Speaking to your children about money
If you’re the parent of a grade-schooler, you’ve probably introduced your child to the tooth fairy. But what about allowances and understanding wants and needs while at the toy store?
Likewise, if you have a teenager, what about conversation starters on debit cards, compound interest and Facebook’s stock price?
Feeling unprepared? Not sure where to start? Does it feel awkward speaking to your children about money?
Take a cue from Patrina Dixon and Thomas Beattie – both are parents and both are devoted to helping children of all ages get a grip on their financial ABCs.
Dixon is a Connecticut-based financial educator and author of It’s My Money, a personal finance book geared to teens ages 13-18.
Beattie is chief executive officer of Voleo, a financial technology company that has created a stock trading app particularly useful for investment clubs. He also is a Junior Achievement volunteer who teaches elementary-school kids about money basics.
I asked Beattie and Dixon for comments about the importance of teaching kids about money, and how to make it relevant. Here are some of their tips, advice and strategies for parents.
When to start
Dixon: Age 5 to 6, or “as soon as they can recite words to a hit song. The sooner you teach them, the better.”
Beattie: “I joked about teaching my son about compound interest as soon as he could learn to speak. It turns out that’s too early.”
But Beattie agreed that “at around age 5, they can start making decisions at a small level, whether it’s a bit of money for a birthday or special occasion, or whether they are fortunate enough to start earning a small allowance. Saving some or spending some on a toy provides a first lesson.”
From that point, parents can ramp up the teaching. “I honestly believe that age-appropriate financial education is critical. But the thing about financial literacy is that it only sticks if it is relevant.”
For example, Beattie said, “it is not effective to teach a child about mortgages. They can’t relate to it. But the concept of paying different amounts for the same object depending on whether you pay in cash or with a credit card over time … that surprises them.”
Needs and wants
Dixon: Explain the differences with real examples, she said. “You need a place to live so you pay your rent or mortgage. You want a new pair of sneakers, but you don’t have to have them.”
Dixon: “Bring kids inside the bank and let them assist with the transaction. If you are making a deposit, let them complete the deposit slip and give both the completed deposit slip and money to the bank teller. I know it is easier to go to the drive-through, but going inside the bank and letting them help you with the transaction will go a long way.”
Beattie: The message to your kids can be, “Credit cards are not bad but should be used responsibly.”
Parents should also explain the impact of falling behind on credit card payments, the need to pay the plastic off in full each month, and how you can earn rewards points for using a credit card.
For young readers, there are many books with money themes. Dixon suggested Wesley Learns to Invest, by Prince Dykes and Kids Who Bank Presents Kidpreneurs, by Jatali Bellanton.
For teens, she recommends Rich Dad Poor Dad for Teens, by Robert Kiyosaki.
Best advice they’ve ever received
Dixon: “Live below your means. Don’t just spend because you have the money to spend. Save more.”
Beattie: “Invest whenever you can afford to and as consistently as possible.”
Steve Rosen helps parents teach their kids to become money-savvy. Rosen, an assistant business editor and columnist for the Kansas City Star, offers advice, teaching techniques and personal observations on a range of topics that are helpful for kids in preschool through college, as well as their parents.