The question of how to talk to your kids about money—and when—comes up almost as soon as children start talking. They see toys at the store that they want to buy; they pretend to shop with fake credit cards at home. Children as young as two and three might be comfortable with toy cash registers and purses, but for their parents, it’s a different story.
According to a new T. Rowe Price survey, parents feel extremely awkward talking about money. As a result, they avoid the topic and even lie about it, misleading their children about their own financial situation and what they can afford.
But children often pick up on subtle cues and tension, which means they’re probably learning money lessons even if parents aren’t consciously teaching them. The survey revealed that about half of parents said they disagree on financial issues, and about the same proportion of kids said they were aware of that disagreement.
As T. Rowe Price financial planner Stuart Ritter puts it, “Kids are seeing what’s going on anyway, and without your context around it, they’re going to draw their own conclusions”—so parents might as well start the conversation themselves.
“The Rock,” also known as Dwayne Johnson, recently shared a traumatic financial lesson from his own childhood that underscores that point. He recalled (for cameras filming a documentary and reported by TMZ) that when he was 14 years old and living in Hawaii, he and his mother came home one day to an eviction notice. At the time, he says, his family was experiencing tough times, living paycheck to paycheck, and living in a small one-bedroom apartment.
Seeing that eviction notice and watching his mom’s reaction crystallized his own commitment to finding success, he says. “I knew if I could build my body, with my own two hands, and I can be somebody, I can control, in a way, my own destiny… I wanted to do my part in making sure we never came home again [to] an eviction notice and a lock on the door,” he says.
The Rock’s trauma inspired a commitment to building financial security. Other children learn different lessons. Research by financial educator May Ann Campbell has found that young people often repeat the same mistakes as their parents and even grandparents, and that modeling sound financial behavior is one of the best ways to pass down positive money lessons.
Similarly, money and time guru Laura Vanderkam suggests that parents reflect on the money lessons that they do—and don’t—want to pass on, and make a conscious effort to rid themselves of any negative habits.
I remember my own parents being very frugal when I was young, and often taking time to explain why we couldn’t buy a new toy or other frivolous purchase. They did, however, make an exception for educational materials, and purchased books and workbooks more liberally. Today, I pretty much continue follow their example.
Do you have childhood memories that continue to affect the way you handle money?