Pattie Lovett-Reid: Talking to your children about money
A new survey from the American Institute of CPAs found parents with children under the age of 25 were giving their kids on average $30 per week in allowance, enough to rake in $1,500 a year. However, only three per cent of parents said their children saved this money, which was mostly spent on outings with friends, digital services, or downloads.
This is one of those reports I find to be a head scratcher.
Parents want the best for their children – it’s a natural instinct. It can also be very easy to say yes to financial requests even when your gut tells you to say no, especially if you can afford to say yes. Before you know it, your children become teens and are on the cusp of embarking on the next stage of their life, which in many cases is some form of post-secondary education.
While not all children respond the same to the “money conversation” – and there are different ways to have it – you have to start somewhere.
Here’s how you can begin.
- Sit down on an individual basis and work with them to create a monthly budget. This allows for a dose of reality of actual costs when not subsidized by mom and dad. Consider factors such as food, clothing and taxes, etc.
- Pay them to save. I know at first blush that seems a little counter intuitive, but in our household, we introduced a matching concept early on. Limits were put in place and matching occurs when savings goals were achieved. The younger they were, the lower the dollar amount. It was more about not spending than the reward. Ultimately, the reward was eliminated and yet surprisingly the savings still happened.
- Ask each child set their own savings goals. Encourage them to save for something that matters to them and gets them excited about saving. It will also allow them to experience the painful feeling of when that money is all gone, it is gone and the savings begin again. It was surprising to me how often something they thought they wanted in a given moment wasn’t the case even an hour later.
- Teach them the art of being thrifty.
Teenagers who handle money responsibly tend to have that responsibility flow into other areas of their life. As a parent I’ve always believed I owed it to my children to talk and teach them about money. One of the best ways I’ve learned to teach accountability is to give responsibility. Shift the focus: If they spend their money unwisely they aren’t disappointing me, they are disappointing themselves.
Discussing allowance and money management is a golden opportunity to have an important financial lesson outside the classroom.