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How to talk to your kids about money

As a child, Krystal tried to understand why her family suddenly couldn’t afford the things they once could. Her parents bought their first house at 21, then upgraded to a new home after she was born. But when Krystal turned 7, her mum’s behaviour changed, and tensions began to grow in their household. Bills were overdue and debts started to spiral out of control, which all led to her family feeling the weight of major financial pressure. Talking to your kids about money can seem daunting, but it’s important to start the conversation early so they can develop financial habits that will last a lifetime.

Growing up in a household that saw both the highs and lows of financial stability, she now finds herself wishing that her parents had more honest conversations about money with her growing up. In our fifth MyMoney MyStory podcast episode, Krystal talks about how joining MyBudget changed her family’s relationship to be more open to talking about money and helped repair their broken relationship. 

Why it’s important to talk about money with your kids

Setting up your children for financial success means talking to them about money from a young age. By teaching them the value of money, budgeting, and saving, you’re giving them the tools they need to become financially responsible adults.

Krystal’s dad made a crucial financial decision in 2021 when he decided to join MyBudget, creating a shockwave of relief for their family. He went from drowning in debts to consistently paying them off and achieving lifelong financial goals. 

“We’re having a bigger effect in the community than just our clients,” MyBudget Founder and Director Tammy Barton stated during Krystal’s podcast episode.

Be honest about your financial situation

“From a young age, about six or seven, I first started to notice it. But Dad essentially just liked to spend a lot of it. I saw my family getting into a lot of debt. I started to ask questions around the age of 10 or 11 when we started learning a lot in math about money and what you’re spending.”

Bills were due that would become overdue, meaning her mum would be chasing extensions and trying to scrounge together whatever money she could to pay down the arrears. Krystal had to read between the lines about her family’s financial position, making her feel obligated to help, without really knowing how. This led to pressure that was felt by the entire household when it could have been addressed earlier through clear communication and budgeting. 

Talking to a financial advisor or an accountant can be a good start to preparing a financial plan. The MyBudget difference is that you can make your current income work toward your goals with feasible and realistic changes to your budget.

Start early to build good budgeting habits

Money habits are learned behaviour, especially from a young age, and for better or worse, they can heavily impact your relationship with money. Your spending habits and personal finances greatly impact your children’s understanding of money matters. Krystal and her brother began to make board payments after they started working, which helped their parents to find their feet again. But a few years later, the spending issues came back into play. It wasn’t much longer until it would contribute to the collapse of Krystal’s parents’ marriage. “At that point, what happened and how much debt had been accrued over the years came to light. It was in excess of about $50,000 because they essentially had car loans, credit cards, all of that sort of thing.” 

Teach the basics of saving, spending and giving

Positive money habits can be established in children from a very young age. In the podcast episode, Krystal shares, “teach your kids to live within their means, set goals and encourage and show them how to work towards them”. Teaching savings with their own bank accounts (or piggy bank if you’re old-school) and putting away birthday money is a great starting point for young children. Each birthday, you can encourage your child to save most of the money they receive as gifts, with a small allowance for spending. You can sit down and have a conversation about financial goals, getting them to think about the value of saving as opposed to spending as soon as you get extra money. In the wise words of Krystal’s pop: “if you can’t afford it, you don’t need it”. 

Teach the value of delayed gratification

Saving for a big item, like a toy or device they want, is an ideal way to teach about everyday life and financial skills. Delayed gratification is one of the most important money lessons you can teach and can help your children avoid getting into credit card debt in the future. It is one of the greatest money values to have and is a great age-appropriate conversation with your children. A healthy relationship with money can lead to more opportunities to find success in life.

Use real-life examples to teach money management

The concept of money needs to be discussed in depth for children to understand it completely. Some money topics they need to understand are: where it comes from, why we need it, how to get it and what it is used for. Teaching them the best way to ensure they are financially secure is a valuable lesson that will stay with them for life.

Encourage kids to set financial goals

Many people have never created money goals, let alone reached them. Talking to your kids about money goals sows the seeds of understanding to ensure they are comfortable with saving. Before you have the conversation, make sure you have a clear understanding of your own goals so you can communicate the importance truthfully. 

Make a plan to reach the goals

In order to encourage financial goals in children, you could employ a savings chart or have rewards for a savings goal. Giving your children the opportunity to earn more through chores can encourage them to work harder in order to reach their goals faster. If your children are old enough, they could look at taking part-time jobs, or you could issue them a monthly allowance, and this can teach them the value of budgeting.

As a MyBudget employee, Krystal understands the importance of clear budgeting and has witnessed the profound impact it can have on lives. Since joining MyBudget, Krystal’s dad has made huge advances financially and is smashing his goals. 

how to talk to your kids about money

Avoid using money as a reward or punishment

When you tie emotional reactions to money, it can lead to emotional spending. For example, taking money away for bad behaviour can lead to self-sabotaging behaviours in children. They need to see money as neutral, so they can stay in control of their behaviour around it and use it to their advantage rather than as an emotional trigger. Dr Helen Street, psychologist and educator, says you should acknowledge children’s success, not praise them. “If I said to my kids, ‘If you tidy up the living room, I’m going to give you ice cream’, they might tidy up the living room, but not because they’re doing something for the family or because it needs doing or they want to help out – they’re doing it because they like ice-cream,” says Dr Street. By teaching your children about the purpose of good money habits, rather than just rewarding them for it, they will gain a mature understanding of the long-term benefits. Teaching children about money and showing them why they need money skills is a great gift of maturity you can pass on to them.

Make it a continuous conversation, not a one-time discussion

Talking about money may feel a little uncomfortable, as it has always been seen as a no-go zone for conversation historically. In reality, it is critical for children to have an in-depth understanding of money and saving. Start with basic money conversations, or introduce a money box for saving, to start instilling money values in your children. The life lessons we can pass on to our children will allow them to bring money values to their adult life. Communicating your approach to money conversations and buying decisions is a great way to review your own habits and ensure you’re equipping your children with the understanding they need to succeed.

To get started and take charge of your own financial future, MyBudget has helped over 130,000 Australians live their lives free from money worries. We can help you too, be sure to give us a call on 1300 300 922 or enquire online today.

This article has been prepared for information purposes only, and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information in this article you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.