Piggy Bank: 4 Things to Discuss
Stephanie at Six Figures Under shared what I think is the greatest illustration about our thinking behind financial training; “If you were totally new to knitting, but wanted to learn how to make the cute washcloths your friend was always making, would you want her to give you a general overview and not bother you with specifics or would you want her to sit down with you and show you her secrets step-by-step?”. Genius, am I right? For so many of us, we use general terms and overviews without getting into the nitty gritty of finances. But the more knowledge and experience we can give our kids the more successful they are likely to be, this is especially true when it comes to their financial future.
The question becomes, how specific to we get? This will depend mostly on your child and what they are able to understand but also, on what you are comfortable sharing with them about your finances. Stephanie advises, “Seriously consider being a little more open than society says you should be comfortable with.” She goes onto explain 4 things that we should be telling our kids about our personal finances.
- Where the money comes from: Your children likely do not physically see the money that you bring home from work, unless you receive cash tips. Help them to associate honest work with earning money by explaining why you can’t stay home but instead need to work so your family can pay for things that you all need.
- How much stuff costs: Electric bills, cable, rent… kids have no idea how much these things cost. But depending on their age, perhaps they should? For the younger ones, sharing with them how much the everyday essentials cost like milk or their favorite cereal and helping them realize how quickly these little items add up to a big sticker price, could really open their eyes.
- How you decide what to do with your money: Stephanie suggests, “Show your kids how you budget your money. You are their first example and teacher... Show them how you put your money first toward the most important or pressing expenses, plan ahead for upcoming expenses, and actively manage your money (instead of letting it manage you)! Show them how you save for a rainy day and how you choose to give.”
- What debt is, how to deal with it and how to avoid it: Trust me, this one is not at the top of my list to discuss with our little ones either. I don’t like thinking about debt much less discussing it with someone. But if we share the concept of debt with our kids it may be easier for them to understand why some of their wants may go unmet and why sacrifices are made.