Are you talking to your kids about money?
Only about half of parents take the time to discuss financial issues with their children, according to T. Rowe Price’s 11th Annual Parents, Kids and Money Survey.
Wait, it gets worse. About one in four moms and dads told the survey that they are very or extremely reluctant to talk dollars and cents with their children, which puts the issue right up there with school safety, sex, drugs and bullying.
Talking money doesn’t have to be so intimidating. Parents can make the conversations part of everyday activities from a very early age.
Here’s a good way: From the time your kids are 6 or 7, involve them in using a debit or credit card to pay the check at a restaurant. Thomas Hay, director of retail digital strategy at BOK Financial, said his kids conduct the transaction, review the charges and calculate the tip.
“I want to be sure spending money isn’t a foreign concept to them when they’re 16,” he said. “They need to know that every time we choose to spend money on something, we’re choosing not to do something else.”
If the family spent $30 on breakfast at a restaurant, they discuss what they aren’t going to buy. It introduces the concept of managing spends without a "dry, boring budget talk,” he said.
Cue the piggy bank!
It’s never too early to consider saving for your children’s future—and letting them in on the plan.
“Time is the most important factor when it comes to saving,” Hay said. “If you can start the day you find out you’re having kids or even when you decide to start a family, that money can begin to work for you.”
It’s also about being intentional about your saving, said David Reynolds, BOK Financial director of product strategy and credit delivery. “Before my son could even talk, we put a set amount away each week to create those intentional habits for a lifetime.”
Now 12, Reynolds’ son is earning money by doing chores around the house. “He has the opportunity to earn money when he mows the lawn, but he has to ask for the payment,” Reynolds said. “That’s as an important a life skill as how to manage the money once he gets it.”
Reynolds has helped his son research options for setting up a checking account so he has a place to keep his earnings. They discovered that many traditional banks require youth to be of high school age to open an account. Parents may want to explore fintech (financial technology) options, some of which allows younger kids to have a debit card and parents to control where the money can be spent.
Ben Reynolds is proving to be one savvy 12-year-old. With an interest in history and economics, he has been curious to learn about how the stock market works. With his father’s help, he set up an online investing account where he can invest his lawn-mowing money and get hands-on experience.
“It has been fun to watch him do the research, ask questions and learn in real time,” Reynolds said. “Even though it’s not a traditional savings account (which he also has), he is learning how to save and is facing more complex money management decisions.”
Regular and open communication is key in this scenario. Father and son often research companies together and talk about how things happening in the world might impact those companies and their stock value.
“Kids are a lot more perceptive than we give them credit for,” he said. “He has asked some great questions and made some really good decisions.”
Hay and his wife are providing an allowance to their 11- and 13-year-old daughters, but they stress the importance of children earning the money rather than feeling entitled to get it.
“It’s important for them to understand that effort creates value,” Hay said. “The opportunity to connect the dots in real-life scenarios they encounter with earning and spending their allowance helps them grasp the concepts of earning, spending and saving.”
Another way to instill good savings habits as children get older is to help your teen open a retirement account and fund it with a portion of their earnings.
“Parents and grandparents can help kids develop good retirement savings practices early on,” said Kimberly Bridges, director of financial planning at BOK Financial. “For example, you could help your teen open a Roth IRA and have them contribute a portion of their earnings and then provide ‘matching contributions’ to reward good saving behavior.”
Bridges reminds parents that teens can fund the account with as much as 100% of their earnings (including the match), but contributions are subject to annual earning and contribution limits. However, it would take a lot of lawns mowed or tables bussed to reach those limits as a teenager.
“Although most teens will be reluctant to lock up their hard-earned cash, this is where parents and grandparents come in to match their commitment to saving for the future,” she said. “The teen will quickly learn the value of the match, and will be able to watch their hard-earned money grow with compound earnings.”
Planning for future success
For parents who are still avoiding the topic of finances, organizations are trying to fill the gaps and focus on financial education to set students up for future success.
Junior Achievement, which delivers financial literacy and work readiness programs to nearly 5 million students per year, reports that 91% of millennials wish they had greater access to entrepreneurial education programs—young people are craving education on these life skills.
Hay wished he had access to a program like JA when he was young. After a challenging upbringing in which the family did not discuss the future, he is committed to having those conversations with his own children and creating opportunities for others through involvement with Junior Achievement.
“There’s huge power for young people to have an adult ask you what your plans are for the future,” Hay said. “It’s really impactful for kids to interact with someone who wants to hear what they have to say and to potentially picture themselves in similar shoes one day.”
BOK Financial’s Learn for Life employee volunteer program emphasizes experiential learning about financial topics. By leading elementary-aged students in a game, teaching classroom-based curricula with small groups of middle school students, or helping high-school-aged students navigate a real life scenario at Junior Achievement’s Finance Park, volunteers engage with youth at their level.
“In addition to providing a hands-on experience, our goal is to engage students in one-on-one conversations with a caring adult. That can be just as impactful as the educational material,” said Leslie Paris, BOK Financial director of community and employee engagement.
To echo that notion, Hay engages in regular conversations about career ambitions with his own middle-school-age daughters.
“For me, it’s less about the specific career interest and more about fueling a passion for the future,” he said. “I believe regular conversations about what it takes to reach certain milestones in life are crucial to help kids have the confidence they need to pursue those dreams. I do this with my kids and even if the interactions are smaller, I try to do the same things for the kids participating in the Junior Achievement programs.”
In their own words
We chatted with a few children to get their take on money matters—everything from ways to earn and save money to their opinions on the benefits of using cash versus credit cards.