Let’s face it — most grown-ups know very little about managing money. So expecting our kids to intuitively understand the key principles of cash flow is about as realistic as expecting your spawn to win the Nobel prize at the sixth grade science fair.
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The truth is, while we know it’s important to teach our kids about money, a full 57 percent of parents say they’re not sure where to begin.
That’s not surprising because finance freaks out many of us. One survey found that nearly three-quarters of parents feel at least a little reluctant to discuss the topic with their offspring. It’s one of those grim realities of the grown-up world we try so hard to shield our little ones from — like bifocals or the downside of an open bar at a wedding. I mean, who wants to talk about saving for college when — look, a shiny fire truck!
There’s a painless way to dive in. Simply ask your kid a few questions. Find out what she knows and go from there. Don’t think of this as a pop quiz so much as a conversation starter — for a talk that’ll last a lifetime.
1. Where does money come from?
Like that cringe-inducing question about babies, the answer can be a real shocker to kids. Money is not, in fact, created inside a magical ATM. Our Federal Reserve fairy godmother, Janet Yellen, doesn’t leave it in a basket on our front doorstep. Money is something we work for and then nurture by spending wisely and investing with an eye to the future. If you want this lesson to really hit home, take your child to work. Let her see what you do all day to earn money for the family — and create a masterpiece with the highlighters.
Just remember the rule about the birds and bees, though: The only thing worse than saying nothing is saying too much. Don’t overshare your own financial history with your children. Why? Because when you tell your kid about that time you blew your college textbook money on Justin Timberlake tickets… she might start getting ideas. Oh, and if you share your salary information with your second grader? Don’t be surprised if he shares it with all his friends. Kids and secrets are not a good mix.
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2. Why won’t Mom or Dad buy you that thing you absolutely need right now, immediately, or you’ll die?
No, it isn’t because Mom and Dad are cruel. It might not even be because you can’t afford it. (After all, forking over a few bucks for the claw machine at the mall won’t break the bank for most moms and dads.) Saying yes out of weakness isn’t the right parental move. Instead, take a breath and explain that you have a family budget, which is really just a plan for how your money is spent. Needs come first and wants come second — if they make the list at all. (Milk for breakfast and a new winter coat are needs. The latest version of Minecraft? Not so much.)
As terrifying as the prospect can seem, bring your first grader along to the supermarket. Explain that you have just $200 for groceries. (If you can use cash rather than a card, all the better.) Now, make it a game (think of The Price Is Right). Invite her to help you comparison shop. Should we buy the store-brand peanut butter instead of the name-brand one for two bucks more? Sure. But generic toilet paper? No thanks. Let’s see how much money one kid can save the family!
3. Why am I letting this ceramic pig eat my allowance?
You think you have a hard time socking away money in a 401K, imagine what it’s like for a 7-year-old. Even young children can learn the value of delayed gratification. One great way to encourage kids to save is to establish rules. Say your kid has her eye on a $16 toy microscope, but she earns $5 a week in allowance. Suggest that she set aside four of those five dollars every week. She’ll be a little Madame Curie in a month. If your kid is into numbers, use this online savings calculator to show her the magic of compound interest and how long-term saving really pays off.
In a recent survey, more than a third of parents said they felt that kids nine and younger are ready to open a bank account. Amen to that. A visit to a brick-and-mortar bank to set up the account will offer a more concrete experience than an online bank. And though 0.5 percent interest may sound anemic to you, if you’re able to start your kid with $200, that’s $1 for free at the end of the year. (Make sure your bank doesn’t charge low-balance fees, or your kid’s deposit will be eaten up in no time.)
Whatever you do, keep it age-appropriate. (You wouldn’t expect your kid to do groundbreaking immunology research with that toy microscope, right?) To help you tailor your money talk to your child’s age group, use Money as You Grow. I launched Money as You Grow as a member of President Obama’s Advisory Council on Financial Capability. Recently adopted by the Consumer Financial Protection Bureau, the campaign offers lessons and activities to make money geniuses out of children of any age. There’s even a poster you can print out and hang on their bedroom wall — right beside that one of Justin Timberlake, perhaps.
Did you give this quiz to your kids? I’d love to hear about their reactions below!
More: 4 Ways to talk about money without sacrificing the things you want
Beth Koblineris the author of the New York TimesbestsellerGet a Financial Life, and the forthcoming book,Make Your Kid a Money Genius (Even If You’re Not), to be published by Simon & Schuster. Visit her at bethkobliner.com, follow her onTwitter, and like her onFacebook.
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