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How Important Is it To Discuss Financial Health With Your Children?

Financial health is essentially the state of an individual’s financial affairs. It’s an umbrella term that can refer to things like income, savings, investments, debt, assets and how well you’re doing in all those areas.

Financial health is essentially the state of an individual’s financial affairs. It’s an umbrella term that can refer to things like income, savings, investments, debt, assets and how well you’re doing in all those areas.

Many families hesitate to or don’t even consider discussing finances with their children. But by not talking about money, you could be leaving an important gap in their education.

Why having good financial health is important

Having good financial health means that you’re less likely to be in unmanageable debt, you’re more likely to have savings, you can get yourself through an emergency, and you have a better retirement plan.

It means you don’t have to always rely on credit to get yourself out of tricky situations, which can end up eating away at your income.

Therefore, teaching children good financial health practices is essential. By equipping children with the knowledge, tools, and confidence to manage their money well, you’re setting them up for future success.

Those unprepared for handling money may be more likely to make financial mistakes like relying on payday loans, overspending, making poor investment decisions, or failing to save for a rainy day.

How to talk to your children about financial health

The approach you take will all depend on the age of the child to start with. A five-year-old probably won’t be ready for a 401k talk, for example. 

Introduce them to money from a young age

With very young children, you can introduce them to the concept of physical money and even bank cards just to familiarize them with those. 

Lots of people think that kids are too young to learn about money. But you don’t have to start teaching them about money in a serious, lesson format. It all starts with little introductions here and there. 

Drop money talk into everyday conversations

Not everything needs to be a sit-down lesson. Try to get into the habit of dropping money talk into everyday life. Help children understand that it’s a necessary part of life and that it doesn’t have to be complicated or scary. 

When you visit the local store, movie theater, or restaurant, take a moment here and there to bring up how much things cost. Perhaps ask them to count up how much you have to spend versus how much things cost. 

Encourage saving

As they get older, you can introduce them to the idea of savings with pocket money and eventually help them open a minor savings or teen checking bank account. Learning how to save is an important lesson in delayed gratification and being patient with the money you have. Teach them that they can purchase the things they really want if they manage to save. 

When they tell you how much they managed to save, be encouraging and enthusiastic about it to give them positive reinforcement.

Encourage independence

Learning about money is as much about confidence as knowledge. As children get older, they naturally seek more independence. So, let them make some money decisions on their own and learn the consequences.

Encourage them to head to the counter and pay for things they want on their own to teach them the true value of money. Ask their opinion on how much they think something is worth and whether they really want it or to keep saving.

This will help them gain the confidence to make bigger decisions that have more impact in later life. It could also encourage them to research the best options for how to spend their money one day.

Use apps or games to teach them about money

With more digital educational content for children out there, you can find apps or games that help teach children more about money. For younger children, you could even experiment with fake money in games like Monopoly.

It may not seem like playing with money is teaching them much, but children will still absorb these lessons. They may not realize it at the time, but the groundwork you put in now will help sow the seeds for a more stable and confident approach to money.

Discuss your own finances with children

A lot of people are very hesitant to discuss their own finances with children, especially if you’re facing money worries yourself. However, children by a certain age are usually smart enough to figure out when something’s wrong.

By shielding them from money worries and keeping everything a secret, you’re not doing them any favors. Of course, you don’t want to panic children, but letting them know what’s happening in a calm and collected way helps to make the conversations about money more open and productive. 

Those conversations can also go a long way in teaching them what money habits or decisions to make in the future, and how to deal with any money worries that come up.

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