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Talking to Your Kids About Money

By David Smyth

When it comes to your kids and talking to them about money, you might have as many questions as to when you should start the conversation as you do about what to say. As a financial planner, I probably erred on the side of talking to my sons before they could really understand what I was saying! And in all honesty, I didn’t get much of a response from them about money until they came to the realization that they could buy apps for the iPad!

For most of us, money only really matters if you don’t have any and you need some. In the case of my boys, they knew how to count pennies, nickels, quarters and dollars, and they knew that money buys things, but it didn’t really hit home for them until they wanted something for themselves. A 99-cent app was the perfect way to start that discussion.

As it turned out, it wasn’t just buying apps that aided in teaching my boys about money. When my two older sons were about 8 and 5, we downloaded an app called My Job Chart that allowed my wife and I to assign age-appropriate tasks, such as teeth brushing and picking up toys for the 5-year-old and small household chores for the oldest. The boys earned points for each job completed, and they could rack up extra points for helping out Mom and Dad. Then they could trade points either for money or things. So without actually exchanging any currency, they began to learn that action creates reward.

Now that the boys are a couple years older, they are actually working for dollars. By completing their chores, they receive money at the end of each week to be split equally in one of four envelopes: short-, medium- and long-term savings, and one for other expenditures such as gifts, apps, charitable donations or candy – a line-item in any kid’s budget, right? My oldest, Gates, is saving for a Nerf gun in the short term, an automatic Nerf Gatling gun in his mid-term envelope, and his long-term savings goal is a 22-inch TV for his room – hey, it’s what he can afford!

Our objective was to teach our children to be consumers, but to be discerning consumers. We want them to have fun, but also to learn about delayed gratification and saving for future goals and wants. On long-term savings, I match them dollar-for-dollar, just as employers often match retirement savings.

I’m thrilled to say that we’ve seen Gates and Ridley make some amazing choices with their money, such as the time Gates wanted to give all of his to relief for the hurricane in Japan, or the time Ridley accidentally broke Gates’s slinky and wanted to buy him a new one. We’ve also overheard Ridley asking his big brother questions about money, and how many coins make up a dollar, etc.

In the end, money is simply a tool that’s part of life, not an all-encompassing thing, and we didn’t want to treat is as anything magical or mysterious when talking to the boys. Tell us your family’s story about kids and money. How did your parents teach you about finances? What strategies do you use in talking to your own children? Drop us a line and tell us! We’d love to hear from you.

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