How to Teach Your Children About Money

Last month I opened things up to my email subscribers by asking for any suggestions for future writing topics that I’ve yet to cover here. By far the most popular and repeated question came from parents and grandparents who would like to know how to instill good financial habits into their children and grandchildren.

It’s an interesting topic for me to ponder because it’s something I’m trying to figure out on my own, as well. I have a 16-month-old daughter who’s growing up way too fast. I’m constantly worried about dropping the ball by not teaching her the right things or completely messing up as a parent. So far, being a parent feels like a constant tug of war between joy and fear. I don’t see that ever going away.

This is one of the reasons that making rational financial decisions when it comes to your children is so difficult. First of all it’s very difficult to keep your emotions out of your financial decisions. And second of all it’s also impossible to keep your emotions out of the decisions about your kids. Every parent thinks their baby is the cutest one on the planet. I know I do. I’m completely biased but it’s impossible to turn that bias off in this case. Put the two together and the probability for irrational decisions goes through the roof.

One thing I learned even before my daughter was born is that everyone else who’s ever had a child before you is going to offer you advice whether you ask for it or not. This can be either extremely helpful from the right sources or extremely annoying from the parents who don’t understand that no two children are the same. Some people don’t seem to realize that not all children respond the same way to every parenting method that’s worked for them. There’s something of a trial-and-error process where you try to take what’s worked for others and apply it to your own very unique situation and child.

Anecdotal advice and evidence from other parents is the most helpful aspect of my favorite book I’ve read so far on the topic of children and money — The Opposite of Spoiled by the New York Times’ Ron Lieber. Lieber offers some really great advice in the book about some of the tactics he’s used with his own children to try to help them become financially literate. But he also uses countless examples from other parents in discussing things like allowance, chores, the tooth fairly and answering the difficult money-related questions most kids like to ask.

My biggest takeaway from Lieber’s book is simply to communicate more with your children about your finances. This can be a difficult task for some because it can require a hard look in the mirror about their own financial habits. Money is a taboo subject matter because so many people make terrible choices with their money. It’s tough to pass along good financial habits when you don’t have any yourself.

Here are a few other lessons from Lieber’s book:

• Be as honest as you can with your kids about money to establish trust. Have an open door policy and don’t skirt any big issues.
• Ask them questions instead of ignoring their inquiries about money. Figure out why they’re asking you a specific question about money before clamming up and brushing them off.
• Try to involve them in some of the more mundane financial tasks we’re forced to deal with on a regular basis to show them how important personal finances can be people’s lives.
• Money can also be a great tool to teach children how to give to others. Lieber’s four biggest topics are earning, saving, buying and giving. Generosity is the one with the biggest crossover potential for teaching them how to be a good person.

My favorite quote from the book is when Lieber says, “Every conversation about money is also about values.” I like the idea of using money as a tool to teach your children about the right values. Money doesn’t have to be the root of all evils if you frame it correctly and put it into perspective.

There’s still a lot for me to learn when it comes to this topic, but I’m glad that so many other parents and grandparents out there see the value in teaching our children about money. Maybe the best thing we can do is teach them our mistakes so they don’t repeat them in the future.

Check out Lieber’s book here:
The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money

Further Reading:
Priorities