Three Reasons You Shouldn’t Wait to Talk to Your Kids About Money

"The first step to teaching your kids how to handle money is being a good example" (Dave Ramsey)

In today’s world, everybody needs a healthy appreciation of money and how to manage it.

This is not just for practical reasons. Financial issues are a major cause of health problems and stress. They are also a major cause of disagreement between couples.

We need to prepare our children for this reality. And there are three good reasons to do this as early as possible.

1. Parents have the most influence on attitudes

   Academic research shows that, when it comes to money, the skills and attitudes children take into adulthood are mostly learnt from their parents. What they learn at school or even through the media might be useful, but what they pick up at home has the most impact.

   A 2020 study by researchers in India and France found that children who have healthy financial discussions with their parents have better financial well-being as adults.

   The same study also found that people’s attitudes towards money are a strong predictor of their financial wellbeing. This is something that is becoming widely accepted: there is a clear link between how we think about our finances, and the state of our finances.

   Those with healthy attitudes to money are likely to have lower levels of debt and better rates of saving. And those attitudes are most likely to be learnt from parents.

2. Children develop attitudes at a very young age

   In 2018, researchers at the University of Michigan ran a study that showed just how important early financial socialisation is.

   The researchers found that kids as young as five had already established attitudes towards spending and saving. They were already showing a predisposition to one or the other.

   And this translated into how these children actually used money. When asked about how their children behaved, parents confirmed that they were more likely to act in line with their attitudes.

   "We did not necessarily expect this in very young children, and it raises all kind of developmental questions," said co- author, Professor Scott Rick.

   What parents should note is how this highlights the importance of engaging with your children about money early in life. The attitudes that they develop in their most formative years will likely stay with them.

3. Parents teach us the most about who to trust

In a world where we face a constant information overload, discretion has become a critical life skill.

And, once again, decades of research have shown that this is something that parents are in the best position to impart.

Back in 1999 a study from the University of Minnesota Twin Cities found that the best protection against “undesirable media influences” was the family. It also noted that exposure to television was linked to higher materialistic values, except in families where good communication was highly valued.

Put another way: the better that parents are at communicating with their children about what sources of information to trust, the more discerning they are in their spending habits.

When children have so much information around them, it’s easy for parents to underappreciate just how significant the early lessons they teach their children can be. But instilling the right attitudes towards money even before they go to school can be a life-long gift.

Ask a professional some ways in which you might get your kids involved in thinking about their future finances.