Hate talking about money with your kids?
It's a sticky subject in the best of times. These days, it's downright scary, as the pandemic rages and the economy tanks.
Many parents are generally reluctant to talk about money with their children, says Thomas Henske, a certified financial planner and partner at Lenox Advisors in New York. However, now is an especially good time to teach your kids some basic financial info and allay their fears.
Questions from kids like, "How much money do we have?" or "Are we rich?" could make some people uncomfortable, but they are great conversation starters, Henske says. And they don't have to be directly answered if you don't want to.
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Try answering with questions of your own, such as "What do you mean by rich?" or "How much money do we need?"
Henske didn't feel ready to reveal his net worth when his children asked about it, so he turned the exchange into a conversation about what they thought the figure was — "They gave horrendous answers," he said — along with the value of their house and their mortgage.
Here are six dos and don'ts to help your kids, no matter their age, learn about money.
Not discussing money is like not discussing sex, Henske says. Just as most parents have some kind of conversation about intimacy so their kids go out into the world prepared, he recommends talking about money openly, too.
"We still treat personal finance and money as a kind of taboo," said Liz Gendreau, 40, who blogs about family finance on her website, Chief Mom Officer. Gendreau has three sons, ages 16, 12 and 5.
By the time kids are in their teens, parents can talk about college costs or buying a car.
"They benefit from learning how to budget," said Gendreau, who lives in Hartford County, Connecticut. "The more you can educate your kids through real-life examples, even things you wish you'd done differently, the better."
"Parents sometimes sacrifice too much for their kids," Gendreau said.
It's a mistake to give kids everything, especially if it comes at the cost of saving for a parent's own retirement, says Gendreau. Whether it's expensive college tuition or a lot of after-school activities, parents should balance their own financial needs with those of their kids.
"It may not be something they want to hear, but you have to make choices with your money," Gendreau said.
People commonly confuse loving with giving. The amount of time you spend with someone is more meaningful. "That is finite, and it's the ultimate currency," Henske said.
A pandemic bonus: Canceled programs and plans give you an opportunity to show your kids what together time really means.
What's credit, what's debt and what's the difference?
"It's really important to sit down with your kids if they're still young or even have a conversation with a young adult, and really teach them about the dangers of using credit cards," said Brad Klontz, author of "Mind Over Money" and co-founder of the Financial Psychology Institute.
People don't understand how credit works — "You're actually taking a loan from a bank at a very high interest rate," Klontz said — or how misuse can spark financial disaster. In fact, three out of five Americans say their credit has been harmed by the pandemic, and about three-quarters worry about paying their bills and making good on loans.
Debit cards work on money that is yours. When you use the card, you're subtracting money from your own account.
Kids who don't understand how credit works can face financial disaster when they first sign up for a card, which may be in college, Henske says.
Young kids need to learn the difference between a need and a want.
Teach them strategies and have discussions around how much they want something to avoid tantrums when you say no to a purchase.
When Henske's kids were small, he used to have them put things on a list, a strategy he recommends starting at age 5 or 6.
Older kids can write down what they want in a notebook. Younger kids can, with your help, print out a picture online of the desired object.
Two days later, they may find they no longer want it, Henske says.
Kids should be part of the conversation when a family buys a car or plans a vacation, Henske says. Otherwise, that's a lost opportunity to teach them the value of a dollar, since they rarely understand how much big things cost.
The experience will come in handy when they need to make informed decisions about choosing a college or thinking about careers. "They don't understand the income and lifestyle that a specific income affords you," Henske said.
Don't forget another facet of buying: arguing for refunds.
The pandemic has created a chance to let kids see how you negotiate for a refund on plane tickets for a canceled trip.
Always let kids contribute something financially.
High school students might pay for their car insurance. A teenager who wants an expensive iPhone might pay for the data service portion of the bill. "It doesn't have to be an unworkable amount," Henske said.
When his son wanted to go to a private school, Henske came up with a dollar amount that he could contribute. "It's not huge, but he has to go out and referee games, work at an ice cream place," Henske said.
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