Talk to Your Kids About Money

By Allison Berman
January 6, 2009

Many people are uncomfortable talking about money. My thought is if a topic makes you anxious, it's probably an important conversation to have. Anyone excited about talking to your kids about the birds and the bees? I didn't think so. Open a "financial dialogue" with your children by sharing your own situation without talking numbers. Explain how you got here including your successes and missteps.

It isn't enough for kids to see the net result of your careful financial management, teach your children how to achieve it themselves. When finances are good tell them, and explain you're saving for when finances aren't good. When times are tough, don't scare them, but tell them that too! Explain it's not enough to cut back, that you are dipping into savings.

If you have trouble with your finances don't write off your ability to teach your children to be responsible with theirs'. It's challenging to show your children you're fallible but sharing your difficulties demonstrates how their actions can yield negative consequences -without your children having to experience the repercussions. I have college friends who intended to pay off their credit cards upon graduation. Years later they're still paying the interest on purchases that are distant memories. Imagine the message you send your child if you make yourself vulnerable and share that with him.

With older children, be proactive. Open a card in her name with a preset spending limit. Teach her to use a credit card like cash - charging only what she can afford. Explain when you're responsible with your credit card you can build a high credit score. She can qualify for a lower interest rate mortgage and owe the bank X fewer dollars than someone with a low credit score who was only eligible for a higher rate.

It's never too early to talk to your kids about money. Our 5 year old knows money is not a toy (my husband's wisdom). She "deposits" real money into a savings jar and her charity box. She uses pretend money to buy pretend things, to carry in her wallet, and to "deposit" in pretend cash registers.

Recently, what could've been a sticky situation arose at her grandparents when they didn't have pretend money. They reached into their pockets to give her real money. I explained if they want to give her the change as a gift she can "deposit" it at home with her other real money, but she only plays with pretend money. The solution: they made pretend money - a fun activity that preserved my husband's and my ability to teach our daughter about spending and saving.

My husband and I attribute our ability to live within our means to lessons we learned from our parents and strive to teach similar life skills to our children. Whether you struggle with your finances or manage them with ease, teach you children how to be responsible with theirs'. They will thank you for it.

"Tune in" next week for more on families and finances to see some of the many benefits of giving your child an allowance.

Allison Berman, an artist and mother of two, handpaints custom home accessories for interior designers and private customers. She works out of her home studio in Warwick, NY. See her collection at www.withlovealib.com. She can be reached at ali@withlovealib.com. Her column appears Tuesdays.