6 Key Questions Before You Teach Kids About Money

I’m often interviewed by the media on the subject of kids and money, and I keep an informal tally of the questions I’m asked most frequently. To mark National Financial Literacy Month, I’d like to run down the list for the benefit of everyone with similar concerns. In this first of two columns, I’ll focus on strategies parents can use when they talk to their children about money.

Why bother to teach kids about money?

Your goal is to turn out adult children who have a healthy attitude toward money and the ability to manage it, so they don’t land back on your doorstep after you think they’ve been launched. Plus, you want them to learn financial values—personal responsibility, thrift, deferred gratification, charitable giving.

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How early should parents start the conversation?

As soon as kids start raising the subject of money. Don’t rush things, and keep the discussion age-appropriate. Let’s say your 5-year-old asks to go to McDonald’s for lunch. You say you don’t have the money, and your child replies, “Just go to the bank machine and get some.” Instead of freaking out, explain that the bank is like a big piggy bank for Mom and Dad. Just as your child’s piggy bank is sometimes empty until he puts in more money, so is yours. It’s a simple lesson that money is not infinite, and it will head off the same question next time.

Why are parents reluctant to talk about money with their children?

Sometimes it’s because money was a taboo subject in their own families. Sometimes they don’t feel confident discussing financial matters, or they’re embarrassed that their own finances aren’t in good shape.

How can parents bolster their confidence?

First, remember that no matter how little you know about money, you always know more than your kids. And even small lessons can have a big impact. Teenagers, for example, don’t always know the difference between a savings account and a checking account, or a debit card and a credit card. And they don’t understand that a credit card isn’t money; it’s a loan on which they’ll have to pay a high rate of interest. Just learning that can keep them out of credit trouble.

What if a parent’s own finances are a mess?

Use the opportunity to whip them into shape. For example, if want to teach your kids to save but you don’t save yourself, join your retirement plan at work or set up an automatic deposit to your savings account. If you feel you need to learn more about money matters, use the valuable information in Kiplinger’s Personal Finance magazine and at Kiplinger.com and other good sources.

How can parents squeeze these lessons into their busy days?

You don’t have to set aside an extra hour to discuss money with your children. Take advantage of situations that arise every day—for example, the short explanation of how banks work in the first question above. A trip to the grocery story can be an opportunity to compare prices of different products. And while you’re driving the car pool to soccer practice, have a conversation about why sports stars earn so much money. Next: Tough questions about allowances, credit cards, saving and investing.