Why it's important
Establishing a financial foundation while your kids are young can have a lasting impact. Just as with everything from fitness and nutrition to academics and work ethic, the values and habits you instill in them during childhood can flourish in adulthood. Kids who learn about money are more likely to understand the importance of setting spending limits, creating budgets and learning to control impulse buys down the road.1 Making conversations around money the norm can demystify it and make children feel more comfortable about asking questions and learning the ins and outs of finance right now.
“Although it’s never too late to develop good money habits, starting the conversation when children are young will make things easier down the line when the stakes are higher.”2
Have those important conversations with your children, whatever their age: what is necessary and what can we live without? How much should we keep, spend and give away? Encourage your kiddos to break their money into those categories: savings, spending, giving.
Discuss long-term goals, too. Broach the topic of college or careers, travel, parenting, homeownership. Ask your children to think about their future plans. Open up these conversations so everyone in the family can share.
Talk about what you wish you’d known when you were younger. “Maybe you didn’t begin saving for retirement early enough or wish you’d given more to charity. By hearing your personal experiences, they can avoid those mistakes. More importantly, they learn that mistakes happen, and think of them as learning experiences.”3
Beyond giving your kids a basic understanding of finances, talking to them can help them feel more secure when the world feels uncertain and demonstrate the importance of having an emergency fund for any eventuality. Studies suggest that conversations about the scarier side of money (e.g., loss of employment, unexpected home or car repairs, medical bills) can have a big impact on how kids view spending and saving. One study “revealed that respondents whose parents did talk to them about financial crises or recessions were more likely (72%) to be in good financial standing now than those whose parents did not (65%).”1
However old your children are, whether your finances are in great shape or not, it’s always the perfect time to start talking about money.
How to start the conversation (and keep it going)
Financial health is easiest to grasp when it’s taught in simple ways. Below are some ideas on how to get started. Remember, it’s not a one-time talk, but an ongoing conversation that you can reinforce with your own examples and teachable moments.2
Make it a part of daily life
Talk to your kids as openly about money as you feel comfortable. You can do this by including them in certain money decisions. Ask them to help set and stick to a grocery-shopping budget or discuss the reasons why certain things cost more than others.2 While it’s not a great idea to share stories about financial insecurity, debt or bills, it can be healthy to open up the conversation so that money chat becomes commonplace and your kids feel comfortable discussing ideas or posing questions.1
Model smart money behavior
Children learn a great deal from observation. Don’t hide your attempts to deal with finances. Balance the budget out in the open. Discuss sales tax and coupons. Talk about the reasons certain products might be more expensive, and share your thoughts on what you think is worth extra dollars and what is merely marked up because it’s a name-brand item. Explain name-brand vs. generic. Show your kids that you don’t deal with anxiety or sadness with retail therapy. The more you demonstrate your approach to spending and saving money, the more your children will start to formulate their own.3
Create teachable moments
Many topics that come up during any given day can be easy forays into finance. Explain why certain purchases are necessary and some aren’t. Point out when you’ve decided to purchase something: maybe it’s on sale. Maybe you’ve saved for months. Discuss the reason you’ve decided to cut cable, subbed in generic foods or reduced takeout to once a month. Use every opportunity to explain the difference between need and want, as well as the difference between what you, as a family, can and cannot afford.4
Show your kids that not every problem is fixed with money. Not everything fun costs money. Sometimes, you just need to show a little ingenuity. Clean or mend worn clothing items, repaint a bike, fix toys that have seen better days, make your own favorite foods instead of ordering them in, have friends over instead of going to amusement parks or movie theaters.2 Once you show your kids the money they can save without sacrificing anything they truly need or want, they’ll appreciate the creativity and have fun with it, too. After all, kids will only place as much importance on spending money as you do.
Let it be an opportunity to give
Not everyone has the same amount of money as everyone else. Children start picking up on this pretty early. Talking to your kids about money is an incredible opportunity to introduce the idea of sharing their own money. How do we contribute to those who have less than we do? What portion of our money do we devote to needs, wants, savings and giving? Showing your children the value of contributing to the community now is laying the groundwork for thoughtful, conscientious adulthood.2,4
Open a savings account together
Get your kids actively involved in spending and saving their own money with a Flagstar Kids Savings account. Opening an account together makes saving more tangible, and with high-yield interest on the first $500, it’s designed to fit your child’s earnings as they make their first steps into money management. There are no monthly fees and no minimum balance, just an account tailored to kids.
I’ve met with my significant other and we’re in financial alignment. What’s next?
Personal finances should be a team effort for couples. Getting on the same fiscal page is phase one. Now you can start to work together to reach your financial goals.
How to build lifelong habits
Like any other lesson you want to impart to your child, financial smarts are part of an on-going process. While most experts agree that there’s no bad time to start the discussion with your kids, there are suggested parameters to get you started. Remember: few parents feel totally confident about how to talk money with their offspring. But at the very least, it’s a great opportunity to spend more time with them and show them that the topic matters to you.
Here are some ways (and times) to approach money with your children:
Toddler + preschool
Let your child witness you handling the finances, whether it’s paying the bills each week or month or getting cash from the ATM to pay the babysitter. You can also consider using one of the many incredible children’s books out there on the topic to help explain.4
Elementary + middle school
Talk about allowance. Around seven- to eight-years-old, children begin to figure out how numbers work. Between explaining a bit about money and giving your children a few dollars for the chores they perform around the home, you’re teaching them work ethic and the sense of accomplishment that comes with earning your own money. You can extend this conversation into savings.4 While a piggy bank can be a valuable tool to help your children visualize their savings, opening a savings account is a great way to start demonstrating how interest can make their money grow.3
Once your kids are teenagers, part-time work is nearly a given. This will look different for every kid and depend largely on each teen’s individual family, financial and academic situation. But if your children are able, it’s a great idea to push them to work. It gives young adults the freedom of earning their own money as well as a sense of independence and accomplishment.4 Start discussing debit accounts with them. The SimplyKids account offers a free VISA debit card for kids 13+, and this can be another good way for teens to take their first steps into independent money management.
Be willing to chat with your children.
Don’t be afraid to let your kids learn from your mistakes. None of us are perfect and it’s often comforting to know that no single person has all the answers—especially when it comes to finances. It might be a relief to know that others are making our same errors. Many parents feel insecure about sharing their financial challenges and concerns. The important thing is to show that you’re committed to your kids, to managing money responsibly and to answering any questions that you children might throw your way.
Learn more about our Flagstar Kid's Savings account.
Flagstar Resources to share with your child: