In my work, clients often request that I to speak their children about money. From experience, not every parent sees the importance of having that conversation with their children until there is a crisis moment that forces the issue. It is part of my service offering and a part of my work that I find fulfilling.

 

I would estimate that about 25% of parents do not talk about money with their children, so if that is you, know you are not alone.

 

The ‘Money Talk’ as I like to call it, is crucial and rewarding because with time, you will see the fruits of your labour, but there are several factors to keep in mind:

• Start early
• Small mistakes teach
• Repetition forms habits
• Practice what you preach
• Making a difference for others
• The work of a parent is never done

Start Early

Broaching the money talk early helps de-stigmatize it and avoiding it is a missed opportunity. Piggy banks, sorting coins and learning what the difference is between a nickel, a quarter, a loonie and a toonie when a child is five or six helps introduce the notion of money. Counting coins and adding it all up goes hand in hand with how children learn arithmetic.

Where possible, paying for items in cash instead of credit in presence of your child also shows them that money is not an abstraction – something that springs eternally from a plastic card. At the grocery store, show children that *surprise* - food costs money. What a dozen eggs cost, how much their favorite ice cream is, and how it all adds up at the cash register is also a great way to get them to understand the difference between discretionary and non-discretionary purchases and that decisions about money are part of our everyday.

It usually doesn’t take long for a child to the start seeing things, be it clothes or toys they covet and want to spend their money on. That’s when things can get more complicated.

You’re up against the power of instant gratification, social media and the uncanny ability of a child’s power of persuasion in allowing them the purchase of the latest gizmo. Their cries of ‘it’s my money and I can do what I want with it’ coupled with a healthy dose of guilt because we are often away from our kids due to work and want ‘the best’ for them are all real, but taking the time to work through how spending decisions are made is when the real work begins.

What I have found from both personal and professional experience is that saving is an abstraction while spending it means you have something to ‘show’ for it. Explaining that spending money has an opportunity cost attached to it should a better opportunity come up in the future needs to be factored in. Building in patience with money is one of the most challenging aspects for people of all ages to understand, but if you are able to explain it in ways your child will understand, you’ve nailed one of the key concepts of money.

 

Small mistakes teach

It may sound counter-intuitive, but let your kids make mistakes with their money early. The stakes are small but the teachable moments they can present are priceless. After highlighting the importance of saving, ensuring they are ‘owning’ their spending decision, and therefore feel empowered. If they still want to go ahead and buy something they’ve seen online or at the mall let them go ahead and do so. Sure, after all you’ve just read it sounds like a contradiction, but it isn’t. If they’ve spent all their money, they now have to start from scratch, and in some cases, what they bought themselves loses its novelty rather quickly or goes on sale soon after they got it and they could have paid half of what they did if they waited a little longer.

In all these instances, the opportunity to reflect on the decision making process and the end result is key. Use these small ‘mistakes’ as an opportunity to build trust in the advice your child gets from you and help them see that the decision they took with their money may not have delivered the result they were looking for. Compared to making big mistakes with their money, these lessons come cheap!

 

Repetition builds habits and practice what you preach

As parents we watch our children forming habits in real time. The truth is, they are also watching us. The opportunity to raise our children with habits around money is also our chance to adopt those habits. What credibility would I have if I lectured my children, my clients, on good money habits but couldn’t put them into practice myself?

The notion of paying oneself first falls into this category of habits. It’s how I talk about saving money. Whether it is for your retirement through automated contributions to your RSP, or for your kid’s to ‘pay themselves first’ by setting aside some of the Christmas or Chanukah money they received from their grandparents or allowance earned from doing chores and being helpful in the house, paying themselves first means setting some money aside for the future.

Regardless of your age, this concept will always pay dividends. Setting money aside means giving oneself options. Whether it is the next version of the iPhone, next season’s fashionable pair of sneakers or using some of those savings on a future summer trip, none of that would be possible if there weren’t any savings in place.

 

Making a difference for others

The money talk would not be complete without talking about how money can affect positive change in the lives of others and the world around us. As our children grow more aware of the world around them, they tend to ask questions that we sometimes have a difficult time answering. Why is that person sleeping in the subway station? How come some kids don’t get to go to summer camp? Is it true that some people don’t have enough food to eat?

Teaching children about money includes talking about how it can help others. Ron Lieber’s The Opposite of Spoiled, a New York Times bestseller goes into some detail about an approach of saving, spending and giving that has served as a guide to how to talk about the privilege some enjoy and how others are less fortunate. Being in a position to give to others is a luxury in itself and when seen as a rising tide that helps lift all boats in our communities, it can instill in our children a sense that they are making a difference for others.

In my work, talking about money extends to these ideals. Whether by investing in portfolios of companies that are working towards solutions to our changing climate, addressing the United Nation’s Sustainable Development goals, or talking about how building philanthropy into your wealth can be fiscally advantageous and personally fulfilling at the same time, this multifaceted topic is a fascinating one to explore with people.

The money talk is an ongoing conversation and its benefits will grow exponentially over time. Making the early investments will build habits into your children that will benefit them well into the future. Consider that over time your children will need to make more of their own financial decisions, and without any advice (or surrounded by bad advice), they need to rely on their own intuition as their guide. The stakes will get higher, the decisions more impactful and therefore starting early and often will set them up for success and give you peace of mind in knowing they've developed a framework for making good money decisions.

 

The work of a parent is never done

Recently, I was met with an unusual request from my son. In driving him to school, he asked me if we could park a block or two away from our usual drop-off spot. It was raining heavily, and at first I didn’t understand why he would make such a demand. Then it dawned on me. I was driving a rental car because my car was at the dealership for repairs after a fender bender. He was worried what his friends would think if they saw him getting out of that car. So, I parked the car a few blocks from school and asked him why he wanted to walk the rest of the way in the rain. Apprehensive at first, eventually he confessed his concern. I told him that while understandable, to pass judgement on anyone because of the car they had wasn’t fair. I asked him if he would think any less of his best friend if he found out the kind of car his parents drove wasn’t up to his 10-year old standard. Then I put it another way, “why would what someone thought of him depend on the type of car I dropped him off in?” With the silence punctuated only by the sound of the windshield wipers clearing the deluge, I could tell he was giving thought to the questions I had asked him. With the rain picking up, and the morning bell about to ring, he turned to me and said, “It’s like when we judge a book by its cover, right?” I nodded in reply. Then he said “what are you waiting for? Can you drive me to school please?”