How to talk to your kids about money

Wondering how to have the money talk with your kids? Here are some tips to put them on the road to financial success.

Set a good example – Even before children are old enough to ask you questions, they're already observing you and your attitude about money. So be mindful of what you do around them.

Start early – Kids can be introduced to coins and piggy banks around the age of five. It's fun for them to put coins in a piggy bank. It lets them see the value of each coin and how they can accumulate.

Use real life events – Shopping, errands and planning a vacation are good opportunities to start a conversation about money. Explain why you're doing things a certain way and encourage questions.

Go beyond spending – Often we only show kids how we spend. Take them along when you save, donate and invest.

Explain needs versus wants – Show children the difference between what they need versus what they want. Going shopping with a list, or using stacks of coins to represent household expenses, can make the discussion more tangible.

Give an allowance – While there's no consensus on whether kids should do chores for cash or be given money to cover some expenses, stick to what you decide and don't give cash advances.

Encourage saving – Consider paying interest on what children save from their allowance. Matching a percentage of their savings is another great reward and shows the profit-making potential of saving money.

Sources:

Elliott, Sarah, How to talk to your kids about money, www.howstuffworks.com, Dec.13, 2011

Beacharn, Susan, How to talk to your kids about money, www.drphil.com

Top five money concepts to teach your kids, life.familyeducation.com