Breaking the Taboo: Importance of Money Conversations with Children
Due to long-standing cultural or societal norms, parents often avoid discussing money matters with their children. However, in the long run, this practice does more harm than good. Entrepreneurial-minded children who are shielded from money discussions often lack understanding and knowledge of financial decisions. This could lead to poor financial choices, resulting in economic pressure, insecurity, and even long-term financial difficulties. Therefore, breaking the taboo surrounding money discussions and educating children about financial literacy is crucial to ensure they have the necessary skills to make wise and responsible money decisions in the future.
As a father of five children ranging from seven to eighteen years old and a professional in wealth management for over twenty years, I have witnessed firsthand how a family’s attitude and communication regarding money can profoundly impact a child’s future. The way you talk to your children about money, the emotions you associate with money, and the language you use will leave a lasting impression on future generations.
Lack of financial literacy can leave young people feeling helpless when facing financial issues in the future, and it can even put pressure on their relationships as they grow. I hope to help everyone break the taboo about money discussions in families, as these taboos hinder open and honest communication. I also want to share some practical life skills that I have used to nurture their entrepreneurial abilities from a young age.
To build children’s confidence in money and business concepts, it’s essential to impart these skills to them. Once they grasp these concepts, you can start teaching them immediately.
When my children turned eight, I started opening checking accounts for them. I found this to be one of the simplest ways to teach children money management, such as handling money from birthday or Christmas gifts. Children can learn how to fill out deposit and withdrawal slips, check their account balances, and use a debit card responsibly.
In the age of “plastic money” (editor’s note: credit cards, debit cards), it’s crucial to let children manage money on their own. They can learn the value of money and how to make responsible spending decisions. Practical learning is most effective, and having children manage their accounts helps them understand the effects of interest and the benefits of long-term savings. It also cultivates their financial independence and sense of responsibility, which will be valuable when facing more complex financial decisions as they grow older.
In our family, after children complete their daily or weekly chores, we pay them for any additional tasks they complete. We believe that giving children pocket money to get through the week doesn’t teach them anything. By paying them for extra work, children can truly experience the process of earning money. This teaches them the value of labor and the connection between work and money. Furthermore, it instills pride and a sense of accomplishment in their work.
Paying children for extra work also helps develop their negotiation skills. By discussing the amount of compensation for a task with the child, they can understand the importance of compromise and communication. This helps them build better interpersonal relationships and be better equipped to deal with complex situations in the future.
I believe providing children with clear goals to earn more money is beneficial. One way is to read books on finance, goal setting, and personal growth. As a result, when my children and their friends plan to go shopping or see a movie, they know how to quickly earn extra income to cover related expenses.
After finishing a book, have the child write a one-page summary report or record a video discussing what they learned and their favorite part of the book. This can help them learn time management and improve their reading and writing skills as well.
If you want to foster your child’s entrepreneurial spirit, start guiding them on how to think about entrepreneurship from a young age. Tell them that there are ways to earn money outside the household. Encourage them to offer services such as putting garbage bins back for neighbors. After the garbage truck empties the trash, they can push the bins back to the neighbors’ doorstep for a few dollars per household. In this digital age, let them learn a new skill; many local businesses need part-time help, such as creating social media plans.
Teaching children problem-solving skills, encouraging them to think critically about challenges they face and brainstorm solutions, helps them better tackle complex problems and find innovative solutions – qualities that are essential for successful entrepreneurs. Another method is to involve children in your thought process and show them how you come up with solutions to challenges in your family, work, or personal life.
Provide opportunities for children to explore interests and pursue things they love. This may involve them participating in courses or extracurricular activities such as music lessons, art classes, or robotics clubs, or at home providing them with resources like art supplies, building blocks, or coding kits.
In these activities, avoid setting strict rules or expectations. Instead, stimulate their creativity by providing open-ended prompts or challenges. Instead of assigning a specific project, encourage them to come up with their own projects and support them in realizing their ideas.
Help children understand that failure is natural in the entrepreneurial process. Taking risks is necessary for success. Encourage them to try new things and take calculated risks in pursuing their goals. Children are often taught to avoid mistakes and seek stability, but entrepreneurship involves risk, and often, goals can only be achieved through taking risks. Here are some ways to cultivate children’s risk-taking ability:
– Emphasize the value of trying new things: Encourage them to explore new hobbies and interests. Even if uncertain whether they’ll like it, they should try. This helps them develop an experimental and exploratory mindset.
– Embrace failure: Teach children that failure is part of learning and it’s okay to make mistakes. Encourage them to learn from failures and persist despite setbacks.
– Provide a safe environment for risks: Ensure that children feel supported when exploring interests, providing them with a safe space. This includes emotional support and encouragement when facing new challenges.
– Lead by example and set a role model: As a parent or guardian, share your experiences when facing new challenges with children to set an example of taking risks. Show them that taking risks is part of life and leads to growth and success.
Cultivating a growth mindset in children involves viewing challenges and setbacks as opportunities for growth and learning, rather than proof of failure or inadequacy. Here are some methods:
– Emphasize effort over innate talent. Reinforce the importance of diligence and hard work over innate talent or intelligence in the pursuit of success. This helps children understand that through consistent practice and perseverance, they can gradually improve their skills and abilities.
– Praise their progress, not just the outcome. Acknowledge the progress they make in their growth process, rather than solely focusing on the end result. This can give them a sense of achievement and provide motivation to continue striving.
– Help children set realistic goals. Goals should be challenging yet achievable. Break goals down into small steps to complete gradually. This way, children will have more confidence and motivation.
– Lead by example. When faced with challenges and setbacks in your own life, exhibit resilience and perseverance. Show children that setbacks are part of learning and growth.
Mentorship and networking are valuable in fostering children’s entrepreneurial thinking. Introduce children to some successful entrepreneurs in your network who are willing to share their experiences and advice. This not only helps children learn from others’ experiences but also inspires them to develop their entrepreneurial skills. A great way is to have children attend social events or let them observe some of your business meetings, so they can hear how you and your colleagues discuss business plans.
Encourage children to build their own network of contacts. This helps them expand their skills, gain knowledge, accumulate contacts, and lay the groundwork for future entrepreneurship. There are many activities and conferences they can attend, as well as numerous online forums or groups they can join.
We encourage children to follow the 50/30/20 rule for managing money. This means instilling the habit of saving or investing at least 30%, donating 20%, and having the remaining 50% for personal discretionary spending, such as watching movies, shopping, or, for older children, paying for car insurance. Through this approach, they learn to save, invest, and donate with discipline, developing their wealth perspective and fostering healthy financial habits at a young age.
Engaging in financial conversations and dialogue with children is one of the best ways to learn, enabling them to understand the value of money in the real world. You can share your financial goals and strategies with them. For example, tell children your goal is to buy a new house and explain the steps you plan to take to achieve this goal. Explain how much money you need to achieve this goal, how much money you need to save weekly or monthly, and how long it will take to accomplish the goal of buying a new house for the family.
When involving children in discussions about significant family expenses, such as buying a new car, going on vacation, or purchasing a new house, it not only gives them a sense of responsibility but also helps them understand their direct link to the overall financial situation of the family. You need to help them understand that besides primary expenses, there are many additional costs to consider. When planning to buy a car, inform them about increased insurance costs, vehicle registration, and maintenance expenses, and how to plan for these expenses in advance. Similarly, if you plan a vacation, make them understand the real expenses involved in travel, including short tours, dining, transportation, and other accommodation-related costs, which they may not consider during the planning stage. All this helps children gradually develop a clear and realistic understanding of the costs of real life.
In daily life, be transparent with children about various expenses, letting them know how much it costs to maintain a household and how much it costs to purchase groceries for the family. This helps them truly grasp the value of money and understand your hard work in providing for them, as well as how you budget to ensure their learning materials, sports activities, etc., are taken care of.
I’ve found that many families are not transparent enough in these areas, and children only realize as they grow older that the money needed for these things in life is much more than they imagined.
It is crucial to understand that teaching children about finance is not a one-time action but a continuous process. As a parent, you need to demonstrate through your actions and continually pass on relevant knowledge throughout their childhood and into adulthood. Start with simple, basic conversations when children are young and gradually introduce more complex, mature financial topics as they deepen their understanding, allowing them to participate.
By breaking the intergenerational taboo on money discussions, you can help prepare children better for the future. This will not only give them more confidence in thinking about problems but also make them more comfortable discussing money with peers. As they gradually acquire these necessary skills and knowledge, they will have the ability to make sound financial decisions, ultimately providing them with greater financial security, a solid foundation for life, and long-term wealth growth.
If you remember one thing, it should be: do not hide financial matters from children anymore. Do not expect them to figure out how to manage finances on their own suddenly after leaving the family once they graduate high school or college, even if that’s the path you had to navigate in the past. The goal should be for your children at their age to outshine what you did at that age. Engage in open and sincere conversations with your children, instill in them a sense of financial responsibility and accountability from a young age. Include them in financial decisions, lead by example, and make financial education a continuous process. Helping them transition from childhood to adolescence, they will be more independent and confident in handling money issues. Through this, you are laying the foundation for their lifelong success.