How do I talk to my child about money?

What is it about money that makes it so difficult to discuss with our children? While many taboos around discussing sex, drugs and politics have broken down, for some reason money remains a topic that many parents feel uncomfortable talking about.

A survey by Visa on Women Money Matters found that 30% of mothers never speak to their children about money; another global survey by Visa found that only sixteen percent of South African mothers talk to their children at least once a month about money skills.

I actually disagree with these assumptions, I think we are talking about money all the time – we are just not doing it mindfully. Every time we say “we can’t afford that” we send out a money message. When we splash out and buy our kids the latest gadget, when we envy a neighbours car or support a charity drive at our child’s school we are creating money messages.

What we need to do is to start talking about money in a more mindful way so that we know we are sending our children the right messages and not leaving them confused and often frightened.

I discovered this the hard way when my son, aged six at the time, burst into tears because he thought we were poor and would live in a car!

My husband was in between jobs and we were about to move from Johannesburg to Cape Town. It was a financially tight time and we had to cut back on luxuries, including extra murals at school. The fact that I kept wandering around saying “we can’t afford this” or “we don’t have money for that” combined with selling our home in Johannesburg had created a whole story in his head that we were poor and would not have anywhere to live.

So I sat down and explained that we really weren’t poor. “So why don’t we have money for toys?” he wanted to know.

I realized then that I needed to start explaining how our family finances work. I used some plastic tokens which represented the money we get in each month and showed him how saving works. A few tokens are used for day-to-day stuff like paying for the house, food, clothes, petrol and some nice things like treats and small gifts.

Some tokens are used to add to our pile of money for when we are older or if we don’t have a job, and finally some tokens are then used to save for family holidays and presents and Christmas (he was very interested in the size of this pile!). I explained that when I say we don’t have money for toys, I mean that this little pile for our everyday shopping has run out. I don’t want to take money from the pile that we are saving for important things.

So, I was thinking that I’d done a great job of explaining the basics, when he threw this at me: “But what if you get sick and you can’t work or you are in an accident?” I realized I needed to take this conversation to the next level and explained about insurance and that it would pay us money every month if we couldn’t work.

He then asked to see the “piles of money”. So I went to my office and took out all my statements – my bank statements, money market statements, investment statements and even our insurance policies. Just seeing the numbers seemed to impress him – especially the bank statement that had lots and lots of numbers (he hadn’t yet grasped the concepts of credit and debit ).

That day I learnt three valuable lessons: be very mindful about how you talk about money, don’t think household finances are too complicated for children to understand, and finally make sure your own finances can withstand a child’s scrutiny!

Tips on talking to kids about money

• Never tell your kids you don’t have money – rather say you don’t want to spend money on that as you are putting money away for other things. If you can’t afford to buy something that they want, encourage them to save up for it themselves – this is more empowering than you not being able to afford it.
• Get your own finances in order so that you can show your children that you are making provision for the future – it will make them feel safer.
• Walk the talk. You need to make sure that your own life reflects the values you are teaching your child. If you want them to save, make sure you are saving yourself. If you want them to be charitable, start giving to a charity. Don’t live in debt if you don’t want them to!
• Let your child lead the conversation, once you start talking about money they will hit you with a barrage of questions! Be ready to answer them and don’t say “you are too young to understand or “it’s too complicated” – find a way to explain in a way they understand.
• Listen to them and ask them questions so you understand how they view money. It took me a while to understand why my son was worried we were poor and to understand how important, in his mind, it was to own our own home.
• Don’t avoid the tough questions. Both my sons have asked me what would happen to them if I died. It is very easy to dismiss this with “I am not going to die” but they have opened the conversation, give them the security in letting them know you have a plan.
• Never say “when I was a kid” – times change and so do value systems. Understand the world they are living in today and make money relevant. Talk about your current family values, not how you were raised – this does mean of course that you need to know what those values are!