understand the value and importance of money.
Keep It Simple
Children are constantly asking us as parents to buy something or take them somewhere. Next time you’re faced with these types of questions, answering your children honestly will make the conversation go much more smoothly. By simply replying, “I’d love to go to the movies, but my job only pays me every
other Friday. This Friday is not the week I get paid, so we’ll go to the park instead.” Responding in this manner lets your children know that going to the movies, an amusement park, or the like is something that costs money. It’s OK to not always have the funding available to do something every weekend.
Choose the Right Time
Engaging your children in a discussion about the family finances at the grocery store or when their friends are visiting is not the best time. Preparing your children for what you expect of them prior to entering a store or having friends over is a much better way to avoid uncomfortable situations. Before unbuckling the seat belt and entering the store, say to your children, “We’re going into the store to buy milk, eggs, bread, etc. Sometimes I allow you to pick things out that you’d like, but this is not one of those times. Today, we are only buying what’s on my list. Agreed?” By addressing the issue prior to entering the store, you have effectively stopped the badgering before it even begins. This same tactic can be used when your children are entertaining guests. Instead of waiting for their friends to arrive and then engaging in a discussion over ordering pizza, just let the kids know ahead of time what is expected.
Teach Consequences
Establishing an allowance for children is a great idea – if it is pared with an equally effective reward system. Just like you and I work to earn the money we save and spend, children should also learn to work to earn privileges and benefits. By expecting children to engage in age-appropriate chores, the value of the money or reward becomes much more meaningful. A chart posted on the fridge or other prominent place allows kids to track their progress and know exactly what is expected of them. Also note that “an allowance” doesn’t necessarily have to be cash. Tickets to the movie theater or a coupon for a “chore-free day” can be equally as motivating for children to earn.
Paying for the Roof Over Their Heads
Certainly we’ve all struggled with getting our kids to turn the lights off or take a quicker shower. Many times, however, children don’t think of these actions as costing money. To help them better understand the cost of electricity or water usage, take the time to show your children your next utility bill. By allowing them to see the charges, your children gain a greater perspective on the value of conserving energy and water. Not only are you teaching a valuable financial lesson, but also one that helps the environment as well.
“How Much Do You Make?”
Many times parents struggle with knowing the best way to handle this important question. Children automatically think that a credit card or debit card means there is a limitless pile of money available. Teaching your children how credit cards and debit cards work will help them grasp the reality that using “plastic” doesn’t replace “cold hard cash.”
Opening up to children about the family finances is a great idea. By allowing them to understand the value of money, children gain a greater respect for you and for what they have already. Following the simple steps outlined above will help you make the topic of money a much more enjoyable one for your and your family. n
Elisabeth A. Hall is a Financial Professional with Alliance Advisory Group in Jamestown, NY. She serves as Vice President of the local National Association of Insurance and Financial Advisors for Chautauqua County and is a member of the Million Dollar Round Table. Mrs. Hall can be reached by calling (716) 483-1531 or via email at elisabeth_hall@glic.com.