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How to Talk to Your Kids About Saving Money

It’s important to talk to your child about saving money. Some parents may be more comfortable talking about reproduction with their children than money. That’s because we hold so much emotion about our own financial situation. We also may not have the actual financial understanding to speak confidently about what our kids need to know about money.

In my own experience, I realized that communication and lessons around money are key to financial success. As a father, I am now having these financial conversations with my son. I want to make sure he doesn’t repeat the financial mistakes I’ve made.

Here’s the surprising thing about my money story. I had financially fit parents who managed their money well. However, their money skills weren’t transferred over to me. I now see what was missing. My parents made sure I didn’t have to worry about money. But without the lessons, I wasn’t equipped to manage my own finances well.

Financially well parents doesn’t equal financially well children

My father was a banker in Colombia before moving to the United States. This was a time where all accounts were kept on ledgers and hard copies. Credit cards were not so common and many people had a personal relationship with their local bank associate. My father was given the rare opportunity to personally deal with both financially successful and unsuccessful people. 

He saw first-hand how successful people managed money was no miracle. They saved and invested. By doing this, they made their money grow. He once told me, “Leo there is no great secret to money. You have to spend less than you make. Always remember if you have a plan for your money even unexpected occurrences will not be emergencies.”

Growing up I watched my father take us from living in a roach-infested apartment to our first house. I also witness his layoff that strained the finances. But through it all, he made sure I didn’t think about money while still taking us on vacation. I didn’t realize it then but he had a financial plan. So on his blue-collar wage, he was able to manage money in a way I didn’t understand. Even though he gave me sage financial advice, I didn’t have actual lessons and that lack of financial understanding led me to being a financially unstable adult.

Taught to work for money, but no lessons in saving or growing it

At a very young age, I was taught that I had to work to obtain the things I wanted, but I wasn’t taught to save. So I started working much earlier than my friends or other kids around my age. I spent the money and didn’t save it. My father also helped me through my financial tight spots. He’d let me borrow money and I always required to pay it back. 

My father grew up in a family of six in what many would describe as poverty. His parents hustled to find ways to feed the family. He grew up exposed to the idea that money was scarce. Therefore, he needed to use it correctly because the consequence of not having money meant your family did not eat.

Here’s how that influenced me. My father felt he worked hard to earn and save money so that his own family would not have to experience how he grew up. In some ways, he wanted to shield me from money issues that plagued his childhood. Unfortunately, since I didn’t see how he managed money I was left with the impression money is something I only worked for. When I need it I just work more and of course, there are only so many hours one can work and only so much one can afford.

Things unraveled for me. I began relying on credit cards. For example, Christmas is big in my family and so I used credit to purchase gifts. Low and behold, I had no clue that my dad didn’t use credit. Instead, he saved throughout the year into a Christmas club account at the bank.

My dad also had a side hustle at night. He would clean buildings (and I would come along to help). I got paid to do this but I didn’t understand that the money my parents made cleaning those buildings at night was being saved for a downpayment to buy our house.

The importance of teaching money lessons to raise financially well kids

I lived an amazing childhood full of happy memories. I was also raised to work hard to make money to obtain the things I wanted, But I never learned that money itself was a tool, not just a resource that replenishes itself. 

With no real consequences for spending my paycheck a few days after I got it, I never worried about the future. My father gave me a wonderful childhood where I didn’t worry about money. Unfortunately, that was a missed opportunity to teach me how he was able to obtain that life and keep it. 

I look back now when my dad was laid off. Our household was as jovial as ever. He made sure we weren’t worried. But, again, I had no clue he had saved one year’s salary for those very moments. He had an emergency fund.

As those years passed, I believed the only path to financial freedom was to make more money. I went from job-to-job increasing my hourly wage and my discontent always stemmed from not making enough. I now realize part of that equation of financial success is having a plan, saving money for emergencies and financial goals.

So what is the lesson for you? It’s not just important to manage your money well. It’s important to show your kids how you’re managing your money. They need to see how it’s earned but also how it can grow without needed to work more hours. Showing your child the inner workings of your financial life can open a dialogue that can set them up for financial success.

What can you do for your child (young and old)?

Teach them the basics of personal finance. It’s never too early to talk about money. The sooner you start the less awkward it will be to have those tougher financial conversations. If they’re getting their first allowance or paycheck, show them how you divide yours to pay for bills, expenses, and fund goals. The CARPE DIEM article on what to do with your first paycheck is a good read too.

I also suggest using a savings app specifically for children called Goalsetter. Your child can access their own app and set up their savings goals. It’s a great way to have the money conversation and teach them how to set goals and manage savings.

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