In a previous post, I touched on the idea that you do not need to be an expert to talk to your children about personal finance.  In this post, I want to focus on some common refrains you may have heard in your childhood- “We don’t talk about money.” or “Don’t worry about it” or “My parents didn’t talk to me about money, and I turned out fine.”

I consider myself very fortunate growing up because I did not hear any of those phrases in my house.   My parents were very open about the topic of finances. However, I recognize that this was not typically the case in many homes.  For many of you, the topic of money, especially with your parents, may have been a forbidden topic. Money is not something you could talk about. It would have been just as inappropriate to talk to your parents about money as it would have been to ask them how many times they had sex.

If this resonates with you, I can understand why you may be hesitant to talk to your child about money. Our environments shape how we relate to our world, and thus, you may feel paralyzed around this topic. Many parents have admitted that this resonates with them, and they are regretful that they never broached the topic with their children.

What Are You Passing On?

Why is it that money can be so taboo? Is it related to feelings of shame or embarrassment about the finances, what our parents had, or didn’t have? Or perhaps it was their lack of knowledge on the topic?

How might this affect a child, the lack of transparency? If your parents didn’t talk to you about money did it result in feelings of shame or embarrassment? Some report that it made them feel as if they were not a trusted confidant to whom their parents could share that personal information.

We often inherit our parents’ values around subjects as personal as these. So how have your experiences shaped the way you feel about money now? Does the thought of talking to your child about money, raise those same feelings?  Do you still feel embarrassed or shame? More importantly, do you want to pass those values and feelings on to your kids?

I have a feeling the answer is no.

Be Conscious and Deliberate

A lot of feelings we have towards money, and even actions we take with our money, are irrational. I love the study of behavioural economics because it confronts the fact that people are not rational beings. We may know that we should save, but instead, we spend. We know that retail therapy will leave us feeling worse in the long run, yet we continue to do it anyway. Yet, if we want to have a strong grasp on personal finance, we do need to act rationally and be aware of our feelings and actions regarding money. To truly be reflective and self-aware, we need to go back and revisit some of our early experiences with money.

If the subject of money was “off-limits” with your parents, this likely created some confusion, anxiety or both for you.  If you are willing to reflect honestly, take some time to think about how those early experiences shaped your beliefs about money and how you spend, save and give now. We will likely want to be much more conscious and deliberate with what we teach our children.

We want our children to be comfortable coming to us when they have questions about the world, whether that be about relationships, academics, money or otherwise. To forge that trusted relationship with them, we need to reciprocate and show them that we trust them as well.

You don’t need to whip out a pay stub on day one, but start the dialogue and stay open to answering their questions honestly. A stronger relationship with your child will be your reward.

Keep Learning, Together

I would also want to encourage all of us to brush up on our knowledge of personal finance. Also, as we know, our children will do what we do, and not what we say. So if your finances are messy (as can happen to all of us, myself included), take the time to get them in order. If your child is old enough to understand what you are doing, add them in some of those discussions. If you commit to paying down some debt, include your child in those discussions. Let them see that you are not perfect, but model how to set goals and work towards them.   They will act as your accountability partner. And it is powerful for them to see their role models (you) working towards your goals.

I received a great question from a parent yesterday about something that has been extra challenging since the start of the pandemic. How do we teach our children about money in a digital world?  When so many of our transactions are online, should our kids need to be online to learn about money? This parent brought up the excellent point that during the COVID pandemic, many of us shifted to online purchases. But even before, and definitely after the pandemic, more and more of our buying is going to be online. With so many of our financial transitions being digital, how do we give our children a chance to experience handling money?

If you have read my post on allowances, you will know that I’m a big proponent of avoiding digital options until your child has a firm grasp of saving and spending using cash. So, when the pandemic hit, I decided it was an opportunity to test out some of the options to practice using money in a digital world available to me.

We tried using Rooster Money for my nine-year-old son, who has demonstrated an excellent grasp of money management. I did not and would not make this transition with my seven-year-old daughter since she is still getting a handle on saving, but my son has had three years of practice and is doing well.

I won’t lie; the advantages of using apps to manage an is hard to argue. It automatically credits my son’s account with his allowance every week. It allows him to move money from his accounts as quickly as an online banking account.

The drawback to going digital

But, even with all those convinces, it does raise a few problems.

1.  I require that my son have access to a device. This is not too challenging for me, but it may be for some parents and add to that, I have been battling with the increased screen time due to online learning, so adding another reason for him to be on a device isn’t my favorite.
2. We have fewer discussions about money. My son can use the app to shift money from his different accounts (spend, save, give), but since it is happening virtually, we have fewer interactions and less dialogue about what he plans to do with his money. This challenge would be a show-stopper for me if my son’s interest in money and money matters were not as deep as they are. So, instead, we find other opportunities to have these discussions. But if he was less interested, I think I would switch back to cash for this reason alone.
3. When we manage his money via an app and make online purchases, it can feel like I am buying things for him since he does not have his online accounts or credit cards to make purchases. So instead of buying what he wants, he has to use my accounts and credit card and pay me back. This experience is a far cry from when he would go to the store and buy his own stuff. To help overcome this last hurdle, companies are releasing debit cards for kids, and I will dive more into those options in a future article.

So, what is the solution?

I still firmly believe that for younger children to get their first opportunities to interact with money, they should do it at a physical store. There is more to money management than moving money from one account to another. Interacting with service people as they cash you out. The anticipation of a purchase. The feeling of the exchange when you hand over your money to receive your item or service, to name a few.

The sooner we can give our little ones those opportunities to practice those skills, the better. I acknowledge that we are moving to manage more of our money in a digital world. As our kids grow up, they will likely do most of their transactions online, but that doesn’t mean all of their transactions will be online. There is a reason why online stores call it a shopping cart. And have a check-out button. They are a proxy for the real thing. So, let’s give our children a chance to experience the real thing before they move to the virtual.

How does that work in practice?

I know it is not feasible for most people to take their child to a store all the time, but that doesn’t mean you can’t do it once in a while. A solution that worked for my kids was taking them to a physical brick-and-mortar store once a month. That cadence worked for us. They usually needed a few weeks to save up enough money to buy something, and I usually could find time in my schedule to take them to a store once a month. But that may be different for you. I also make sure to switch them back to cash and let them take complete control of the interaction once we are in the store.

In the end, I hope you will do what works best for you. If monthly doesn’t work, maybe you shoot for every two months. The important thing is that you try to give them the opportunity to manage their own money in whatever form works best for you and your family.