(CNN) – Children are watching, and it is not only behaviors like kindness and empathy that can make an impression on them. They also see how their parents handle money, for better or for worse.
“I wish they had taught me how to pay bills and the importance of paying them on time,” said Amiyrah Martin, a mother of three from Columbus, Ohio. “As parents, we lose the opportunity not only to be transparent about the bills that come into our home, but also to show children how they are paid.”
Other parents told me that they wish their parents had taught them the basics of budgeting, savings, and credit cards, and more advanced topics like investing, mortgages, managing taxes, negotiating wages, and calculating retirement savings.
Why aren’t the money talks taking place? Shame is a common reason. Embarrassment over financial mistakes can prevent parents from having positive conversations about money with their children, said Monica Eaton, certified financial education instructor and founder of Alconbury Press, a media company focused on financial education for children.
Eaton encourages parents to forgive themselves for past mistakes, recognizing that this can be difficult if you are still living with the consequences of your past. “By making peace with the money mistakes of the past, parents can be in a better position to guide their children toward positive financial behaviors.”
There’s no need to dwell on financial struggles too much, cautioned Beth Kobliner, author of “Make Your Child A Money Genius (Even If He Isn’t).” She recommended being honest, but brief. “You don’t need to go into sordid details, but if, for example, credit card debt kept you from reaching some goals in the past, let them know.”
You don’t have to go far to get started, as there are many daily learning moments about money. And kids are better off experimenting and making mistakes with their little assignments when the stakes are low. Here are five ways to approach money with tweens and teens.
A cornerstone of money conversations is identifying needs versus wants. Before heading to the store with your kids, Kobliner recommended being clear about what constitutes a need, like milk, versus a want, like chocolate milk.
“It’s okay to indulge in small wishes every now and then if your family’s situation allows, but needs always come first,” Kobliner said.
Keep it simple if your child asks for something like candy at the box. “Don’t lie and say you don’t have enough money to avoid a collapse,” Kobliner said. Instead, he recommended a straight answer like, “No, I don’t think we need to spend money on that right now. We’re here for the basics today.”
Kobliner noted that the importance of building this foundation is supported by research. A 2011 Duke University study found that children whose parents gave up on the pay line were more likely to develop credit problems as adults.
Consider giving children leeway to identify their needs and wants. Lauren Schamaun, a mother of 13- and 16-year-old teens from Rockville, Maryland, said she felt stressed balancing the eating-out budget with her children’s requests for cash as they became teenagers and more social with their children. friends.
Schamaun’s solution was to increase his teenage children’s allowances but stop giving them money for outings. “If they want to spend $ 12 on a smoothie bowl, they can, and that doesn’t affect my budget anymore. I’ve seen them weigh the pros and cons of such expenses and learn to manage their own money well.”
Talking about goals is important. “Lifestyle goals can affect the type of education and line of work that students pursue. Those choices will have big implications for their long-term earning potential,” Eaton said.
If college is one of those goals, Kobliner recommended that parents establish a dedicated college savings plan and start talking about college affordability during the eighth grade. “Let your child know that you are saving money for college, ideally in a 529 (college fund),” he said. “Studies show that kids who know this are more likely to go, regardless of how much their parents have saved.”
There is a temptation for parents to use money as a carrot for children, and some children may suggest financial incentives based on what they hear from their friends. A survey showed that half of parents give their children money for good grades, an approach Kobliner advised against taking.
“Research from Harvard University shows that these bribes don’t work because external motivation is not what will make them work hard in the long run. That requires internal motivation, that feeling of authentic accomplishment,” Kobliner said.
Conversations about what to do with money, whether it’s an allowance or earned in some way, are crucial. Parents should teach their children to spend less than they earn, Eaton advised. “This is essential money management advice and it’s critical.”
This important lesson is even on the minds of parents of preschoolers. Liz Callin from Milwaukee is already planning to show it to her 4-year-old son. “I wish they had taught me how important it is to start saving early and often. Saving 10% of each paycheck will be something I will teach my son when he grows up.”
Kobliner recommended that parents help their children open a Roth IRA to save some of their earnings. “This is an excellent opportunity to teach your teenager about the magic of compound interest,” he said.
Mathematics speaks for itself. Kobliner shared this simple and powerful scenario to use in conversations with children: Starting in your 20s, if you save $ 1,000 a year and stop at 30, you’ll have more than $ 200,000 in retirement.
Conversations about credit cards are important, especially if your teen is heading off to college, a common recruiting ground for enrollment.
“When I got to college, I signed up for a credit card because of a free ‘gift’ and didn’t realize what APR meant,” said Emily Williams, a mother of 4 and 9-year-olds in Malden, Massachusetts. . “I couldn’t keep up with the monthly payments and got into a lot of debt.”
Kobliner recommended explaining the concept of credit card interest to children with an example like this: accumulating a $ 1,000 balance on a credit card but only paying the minimum each month would take more than six years to pay and cost almost $ 600 in interest.
Children will eventually need to learn to manage their money. Keep conversations age-appropriate, focused, and fair.
A 2018 study by T. Rowe Price indicated that the tides are beginning to turn, but Kobliner shared that years of previous surveys consistently showed that parents are more likely to talk about financial problems with their sons than with their daughters, which leads for children to express more confidence about financial matters.
“Many parents believe that their (male) children are smarter with money. This is silly and must end,” Kobliner said. “Especially when girls face an uphill climb anyway to earn salaries that are on par with their male peers. Make sure all boys are equally prepared for financial smart lives.”
Christine Koh is a former music and brain scientist turned author, podcaster, and creative director. You can find her work at christinekoh.com and on Instagram, Twitter, and Facebook at @drchristinekoh.