Despite a hefty load of teaching duties from potty-training to self-feeding, parents are apparently willing to take on another major task: Passing on money skills. According to a new survey from ING Direct, the vast majority of parents say they are in charge of their children’s financial education. But parents don’t give themselves high marks as teachers. Fewer than one in three think they’re “excellent” financial role models.
So, what’s a struggling parent to do? Here are eight easy ways to start teaching your children about money today:
[In Pictures: 10 Smart Ways to Improve Your Budget.]
Get over the awkwardness. The ING Direct survey found that parents feel more prepared to talk about drugs, alcohol, and sex than money. Maybe we just need a family-friendly analogy for the money talk, like the birds and the bees. Whatever trick you use, find a way to bring up dollars over the dinner table, or wherever else you make conversation with your kids.
Use other people’s lesson plans. You don’t have to do all the hard work yourself, because other people have done it for you. Mymoney.gov, AmericaSaves.org, ING Direct’s Planet Orange, and SchwabMoneyWise.com are just a few of the websites designed to help parents educate themselves, and their children, about the ins and out of money.
Practice one financial tip a week. Arkadi Kuhlmann, chief executive of ING Direct, recommends picking one financial tip each week, such as setting up a budget, and talking about it as a family. That way, parents can also make an effort to set a good example, too. At the grocery store, they can take a minute to explain how to choose an affordable brand of dishwasher detergent, or how to compare the cost of bread.
Connect allowances with future careers. Paying children for chores around the house can lead to problems, because it teaches them that working for money isn't fun, warns Alisa T. Weinstein, author of Earn It, Learn It: Teach Your Child the Value of Money, Work, and Time Well Spent. Instead, she recommends connecting allowances with tasks related to various careers. Children can choose a career, and then complete tasks related to that career. Travel agent tasks include reporting on a destination in an appealing way, creating a brochure, and for older children, calculating exchange rates.
"This way, the child is making the connection between effort and money, and the feeling that you worked hard for something. If you can capture that, then you're much more likely to have a child who grows up and can find emotional and financial fulfillment in their careers," says Weinstein.
Show kids what you can do with money. Susan Beacham, co-founder of Money Savvy Generation, invented a piggy bank with four compartments—save, spend, donate, and invest—to teach kids how to budget. "You're teaching them to stop, pause, and reflect, and this is the first step toward teaching them to delay gratification," she says.
Watch out for the subtle messages you send. Mary Ann Campbell, a financial educator, received mixed messages about money growing up. Her parents, in fact, implied that sending a girl to college was a waste of money, so she had to find a way to pay for her own education, along with the help of one of her brothers. That’s one reason Campbell wrote her PhD thesis on how 20-somethings learn about money from the way their families talk about it. She discovered that the way parents and grandparents talk about money, as well as the way they act, makes a big impact.
While most of her 20-somethings learned about frugality and saving, the interview subjects who didn't have the benefit of those lessons—either because their parents spoiled them or their parents seemed to struggle with money themselves—repeated some of those same bad habits. Her students, she says, often didn't even realize how much their parents had influenced them until she started asking them questions.
Let them make their own mistakes. Lewis Mandell, a finance professor at the University of Washington who has studied financial literacy, says allowing children to experiment and make mistakes can provide more useful lessons than anything taught in school. He encouraged his now-grown daughter to invest as a teenager; she learned how to diversify after losing money in Pepsi stock.
More independence can be good for parents, too, who often help their adult children so much that they hurt their own financial security. Most college graduates now say they plan to move back home, at least temporarily. A Pew Research Center study released earlier this year found that 36 percent of Millennials receive money from their parents or other family members. One Ameriprise Financial survey found that almost one in three parents in their 50s and 60s often give so much money to their adult children that it eats into their own retirement savings, but most don’t even realize it.
As they get older, limit the support you provide. While assistance during those challenging early adulthood years can help adult children find their footing, parents can inadvertently set up a cycle of dependence. If your money ends up going towards frivolous purchases like vacations and cars, you should probably freeze those payments. But if you’re helping a hardworking son or daughter afford an internship in an expensive city, there's little reason to hold back, other than your own budget. If you can’t afford financial help, consider giving in other ways, by offering the occasional home-cooked meal, babysitting services for grandchildren, or even just a listening ear.
Teaching kids about money doesn’t have to be complicated. Instead of technicalities like 401(k)s and bonds, they can start to grasp broader concepts like the importance of saving for a rainy day, spending less than you earn, and how money can grow over time. And if parents are still struggling to apply those lessons to their own bank accounts, they can use the opportunity to change a few habits of their own.
Kimberly Palmer (@alphaconsumer) is the author of the new book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back.