Talking To Your Young Children (and Grandchildren) about Money

Damian Winther, CFP®
Mar 28, 2018 11:40:00 AM

piggy bankAs a Financial Advisor, talking about money, finances and cash flow with clients is a normal every day occurrence. One of the most common questions I’ve been asked by clients has been “How can I talk to my children or grandchildren about money?” and “How can I teach my children about the value of saving?” As the father of four young girls, clients’ eyes invariably lock directly on mine when asking questions like these.

Don't Be Afraid to Have "The Talk"

In my opinion, I find having open and honest money conversations with my young children is crucial to their education and growth.

My personal experience is that many parents and grandparents ignore this topic with their children and try to justify it with comments like:

  • “It’s none of their business.”
  • “They shouldn’t be involved in family finances.”
  • “They’re too young to understand how this works.”

I believe children’s brains are sponges and they learn from those closest to them. As parents, we spend countless hours helping our children with their homework, helping them succeed as athletes, teaching them the value of respectful behavior and pushing them to be the best they can possibly be. At the end of the day, we all want what’s best for our children and we want to prepare them for life as an adult. It’s because of this that I believe we should begin teaching children about money early in life as this is one of the most fundamental life lessons they will be dealing with forever.

My children are very different when it comes to money and their views on what money means and/or can do for them. My wife and I do our best to have open conversations with our children regarding money, in particular, the cost of things they are surrounded by each and every day such as homes, cars, sports, toys, clothes, vacations, etc. These are expenses all children are very much aware of and I find it surprising how often my children initiate the conversation.

Explaining Debt

In addition to money, we also explain how debt works since comments like “just use your credit card” started raising some red flags when they were even younger than they are today. While they certainly don’t understand the intricacies of interest rates, repayment terms or bankruptcy, they do understand that with debt comes a future repayment obligation that may impact their financial situation down the road, potentially in a negative way.

Explaining Philanthropy

From a values standpoint, my wife and I also involve our girls in decisions regarding some of our philanthropic planning. We want them to feel involved and vested in the choices we make and we have found that involving them in this process has created an awareness of not only where we are financially as a family, but what groups and organizations we want to put effort behind in terms of financial support or giving back with our time and energy. It’s really been a valuable experience and our kids have taken a very active role in this process.

Learn more: Planning Your Charitable Contributions in Retirement

Explaining College Planning

Perhaps it’s the Financial Advisor in me, but we also have conversations with them regarding their 529 college savings plans. We show them their statements and let them see for themselves how contributions and market changes impact their balances. Our primary objective is to teach them how discipline and ongoing savings is a part of every day life in order to plan for future goals such as college. In our case, teaching the “retirement” savings aspect seems a bit early since our oldest is only 9 years old.

Learn more: How to Financially Plan for Your Children's College Tuition

I understand that there are varying degrees to which we all communicate with our children and grandchildren regarding money and financial topics. My primary intent with this article is merely to raise the awareness that our children are far brighter, intuitive and inquisitive than we often give them credit for. They are already asking financial questions, some more complex than others. By not being open and honest in our responses, I’m not sure that we’re sending the right message or preparing them as well as we can or should be for the future.

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