How To Talk to Your Kids About Finances Without Scaring Them

Around 83% of Americans believe parents are responsible for educating their children about money. Four in five people wish they had learned how to manage finances when growing up.

One of the advantages of discussing financial matters with children is to help them cultivate a healthy relationship with money. Kids who have no concept of money may grow up to face a harsh reality check when they learn how expensive life can be. A positive money mindset helps a child learn the importance of delayed gratification, determination, and goal setting, ultimately leading them to success.

On the other hand, your financial struggles can weigh on your children’s minds. If you constantly complain about money in front of your kids, they might feel like they are a burden to you. They might avoid asking to go on school trips or attend birthday parties because they are scared about the costs. While it’s important to be honest with your kids when you can’t afford something, there are ways you can avoid making them feel guilty.

Financial discussions are uncomfortable, but you don’t want to pass those negative emotions to your child. Here are ways you can talk comfortably about finances.

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Kids are naturally curious, so be ready to entertain awkward queries. Your 5-year-old might ask you why their best friend has a bigger house, or your teenager might want to know how much you make in a year. While it can be tempting to push questions aside, failing to answer them can teach them that the money topic is off-limits despite its importance.

Answer with a simple question, “Why do you ask?” to understand what’s on their mind. This tactic can give you time to formulate an answer.

Having regular discussions can help eliminate awkwardness. Start your conversations by sharing positive money stories, from savings updates to resisting an impulse purchase.

You can introduce the 50/30/20 budgeting method to your children if they earn allowances. With this strategy, everyone sets aside 50% of their income for their needs, such as food, 30% for wants and 20% for savings. You can have everyone pool their 30% to do something fun, like going to an amusement park, and allow each kid to set goals for items they want to save up to buy.

When you allow your kids to have a say in what their money is used for, they’ll be more excited about the concept of saving.

Make discussions more digestible for your children, especially younger ones. Focus on the big picture instead of the details. Always talk about your plans for handling a financial situation, instead of just saying, “What are we going to do?”

If you have an unexpected expense come up, like major car repairs or hospital bills, make a payment plan before talking to your kids about it. You can then explain to them what’s going to happen, whether that be taking money out of your savings account or cutting back on takeout or shopping for a few weeks. That way, your child won’t worry that their expenses might be making the situation worse.

Be honest, but don’t overshare and overreact. Your children don’t need to know where every penny goes, but you can give them context. They could also be susceptible to your emotional state and can quickly absorb your stress.

Avoid getting caught up in negative emotions by practicing mindfulness before discussing uncomfortable money matters with your children. Take deep breaths, keep your voice steady, and relax before having these conversations. If you feel heated after looking at your bills, take some time to cool down before talking about it.

Engaging in money-saving strategies together early on helps kids develop financial literacy, which can later play a crucial role in fostering a successful life. Open a bank account for them and explain the concepts of saving, budgeting, and responsible spending.
When they become teenagers, encourage them to get jobs and sit down with them to manage their expenses when they start getting paychecks. These conversations will set them up for success when they enter the real world and need to budget their income on their own.

Remember to keep it real and simple. When times are tough, sprinkle in some reassurance so as not to overwhelm your kids. Someday, they’ll appreciate your openness and the skills they’ve gained to navigate the financial world confidently.