Talking to your kids about family finances

Start when they are young

Though kids may not begin to understand advanced financial concepts until they're teens, they can learn the basics from a young age. From the time your little ones are toddlers, you should be talking to them about earning, saving and spending money. Talk in age-appropriate terms and explain about how you (and/or your spouse) earn money from work. Discuss how the money you earn is used to maintain the house, pay the bills, put gas in the car, shop for food, etc. Help your kids understand that the money we earn needs to go to cover our needs first. Then, what's leftover can be used for savings and our wants.

Keep an ongoing dialogue

Financial basics can't be taught in one sit-down conversation. Instead, it should be an ongoing dialogue in your daily lives. When you are grocery shopping, talk about comparing prices. When you are paying bills, talk about where the money comes from to pay them. Though your kids may see you using credit and debit cards, or writing checks, your children should have an understanding about the money that they represent. Though you don't need to share every tiny detail about your family finances with your kids, you shouldn't be afraid to talk about money with them, either. Take advantage of any teachable moments in your life, from depositing your paycheck at the bank to ordering movies on Netflix.

Put your kids to work

To help your children understand the relationship between money and labor, put them to work. Instead of handing over allowance to your child without any strings attached, have them identify five or six tasks that they can do to help out around the house each week. Sit down and negotiate a value for each of the tasks, and let them know you will only pay for tasks that are completed on time and for a job well done. Hold your kids accountable, and if they don't complete their work as agreed upon, then don't pay them.

Help them save

Whether you set up a savings account for your child or they use a good old fashioned piggy bank, it's important that kids learn early about the importance of savings. Though you can't expect kids to work for and earn money for all their own toys, games and other wants, you can help them establish savings goals. For bigger items, it may be a good idea to set up a system where if the child saves up 50 percent of the cost, the parents will pitch in the rest.

Be honest when times are tough

Every family goes through periods where money is tighter than usual. If you have lost your job and are having to make financial changes at home, talk to your children about the situation. Though young children won't understand about layoffs or the state of the economy, you can use simple terms and explain about the changes that are going to directly affect them. For example, if you're cutting out extracurricular activities, eating at home more often instead of dining out or skipping your annual family vacation this year, you can talk to your child about your financial struggles as well as your plan about how you will get back on track.

More about family finances

Mom vs. Dad: The allowance debate
Talking to kids about financial struggles
Teaching your kids about money and debt

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