Managing Money You Can Teach Kids About Money — Even if it Stresses You Out

by Erin Lowry | December 18, 2020

Who taught you about money? Odds are, it was the people who raised you, whether or not you recognized it at the time.

For many people, talking about money is a cause of stress — even under the best of circumstances. And, that stress might only intensify when it’s on you to lead by example for your kids — particularly when you feel like you’re still a financial work-in-progress. Let’s face it, many people are.

That’s okay. You can still be learning to manage your own financial life, and still be a healthy role model for your kids as they develop their own relationships with money.

In fact, the act of instilling good money habits in them can be an opportunity for you to commit to changing your own for the better, too.

Be honest, but protect them

Financial stressors can weigh on your mind. But there’s a delicate balance between honesty and oversharing that parents must strike with their children. It’s important — and healthy — to discuss the concept of wants versus needs, how to create a budget and set savings goals.

For instance, be upfront about the reality that you can’t afford everything you want in the moment. Discuss the importance of working to save toward a goal. However, frame finances in the sense of having enough to cover your basic expenses so there’s no stress or panic for the child.

Job loss, stock market volatility or an unexpected medical cost can impact finances and stress-levels, but share only the information that your children need to be aware of. There are ways to express the reality of a situation in straightforward terms that kids can understand.

Unexpected costs occur, but it’s how you communicate the realities that matters. For example: “Remember when Dad broke his arm and had to go to the hospital? We’re so glad he’s better, but it was unexpected and expensive. We are okay, but we need to pay the doctors for all their hard work. So we’re going to wait on getting that new video game system, but we’ll have board game and movie nights that will still be lots of fun.”

This approach addresses the expense, the reason for it (Dad’s health and helpful doctors) and manages expectations about how this will shift priorities (paying bills over buying a game system).

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Discuss the importance of working to save toward a goal.
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Mind your language

Kids are known for continually asking “why, why, why?” to every answer provided.

And sometimes that can trigger a fast, perhaps flippant, response to shut down the constant why. A response like, “We can’t afford that,” may stop the pleading, but it could also plant seeds of anxiety.

It’s also important not to joke about being “broke” or “poor” with your children. Even if your family is struggling financially, it’s better to discuss the needs versus wants and focus on how you’re proactively meeting family needs. 

Set savings goals as a team

One way to focus on family needs is by prioritizing saving. If you’ve struggled with setting savings goals personally, take this opportunity to teach your children healthy financial behaviors as motivation to tackle that.

Start by creating a family savings challenge. You can each set individual savings goals and then also set one as a family. Plan for a group goal — like a pizza making kit for the family or trampoline for the yard.

Track as you save up enough in the next month or two and encourage kids to put part of their allowance money toward the family goal. Kids could even pick up extra chores to earn more to put toward savings and explain how putting more toward saving can get them to the goal faster.

Make it fun and visual. Use a large, clear container to put the money into so it’s on display or create a sticker chart that tracks progress toward completing the goal.

After a successful family challenge, set a new, perhaps loftier prize (like a new television, adopting a puppy or a family camping weekend) while also introducing individual savings challenges, like saving up for a desired toy. It’s important to allow your child the chance to make his or her own decisions on how to save and spend money.

This is a good opportunity for you, as the parent, to also set a savings challenge. Set a short-term goal, such as a home improvement project, or long-term goals like contributing more toward your retirement plan.

Happy family playing chess together at home

Engage in money savers and challenges together 

Cooking dinner at home is a simple way to avoid the budget buster of frequently ordering in takeout. Engage the kids by having them help with meal planning for the week — getting takeout for family dinners will then be seen like even more of a treat.

Take stock of your online streaming services as a family and cancel the ones that you don’t use on a regular basis. Apply that same thinking to any subscriptions you receive via mail — if the unread magazines or papers are stacking up, then that’s a good sign it’s time to unsubscribe.

You can also have your child participate in a no spend challenge with you. Whether you want it to be one day a week or for a full week, it’s a family (and personal) challenge to only spend money on the essentials. To reinforce the savings lesson, keep track of the money that may have slowly leaked out of your bank account in a month, but now can be put toward those family savings goals.

Don’t shop to cheer yourself or your kids up

Stress may be a trigger for you to spend indiscriminately, which is another habit you can avoid passing on.

It’s incredibly common for people to self-sooth from disappointment or stress with consumption. A simple way to model a healthy relationship to money is to avoid allowing your children to see you shop in order to feel better emotionally.

You can also avoid encouraging that urge in them by making a purchase as a reward to stop crying or make them feel better. Purchases, particularly the ones that would be categorized as a want versus a need, should be planned for as part of the savings goal strategy.

Encourage charitable giving

However, one way to spend that can bring joy is through supporting others in need.

Set parameters to divvy up allowance into three categories: spending, saving and charitable giving. Consider matching your child’s charitable donation as a way to make it a family affair and reinforce this good practice.

If money is tight, you can also explain how it’s good to give money, but it’s also good to give your time and talents to help others. Partake in volunteer work as a family to model this behavior for your children.

Finally, share what you wish you’d known

As your children age, especially into their teen years, you can start to open up about what you wish you’d known about money at their age or even into your adult years.

Sharing missteps you’ve perhaps made in the past — say, failing to take full advantage of an employer-matched 401(k) — can lay the foundation for making sure your child knows better. After all, it’s only through experience that we learn how to navigate finances and improve upon how we handle them in the future.

Helping your children avoid costly financial moves is a beautiful financial legacy to gift them. And it’s a gift you can bestow today — whether or not you consider yourself financially flawless.

Erin Lowry

is the author of several books including the forthcoming Broke Millennial Talks Money: Stories, Scripts and Advice for Navigating Awkward Financial Conversations. You can find her at Brokemillennial.com, Twitter and Instagram.