Posted: 8:15 am Wednesday, August 20th, 2014

Starting the money talk with kids 

By Helena Oliviero

money clip art

 

T. Rowe Price has released some new surprising findings from their 2014 Parents, Kids and Money Survey of children ages 8 to 14 and their parents. (1,000 parents and 924 kids were surveyed.)

Here are some of the highlights:

Boys vs. Girls 

  • 58% of boys say their parents talk to them about setting financial goals compared to 50% of girls
  • 53% of boys say their parents are saving for their education versus 42% of girls
  • Boys think they are smarter about money – 45% feel very or extremely smart about money compared to 38% of girls
  • Twice as many boys have credit cards – 12% of boys and just 6% of girls have credit cards

Conversations make a difference

  • 81% of kids whose parents frequently talk to them about stocks and bonds say they are saving for college on their own, as opposed to just 25% of kids whose parents do not frequently discuss investment vehicles
  • 58% of kids whose parents frequently talk to them about saving for college save for their own education compared to 23% of kids whose parents don’t frequently discuss college savings.
  • 66% of kids whose parents frequently talk about family finances feel smart about money compared to 37% of kids whose parents don’t frequently discuss family finances.
  • 60% of kids whose parents frequently talk about setting financial goals call themselves “savers” compared to 46% of kids whose parents don’t frequently discuss financial goals.

Below are five tips for starting the money conversation with kids from Judith T. Ward, certified financial planner at T. Rowe Price

Tip 1:  Start with the basics.

Begin the financial conversation with your kids by starting with the basic terms like savings goal, trade-offs, inflation and diversification. By starting with the basic vocabulary to build a foundation, you can integrate these terms in conversations and start to build upon them.

Tip 2:  Look for teachable moments. 

These can happen when you are standing in a store, opening bills that came in the mail or clicking on a website to plan a family vacation. For example, when your grade-school daughter asks for her own credit card so she, too, can get things at the store for “free,” show her the credit card bill that comes once a month and explain how you pay it out of your earnings.

Tip 3: Cover both mechanics and values. 

Kids will catch on to how cash works quickly, and with the right explanation even the world of credit cards and ATM machines will become familiar. However, parents also will want to teach their children values—how to weigh one decision against another when it comes to spending. Some families emphasize saving for the future, investing in education, or making travel plans to new places a priority.

Tip 4: Share the family finances. 

We have a strong cultural taboo against having our kids know our exact household income or burdening them with worries about a parent losing a job. However, it’s important for kids to understand the choices parents make and the limitations families face.

Tip 5: Keep it fun.

If your kids roll their eyes when you begin to lecture—one more time—on financial responsibility, your messages probably won’t stick. Instead, find ways to keep the conversations interesting at any child’s age. One great way is through online games. T. Rowe Price collaborated with Walt Disney Imagineering to create The Great Piggy Bank Adventure, an online game that teaches kids how to make good financial choices. For this and other games and ideas go to www.moneyconfidentkids.com

16 comments
The Centsables
The Centsables

The best time to start teaching is when kids are young. Visit centsables.com for a fun way to teach kids about money (ages 6 to 12). Or watch our animated series "The Centsables" on Fox Business at 11am ET.

RealKat
RealKat

Our children earn their "age" in allowance each week. They are expected to do chores around the house, and know what is expected of them. Some of the ideas on here I agree with, but some make no sense but it's not my house so who cares? I would never pay my kids by the chore but rather give them a flat amount that they earn based on doing chores (without being told) for the week. $3 to empty the dishwasher? Depending on the number of loads of dishes per week, that would be more than we pay in allowance by age. No thanks. Glad it works for you.

TechMom1
TechMom1

We started a bit late with our son but mostly because I always had an issue paying for household chores. Maybe it's just me but I just couldn't wrap my head around it! My problem is that I don't get paid to maintain the house; I do it because it's my house and I'm responsible to my family to help maintain it. 


I finally read an article when my son was about 12 that talked about separating household responsibilities from fiscal responsibilities. It clicked. We immediately opened our son a checking account and started giving him allowance on auto-pay. We also stopped paying for everything extra. If he wanted to go to the movies, go out to eat with friends, buy the latest shoes or shirt, he had to pay for them out of his allowance. We started saving money honestly! 


Giving an allowance is about teaching fiscal responsibility- that really resonated with me. I still had an expectation that the bathroom would get cleaned weekly, the trash emptied as needed, he would do his own laundry, etc. BUT I didn't pay him for it and there was no question that he didn't have to do those things if he didn't want to get paid. He also could plan what he was going to do with his money knowing full well that 1) he would get the money every week b/c it was on auto-pay and 2) he was responsible to pay for all his "extras". 


When he turned 16 he got a part-time job and we still continued to give him an allowance. Why? Because we didn't want to "punish" him for him getting a job. We wanted to encourage him to work but not for it to be his primary objective while still in school and doing extra-curriculars. We did not give him a vehicle when we turned 16 but rather waited until he was 18 and sold him "our" old family vehicle (aka my husband's truck that he loved from day 1), for 1/2 of blue book value. We made him take out a small loan for it even though he had 3/4 of the money in his savings account so that he could build credit (it's still being paid for on auto-draft out of that savings). 


He's started his 2nd year of college this week and while we pay for the bulk of his college, our agreement is that we only pay if he maintains HOPE (3.0 GPA) because it's simply not a good investment on our part if he doesn't. I pray we don't get to that point of his GPA dropping below a 3.0 because one of my biggest desires is to see him graduate without the student loan debt that I had when I graduated. 


My husband and I made good money but are still paying off our early poor financial decisions. We continue to invest in our future though because neither of us wants to wait until we're nearly 70 before we retire. Our son recently realized that when we were talking this summer and he was like, "Ohhh that's why it always feels like we're broke!" I just laughed and reminded myself that as much as we do talk about money, perhaps it's not enough if he's just now realizing that! 

motherjanegoose1
motherjanegoose1

I worked at WalMart all through HS and college. Wish my parents would have encouraged me to do the 401k. I encouraged my son to do it and he takes full advantage of it. He just bought a house and also got a promotion. Proud Mom.

AtlantaMom
AtlantaMom

Good grief.  The easiest way to educate children about money is to say "no, you can't have that, we can't afford it", even when you can.

motherjanegoose1
motherjanegoose1

The best advice I can give is to assign prices to chores, so that kids can earn &$$. I have mentioned this before..make a chart with:

Vacuum the house $8

Trash out $5

Empty dishwasher $3

When children earn and allocate their own $$$ they have an interest in how it shows up and disappears. Many parents dole out $15/20 per week for kids but have never thought about making them earn it. Less arguing when you can say," sure you can buy that.... It's your $$$".

Lots of my kids peers showed up at college with no clue about $$$. Mine both had a job, car payment and checking account in high school. Their friends blew through their parents $$$ the first semester and then they were told to get a job. Harder to do when it is your first job and there are thousands of other students looking too.

I like the matching idea. I matched $1000 for each oft kids to put a down payment on their car and co signed the note. That also was a learning experience.

My daughter is in her last semester at UGA. She is taking personal finance and we talked about it yesterday. She will probably teach me a thing or two. She also told me that her boss said she is doing very well on her new position and they are looking to train her for management. She has a great work ethic and I am proud of her.

K's Mom
K's Mom

We have just started allowance with our 4yo and it is amazing to see his mind begin to wrap around wants vs. needs.  We are starting slow and certainly are not at the stocks and bonds stage, but we will get there.  A friend has a great idea that we will implement as well.  Once her kids were in school, they started a savings matching deal with their children.  Almost like a 401 K.  The parents match a percentage of anything the child chooses to save. My dad drilled into me to max out 401K at least to the maximum match and it really did stick with me.  I think by matching savings in that way the kids have a visual of how the money grows and may help lead to good habits later on.

motherjanegoose1
motherjanegoose1

Tis true that nothing suggested here will work for everyone. I ( for example) do not rent a house, lease a car or ski on vacation. Yet thousands do. I was actually giving examples not hard and fast rules. Other things I used were: vacuum the car, wash windows , wipe baseboards. There are also things associated with my business that could be done to earn $$$. Everyone has different projects.

K's Mom
K's Mom

@TechMom1 I get that paying for chores is controversial and there are lots of ways to "skin a cat." I think as long as you are trying to teach work ethic and fiscal responsibility you are on the right track. Our system works for our family, but it may change over the course of time. 

motherjanegoose1
motherjanegoose1

Lots of folks could not believe I would pay my kids. These same folks were doling out $$ each week Yes you can save $$ this way. I learned that early on. Plus your kids learn how to budget on their $$. My two both have good credit scores and this was helpful when my son bought his house last month. He has also been with the same company for 11 years ( since 16) and has a doctorate. All played a role in getting a mortgage.

motherjanegoose1
motherjanegoose1

My daughter now asks me why we can spend $$& on things that we could not have when they were small. The answer is that we have more $$$ and less things to buy now and save for. Our mortgage is almost paid and this is the last semester of college Who hoo. Saying no all the time is not IMHO the best answer. Letting them see how quickly $$$ spends and how hard it is to earn is a better lesson.

K's Mom
K's Mom

@AtlantaMom That is definitely part of the equation, but you have to give kids money to spend freely too.

K's Mom
K's Mom

@motherjanegoose1 We have a chore chart.  I know there is major controversy over tying allowance to chores, but daddy and I get paid for our jobs and so our kids will too. Our 2yo is expected to carry his dinner plate to the sink and pick up toys, but he does not get allowance yet and our 4yo has a much longer list.  I have been very pleased with how much the chore chart has helped with consistency on my part and excitement over seeing the fruits of his labor.

motherjanegoose1
motherjanegoose1

Not everything has to be a paid job. As parents, we do not get paid for everything we do. Some things are simply family contributions whether small or large. It is good for little children to assume a family role too.

K's Mom
K's Mom

@motherjanegoose1 I agree with that.  He has a list of 6 things he has to do everyday like setting the table, feed our dog and making his bed.  If he gets stickers in all of those he gets his $4 salary for the week. He helps do things around the house in addition to his "job" and he does not get paid for those.  He has to put $.50 a week in savings and give $.50 to church.  We went to Lego Land a couple of weeks ago and he had some allowance to spend and he was excited that he got to buy something that he earned. He also want to rent a pay per view movie last weekend and asked if he could do it with his money. For a 4 year old he is grasping the concept. Even though we have already opened a savings account for him and put a year's worth of allowance savings in it, we give him the money and make him give it back to us. There is not perfect system, but this works for us and he has learned already some valuable lessons.


motherjanegoose1
motherjanegoose1

Allowing money choices is part of growing up. Little choices for little folks. Big choices for big folks. Learning along the way. My two each had a $100 car payment for 36 months. I could have easily made the payment but they learned that it was required and both were proud when it was payed off. Me too.