The Tough Stuff: How to Talk to Your Children About Money and Finances
By Elizabeth Cody, CFP®
July 28, 2022
No one said being a parent would be easy. In his book The Opposite of Spoiled, The New York Times money columnist Ron Lieber notes that while parents want the best for their children, when it comes to discussing financial issues, things can get tough. Talking to your children about money and finances is one of the most nuanced topics parents can encounter. It often feels taboo and some parents do not feel equipped to tackle the topic. But with a little finesse, patience, and a proactive approach, talking to your kids about finances does not have to be so daunting.
First, understand that there is no set age to start financial conversations with your children. Clinical psychologist Dr. David Anderson suggests opening this conversation with your kids when they reach the second or third grade. This is roughly the time when children’s math skills reach the point where they can do simple arithmetic and grasp basic concepts of spending and saving.
Financial counselor Jen Hemphill recommends including young children in price conversations in the grocery store or while school shopping. When children have the opportunity to learn about the value of life’s goods and services when they are young, they will have a better overarching understanding of how to wisely spend and save their money. Promote the value of earning money—and saving at least part of it—by creating opportunities for your children to earn small amounts of cash by doing chores or getting an after-school job.
Offering an allowance can be a straightforward way of opening the financial conversation with your children. While there are times—birthdays, holidays—when children are simply gifted money, allowances should be tied to a specific behavior.
If giving an allowance is not of interest, you can still work money into daily life by talking through your own financial transactions as they transpire. You may prompt your children to make budget-based purchase decisions, too. Explain that they have a certain amount of money to spend, so they can either purchase two less expensive or one more expensive item for the same amount or money.
Because children learn behaviors from their parents, it stands to reason that they will watch and mimic the spending habits they observe in the home. A 2022 study by CNBC and Momentive of 1,149 parents found that 83% of respondents believe it is their responsibility to educate their children about financial literacy; however, 31% say they do not have conversations with their children about household finances. There are many reasons for this, of course, but even if you don’t feel secure in your own financial habits, it remains your responsibility to educate your children.
Many of us shy from financial discussions, but the truth is that when you start early and regularly speak about money and financial matters with your children, they will only benefit from your candor and be able to make more successful financial decisions in their futures. Speak with your Wealth Manager for more help and ideas on teaching your children about finances.
Articles and Commentary Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA. For disclosures, including additional information on credential designations of SHGA representatives please see our Form ADV Part 2A and 2B Disclosure Brochures, which can be obtained by clicking here.
Video Presentations All video presentations discuss certain investment products and/or securities and is being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect SHGA's or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
