I was lucky. My Dad taught me about money management, how to set a budget, how to save for big purchases, how to balance a checkbook (back in the day when that was done on paper) and how to have good credit.
He also passed on his money philosophy – don’t spend more than you have, if you want extras find a job, shop for high quality bargains, buy things that will last, spend money on experiences not things and “life’s too short to drink bad wine.” There wasn’t a lot of money floating around, but it was spent in a way that made sense with his money values.
As I said, I was lucky that he told me what he wanted me to know about money.
Unlike most of my friends’ parents, he demystified that taboo subject and helped me develop a healthy relationship with saving, spending and managing the money I earned, first through various summer jobs and then as a working adult.
So when I had kids, I also wanted to help them develop that healthy relationship with money. I wanted them to know how to be capable at saving and budgeting, but I wanted more. I wanted them to figure out the answer to: “Why is money important to you?”
You see, I understood why money was important to my dad, but the one step that was missing in my education was understanding why money was important to me. It took me a while to figure that out, but it turns out knowing why money is important to me was critical.
Here are three things I hope I’ve helped my kids learn about money
- Understanding their own money values
Budgeting and keeping track and why this is important
Talking about money is not bad
Understanding Their Own Money Values
Carl Richards, the New York Times columnist and author of the One-Page Financial Plan, says the most important question you can ask yourself is: Why is money important to ME?
What you spend your money on should be in line with what’s important to you.
My dad valued experiences and the sense of some small luxury in his life. My mom, on the other hand, saw money as security. Having enough meant if a disaster happened we would still be OK. Both of them valued education, so they generously paid a good part of my siblings’ and my college education. But spending on a fancy outfit or an expensive car was not in line with what they felt money was for. There was always a push and pull between savings (my mom’s value of security) and a little bit of luxury (my dad’s value), but they usually found a way to honor both ideas.
So why is money important to you? (Not sure? Check out What’s Your Money Story?) Go ahead and share with your kids why you spend money on certain things or in certain ways – or why you don’t. Help your kids figure out what they value – and recognize that your money values and theirs may not be the same. Their spending should be aligned with their values.
Budgeting and Keeping Track and Why This is Important
I learned about why money was important to me first by tracking my expenses. Keeping track of spending sounds boring, but budgeting and keeping track builds awareness and gives you a feedback loop to check in on whether you are actually spending your money in the ways you value.
Recently, my 27 year old son realized he was spending a lot on take out delivery food. He’s gone back to grad school and is pressed for time, so take out makes sense. But he doesn’t have income beyond the money he saved while working for four years after college. In order to make his savings last, he doesn’t have a big budget.
Remembering why money is important to him (experiences with friends) allowed him to adjust. The why behind the money – connection with friends – allowed him to see that eating alone with take out did not match his money values (and is super expensive compared to cooking). So now he cooks more, invites friends over for potluck. He budgets money to go out twice a week with friends and is saving for a spring break trip.
This is not a one and done exercise. Each quarter he can check in and see where he stands. This is made easier by using a free program, like Mint, to track expenses, but an Excel or Google spreadsheet, works just fine. It might take a while to start tracking, but after a while, a one hour peak each month will be all they’ll need to stay on track and check in on whether spending and what’s important match.
Start where you are with your kids. If you get them to start tracking on a consistent basis, they’ll figure this out given the budget available to them.
Talking About Money is Not Bad
Money is one of those subjects that makes people squirm. Like sex and death, they are “taboo.” But in talking about money (and the other two topics as well) from a young age, the talk becomes normalized.
That doesn’t mean that talking about money is always comfortable. Sometimes money talk is difficult because you and the person talking about it have different values related to money (and don’t even know it). It can be challenging when money is tight or when there are changes in income or spending on the table. The more money is something you talk about, the more aware you are of your own money story, and the more you can be non-judgmental, the better these conversations can become.
And there is so much to be gained by talking to your kids about money – helping them learn about what’s important to them, giving them skills to grow into happy and self-sufficient adults and reducing anxiety around money through skills building, to name three reasons. And just like the “sex” talk, this is not a one and done. It’s a consistent sharing at an age appropriate level.
But what if your kid is already 20? That’s ok, start where you are.
Sometimes it’s hard to say what you want to say face to face with an older child.
Kimberly Palmer, author of Smart Mom, Rich Mom: How to Build Wealth While Raising a Family, encourages writing money letters to your kids, as her parents wrote them to her when she was a girl and the letters helped her become a financially successful woman. She’s continuing that legacy by teaching her own kids, through talking AND writing letters to them about financial values and literacy.
If you’re not sure where to start in writing a letter to your kid(s) about money, or if you want more accountability and support to get that letter written, let me help you get it done. Together we’ll get your letter drafted and polished. Learn more here.
Looking for more financial literacy and kids?
Learn about financial matters and more to think about when your child turns 18.
Get started on financial literacy for little kids.
You can even create your own family motto to help your kids remember the money literacy you teach them. If you don’t know how to create a family motto, get my step-by-step guide: How to Create a Family Motto.