Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life
By Robin Taub, CPA, CA
Like most parents, you feel a responsibility to teach your kids about money. You understand the importance of making sound financial decisions and developing good financial habits. You know how financial struggles can strain relationships and even take a toll on your health. But teaching kids about money is easier said than done. In today’s digital world, cash is disappearing, spending is frictionless, and fraud and scams are constant threats. The pandemic has accelerated and magnified many of these trends.
As women, we face certain unique barriers and challenges that impact our ability to generate wealth:
A wage gap where women on average, earn about 15- 20% less than men,
We take more career breaks to have children or care for family members and as a result, our salaries peak earlier, on average in our 40s than men’s, on average in their 50s,
And we live longer, 5 years longer on average than men.
That’s why we want to raise our girls to be responsible, independent and money-smart for life. If we don’t prioritize financial literacy and well-being for girls and women, they may regress into gender-based stereotypes, for example, that money is for men, and women “don’t need to concern themselves with that.” They may regress into traditional lower-earning careers or remain dependent on others.
But if we start teaching our daughters (and sons) about the basics of money when they’re young, we can build on that foundation as they get older. Focus on the Five Pillars of Money: Earn, Save, Spend, Share and Invest. These five pillars never change, but as your kids get older, the specific topics and examples for each of the five do.
If you start when they’re young, your kids can make mistakes when the stakes are low and learn from them. So don’t bail them out of a financial mistake: let them buy that useless toy or those expensive shoes and regret it. Money is a finite resource, and they need to learn to live with the consequences of their decisions.
Unfortunately, many parents feel like they don’t have the time or knowledge to teach their kids about money. One study found that 78% of parents had tried, but two thirds didn’t feel they’d been very successful at it and more than half didn’t know what information they needed.
To make matters worse, in our society, money is still a taboo topic. And the more money there is, the harder it can be to talk about. Are you afraid your kids may ask uncomfortable questions like “are we rich (or poor)?” or “how much money do you make?” Try to answer their questions as honestly and sensitively as you can. You don’t have to get into specific numbers like your salary or mortgage balance. You can talk about general principles, like the importance of having an emergency fund, setting goals or budgeting.
The money talk isn’t a “one and done” conversation. Keep talking about it, sharing information that is age appropriate, taking into account your child’s age, maturity and temperament. And stress confidentiality. These are private family matters and not something you want them sharing on social media.
But remember, actions speak louder than words! Our behaviour around money tells our kids more about our values than anything we say. Teens especially will see through any kind of hypocrisy, and they’ll call you out on it!
So try to walk the talk and get your own financial house in order, so you can lead by example. If you’re curious about what kind of financial role model you are, you can find a free role model self-assessment tool at https://www.thewisestinvestment.com/.
Lastly, don’t wait until your kids are teens to have the first money talk. A recent study by the OECD found that teens who talked with their parents about finances – even just once a week – scored higher on a test of financial skills than those who didn’t. Other research has found that kids who are taught about money at home are more confident and optimistic about their financial futures and better prepared for the decision they’ll face. Teens who are comfortable discussing money with their parents are more likely to become adults who are comfortable discussing money with a spouse or partner.
Teaching your daughters (and sons) about money will pay off in countless ways and may just be the wisest investment you make.
Robin Taub, CPA, CA, is the award-winning, bestselling author of The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life
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