Talking to your kids about money can pay off in the future

Roth IRAs, high-yield savings accounts, and mutual funds are just a few of the phrases regularly thrown around my family’s dinner table when I was growing up.

I didn’t realize it at the time, but having a relative who worked as a financial advisor for several years meant that I gained invaluable financial knowledge. These conversations, which not all of my friends and peers have had the opportunity to experience with their own families, have helped build my confidence in my money and set me on the path to becoming a financial journalist.

This is true even though I grew up in a household of lower socioeconomic status. My brother and I ate cut-price lunches throughout our time in the public school system. My father’s tenure as a financial advisor ended after only five years.

What I didn’t realize as a teenager, hearing my dad talk about diversifying his income and putting money into investment accounts, was that my exposure to his personal finance lessons at an early age would stay with me for years.

How Financial Exposure Affects Children

It is not surprising that children absorb the habits of their parents. Money-related behaviors are no exception, whether your parents talked to you about money or not.

Children primarily learn about money by modeling the behavior of their parents, Brad Klontz, a clinical psychologist and certified financial planner, tells CNBC Make It.

Klontz calls these moments “financial flashpoint experiences”—events that occur in childhood involving money that children may or may not fully understand, depending on whether or not their parents explicitly explain their meaning.

Think about how you were told not to spend your $5 allowance on candy or toys when you were a kid: did your parents explain to you the value of saving your allowance? Did they explain the concept of investing? Or, did they just tell you not to spend it because they said so?

It makes sense for parents to teach their children about financial literacy. But in many cases, money can be a sensitive topic for families. And parents may not be equipped to teach their children a subject they are not completely comfortable with.

“A lot of parents don’t talk to their kids about money because they’re stressed out and don’t feel good about money,” Klontz says.

The problem may not be that your parents didn’t want to explain to you the concept of saving your money instead of buying a chocolate bar. They may simply not be confident enough in their own savings to explain the concept.

More than half of Americans don’t have enough savings to cover an emergency expense of $1,000, according to a January survey by The bank rate found. And about 20% of employees regularly run out of money before their next paycheck, according to Salary Finance, up from 15% a year ago.

“You’re trying to give your kids a boost, and the boost they need more than anything, more than giving them money, quite frankly, is giving them the state of spirit that will help them manage [wealth] well and acquire it,” says Klontz.

How you can help your children

According to a recent CNBC survey and Momentive, a market research company. Conducted in March, the survey included 1,149 parents.

You can start educating your children using online resources, being aware of your financial behaviors and introducing financial topics as early as possible.

“At the age of 3, children understand the value. By the age of 7, children have developed a relationship with money. Yet half of parents don’t talk to their kids about money, so there’s a problem,” Carissa Jordan, co-founder of Benjamin speaks, an online financial literacy resource for parents and children, tells CNBC Make It.

If you’re starting to dive into financial literacy with your kids, Jordan says one of the first places to start is giving them an allowance.

Allowances help kids feel involved in financial decisions and are a great way to learn about budgeting, saving, deferred gratification of expenses, and donating money to fundraisers they enjoy , says Jordan.

If you’re not financially able to put together an allowance, it’s also beneficial to just talk about the aspects of your daily life that involve money as they arise, Make told CNBC. It, Nikki Boulukos, co-founder of Benjamin Talks in Jordan.

“Just look at your daily life and tell as you go,” she says. “If you’re in a cafe with your child, you should be [saying]: ‘Mom will get this coffee by swiping my credit card and the money from my credit card will pay for the coffee. At the end of the month, I will withdraw money from my bank account to pay off my credit card.'”

If kids feel included in the conversation about money from an early age, it can help inspire their curiosity and likely make them more comfortable talking about money for years to come.

How my father touched me

My father passed away in 2021, but I can still hear his voice ringing in my head: “‘Automate your monthly bills. Invest at least 10% of your income in retirement and investment accounts. Don’t let your bills exceed 50% of your income.'”

Today, I find myself working at CNBC and pursuing a career in financial journalism. Not only did my father influence my career, but he shaped my long-term view of personal finance.

I have a Roth IRA account, an investment account on Acorns, a high yield savings account, and a CD or certificate of deposit. All 20 year olds still in college can’t say they did the same thing.

In high school, I came home one day and told my dad that my favorite course was AP Economics, an advanced placement course focused on macro and microeconomics.

His eyes lit up and he said to me, “I guess all this talk about money has rubbed off on you.”

He was absolutely right.

Disclosure: NBCUniversal and Comcast Ventures are investors in Tassels.

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