By the ripe old age of three, researchers at the University of Wisconsin–Madison report, many children are able to grasp economic ideas such as value and exchange, albeit in a very rudimentary way. They can also delay gratification and make choices. Though basic, all these concepts are important in understanding the role of money in our daily lives. Although there’s no economic equivalent of Baby Mozart videos, no stuffed dolls that look like Warren Buffett to tell your kid to “buy low and sell high” when you squeeze them, that doesn’t mean you shouldn’t pay attention to this stuff when your child is small.
Your toddler is eager, and able, to understand a lot. When you notice your little one “swiping” a pretend credit card, asking to push the buttons at the ATM, or looking through your wallet, instead of chuckling indulgently in a “kids say the darndest things” way, start teaching him some of the basic lessons in this book about where money comes from and how to pay for things. Even if your preschooler doesn’t absorb it all, he will still notice that you’re talking to him about something that matters—something grown-ups care about. And odds are, he’s already soaking up more than you think.
Sticking to the truth is good when it comes to money, but so is adapting your message to your kid’s level. If you lose your job, it’s fine to say to your elementary schooler, “We’re going to cook at home more, since that costs less than eating out.” Skip the part about being in such dire straits that you’re dipping into your retirement fund to make ends meet. Given the same scenario but with a kid in high school, talking about how the loss of an income will affect college financing would be not only acceptable but also wise. You can discuss the reality that your family might not be able to put as much toward college expenses, but at the same time explain that she might qualify for more financial aid. In general, when it comes to having any hard money talk with your kid, it’s good to tell it like it is, but also offer reassurance that she—and you—will be okay.
More often than not, when we launch into lecture mode, our kids tune out. Or, worse, our pontificate-y good intentions backfire and push our children to do the opposite of what we’re trying to get them to do. Instead, use stories to illustrate a point. When my friend couldn’t get a decent rate on a car loan because she’d run up too much debt on her credit card on a monthlong, over-the-top European trip the year before, I told my kids the details (without mentioning her name). Anecdotes such as these, which highlight how financial blunders lead to consequences, tend to stick in kids’ minds. Same is true of positive lessons, like an example of the neighbor who saved religiously for ten years, putting aside 1% of every paycheck, so that he could finally buy his dream fishing boat. You get the idea.
Most of us have had a flirtation with bad money management at some point, whether we ran up too much on a credit card or bounced a check or two (or ten). But resist the urge to come clean about your money mistakes to purge your own feelings of guilt or irresponsibility: Your kid isn’t your financial advisor—or your priest. Take a page from the latest research on talking to kids about drugs, which shows that parents who have themselves indulged in the past should not go into details with their kids. If you’re answering a direct question, definitely pick and choose which financial sins you disclose; tales of emptying your bank account for a road trip with an old boyfriend or blowing through your savings to fund a wacky business scheme may glamorize what were actually regrettable decisions that took you many years to overcome.
Whether our wallets are full or empty, in the heat of the parenting moment, it is natural to want to lie a little to avoid tantrums when passing our kid’s favorite stores or during difficult checkout-line discussions. Try not to. Although it might seem harmless to tell a young child, “I don’t have any money with me, so I can’t buy you that bag of gummy bears,” it’s better to say something like, “No, I don’t think we need to spend money on that now. Besides, the dentist told us to avoid chewy sweets.” Straight talk is a good example to set, and if there are real reasons behind your decisions, it’s actually helpful to share them with your child. If what your kid wants simply isn’t in your budget, say so and explain why. Or if you oppose the purchase for some other reason (say, you don’t want your kid toting a bazooka water gun around the neighborhood), then explain that, too. Remember that children are smart and won’t just settle for “We can’t afford it,” which, surveys show, kids mostly don’t believe anyway. No matter what your reasons, saying that you don’t have cash won’t work, since kids know there are lots of ways to pay for things. If you swipe your credit card a few minutes after pleading poverty, you’ll be busted. Once you get caught in a lie, your child will always wonder if you can be trusted. It’s just not worth it. Bite the bullet at the point of purchase now, and it won’t bite you in the backside later.