The answer to that for every parent is YES! You should have “the talk” about money as soon as your kids understand what money is and start asking for it (or treating you like a never-ending golden stream of cash). Making sure your child has a mature and caring understanding of money is a very important part of parenting.
My parents never had “the Talk” with me, and I had to learn a lot of what I initially knew from magazines and on the street, or worse, from the school of hard knocks. If you think you are a Subject Expert, then by all means have that conversation. If you know someone more skilled at the financial arts, bring them in and discuss things frankly and with an open mind with your kids.
Point out that there are many ways to save money, and that some people choose alternative (financial) lifestyles and even invest in dividend-paying stocks (on purpose), not that there is anything wrong with that. As I have always said, “To each his or her own”, who am I to dictate how people should save, as long as they are happy doing it, and aren’t harming anyone.
With no understanding of how money works, the real danger for your child is (naturally) debt. Without “the talk,” kids might think you could only get into debt from having the wrong purse, from being victims of identity theft, from using public ATMs, or from other uninformed ideas. Without a good understanding, kids are much more likely to end up in debt, and once that happens, will they be able to get out of it?
Am I being facetious and mocking Sex Education? No, I am just pointing out that most parents worry a great deal about their kids learning about procreation, sex and such, but not many seem to spend much time teaching their kids about money (nor do they seem to care if the education system does either). Without any financial education, your kids are almost as likely to bring home a bundle for you to help take care of, a large debt!
The Talk about Sex but Not Money?
Most parents will make sure their son has a condom when they go out on a date, but don't seem to worry when they get a credit card and go out for the night. Think about it, it might keep them from moving into your basement, permanently.
🚩Red Flags 🚩
- Kids who believe credit cards are “free money.” There is no free lunch or money.
- Teen bank accounts where parents transfer money without a budget lesson attached. At least have chores associated with the payments.
- Introducing an 18-year-old to a credit card before they’ve learned interest multiplies like rabbits. Also a good book to remember (amazon link)
- Kids mimicking influencer lifestyles without income to match. For God's sake do not let Tikety-Tokety teach your kids about money, or you will pay the price!
Psychological Tricks That Help
- Normalize talking about money. Kids take cues from parental discomfort. Calm tone = their calm tone. Although teaching them to freak out if they are in debt, does have it's uses as well.
- Use visual metaphors (jars, charts, allowance buckets). Kids remember what they can see. How about a honkin' big spreadsheet?
- Tie money to autonomy. Kids love control; budgets give them precisely that. At least it gives them options.
- Make consequences mild but real. Let them overspend once, and coach the recovery. A financial shock collar might be a little more stern at first.
- Model behaviour. Kids copy everything, including your “oops, Amazon again?” habits. It is a lifestyle concept here folks.
Useful links:
Financial Consumer Agency of Canada (FCAC) on youth money skills: https://www.canada.ca/en/financial-consumer-agency.html
Common youth debt pitfalls: https://www.consumerprotectionbc.ca
My list of debt commentary articles is quite long, so let's stick with the basics.
- Three Solid Ideas For Your HeLOC is a misdirection title. With interest rates going up, home equity lines of credit are becoming heavier anchors on your financial life.
- Pay Day Loans? Absolutely, positively NO! Go talk to a licensed insolvency professional before you do this.
- Surreal Paragraphs Found in Credit Card Bills, if you carry balances on your credit cards, you are in trouble. Look at their estimate for how long it will take to pay off the debt on minimum payments.
- A Mortgage Changes You, which is very accurate. When you get a mortgage, your life changes, and it will be a major element of your financial decision-making process.
- Make More by Reducing Debt with some elementary (maybe naive) arithmetic.
- Straight Talk on Your Money is not just a good book (and podcast). It explains how debt can get out of control quickly.
- Debt-shaming: Debt is Bad, but You Aren't having a poke at the "influencers" who say my commentaries about Debt being BAD is debt shaming.
- My coup de grace There is No Such Thing as good debt. Debt is a tool, like a chainsaw, and must be respected.
We talk a lot about expenses because many kids seem to raised in a vacuum about the real costs of day to day living. So when the property tax bill arrives, it gets mentioned. And when we grocery shop, we talk about whether we should stock up on bagels or tea because they’re on sale and won’t be on sale again till it cycles around in 3 weeks. At this stage my goal isn’t to get them to understand debt: it’s to get them to understand the value of a job (any legal self-respect-keeping job!) that pays well. And to hopefully plan on getting one some day.
Mine is 10 years old and we involve him in most of our discussions about money and finance. he may only understand some of what we are talking about, but when he does the questions certainly start rolling… Better to set in motion good habits than trying to undo bad ones. – Cheers.