Will your children know how to save money? Who will teach them to budget? How will they manage their money when you’re not doing it for them?
Kimberly Palmer, author of the exciting new book SMART MOM, RICH MOM: How to Build Wealth While Raising a Family, reminds us that children learn about money and how to handle it, wisely or not, from watching and listening to their parents.
Ms. Palmer, a national money columnist and mom of two, guides parents through the important financial choices they face today. As children observe these choices in budgeting, they internalize their parents’ attitudes about money. This raises some very important parenting questions:
The first step toward helping your kid understand how to manage money begins with talking with them about it. Here’s six ways Ms. Palmer recommends:
1) Mistakes You’ve Made with Money.
Kids love to hear about their parents’ mistakes, and not just to smirk. It lets them know that it’s okay to be less than perfect. Potential examples to share include waiting to start a 401(k) account, getting into credit card debt, or wasting money on a splurge you regretted.
2) How You Earn Money and Use It.
Thanks to direct-deposit, online shopping, and plastic, the exchange of goods and services for cash is almost invisible. Talking about how mom and dad work hard to earn a paycheck so we can turn around and use it to pay for our food, home, clothes, and car can make the virtual world of commerce a little more real.
3) How to Be a Media Critic.
Kids are exposed to advertising everywhere: smartphone apps, websites, product placement within TV shows. As kids get older, point out differences between an ad and a show. Teach them to be skeptical of all the promises that advertising makes to get them (or their mom) to spend money.
4) Planning for Big Goals.
When your kids start asking for expensive things, as kids tend to do, encourage them to draw a picture of what they want and consider ways the family could save to make that goal possible. Explain how you are making sacrifices to put money toward their future college education.
5) How to Use Credit Cards and Bank Accounts.
To kids (and some adults), it’s not at all obvious that you should really try to pay off the full credit card balance each month as opposed to paying the required minimum. Explain why and let kids look over your shoulder as you manage your accounts and pay your bills.
6) Being Assertive (to Companies and Bosses).
Let your kids overhear you calling a company to ask for a refund or to demand better service. Help your kids practice asking for more money, perhaps for their allowance or babysitting services, so they can learn the right words to use and get comfortable with the concept of negotiation before they get their first salary offer.
I spoke with Ms. Palmer about SMART MOM, RICH MOM, here's what she had to say:
What inspired you to address this issue ?
I noticed that my daughter was picking up on subtle messages about money that were not the ones I wanted to send. It really hit me when one night at dinner as we were planning the week, my daughter commented that it was Daddy's job to work and Mommy's job to pick her up from school. I wondered where she learned that from -- why didn't she think my job was important to our family, too? So I made a point of bringing up money more and making sure she know that both her parents were contributing to the household - and that when she grows up, she can, too.
Are mom's better suited to address this issue with their daughters or sons?
The reason I am such a strong advocate of mom's managing the household finances is not that we are better at it, but just that chances are at some point we were going to have to. Because of the fact that women tend to outlive men as well as the growing rate of single motherhood in this country (among millennials, more moms are single than married), we moms have to be prepared to manage the money if we aren't already. Within a couple, it can make the most sense to manage money together, making sure that either person could step in and handle things solo if necessary.
Have your seen situations in which parents didn't prepare their kids for managing money?
Absolutely -- and the most disturbing thing to me is that gender differences with money start at such a young age. As young as 8, you start seeing boys already saying their parents are talking to them about money more than girls -- this comes from a 2016 T. Rowe Price survey on parents and kids. Parents have the power to counteract that.
We can bring up money and have these important conversations with our daughters as much as with our sons. The danger of not doing so is perpetuating the gender differences in the finances world that we continue to live with: In their twenties, young men are already earning more, investing more and saving more than young women. We can and should raise our daughters to be as financially empowered as our sons.
Is it possible for parents to over-share their money concerns?
I think the primary risk is transmitting stress unnecessarily. As much as we can foster transparency and openness on finance topics with our kids, and encourage them to ask questions, we -- the parents -- can still shield them from grown-up financial stresses as much as possible. If mom or dad loses a job, or we're struggling with debt, we might explain it to them in basic terms as an explanation of why we can't afford something right now, but our kids still need to know that those are not their issues to deal with -- they want to be assured that mom and dad are taking care of that! We want to be open in talking about saving and goal-setting without burdening them with unnecessary stress or worry.
Shaping Your Kid’s Financial Future
With college costs rising and families facing increasingly complex financial decisions, SMART MOM, RICH MOM is a must read for parents. Preparing your children to manage their money is as important as teaching them about diet and exercise. Ms. Palmer proves that the road to a child’s bright financial future begins with parents leading the way.
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