In these times, when many young families are still digging themselves out of debt after the Great Recession, talking to your kids about money should rank up there with discussions on drugs, sex and why Justin Bieber should be deported. You may not want to believe it now because they’re still in elementary school, but your children are the next generation of leaders, and they need to learn from our mistakes before they continue the trend of overspending without the available funds.
By talking to your kids regularly about money and showing them what you do on a weekly basis to ensure your expenses don’t overwhelm your income, you provide a base for them to latch onto. This can lead to better spending practices as they reach their teenage years, less financial aid needed for college, and a prosperous life when they marry and start their own young family. Of course, what you say to your children could go in one ear and out the other, but you can feel good that you did something to address the situation well ahead of time.
Like the Birds and Bees talk, discussions about money can be difficult to start. Here are some subjects to introduce that may help.
Debt/credit is bad. You could certainly begin your talk about debt and credit with a review of the national debt, the federal budget deficit and the rising height of the debt ceiling; however, there’s a great chance your young children will have no idea what you’re talking about. This is why you want to start the discussion at a local level. In fact, as local as their level. Provide examples of everyday household situations where an item can’t be purchased or an activity can’t be booked because doing so would cause a debt that can’t be paid. Show your children copies of statements for credit cards you’re paying off so they can get a sense of what it can do to someone.
Money isn’t everything. Sure the saying is cliché, yet it rings even truer in this day and age. Years of overindulgence have been pushed aside and replaced by a growing movement where people are looking for happiness and contentment over a large bank account. Explain to your kids that money rarely makes a person happy, unless you’re talking about Scrooge McDuck. Tell them being out of debt and having money available for emergencies as well as one or two special items should be enough to live a happy life.
Cash on the barrel. Children should be told about the perils of credit when they’re old enough to understand the concept that money really doesn’t grow on trees. Emphasize the satisfaction one receives by paying for an item with cash, regardless how big or small it is. Conversely, try to get across to them the feeling of anxiousness and frustration one feels when the minimum payments on their credit card bills skyrocket to the point they can’t be paid.
Saving for a rainy or sunny day. A 2013 study revealed that 40% of Americans do not have a minimum of $1000 put away for an emergency, which means they could be in serious trouble should an unexpected event take place. Talk to your kids about their own spending and how much they should save in case of emergency. Explain the concept of putting away three to six months of living expenses to make sure everyone in the household is comfortable in case of unemployment or becoming disabled.