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Raising money-smart kids

They say money talks, but the prospect of having conversations about finances with our children is intimidating, to say the least.

Finances are one of the biggest stressors for adults, and in a time when cell phones, tablets and other expensive gadgets dominate our lives, it’s no surprise that talking about money with kids can add a whole new level of stress into the mix. However, experts say there are ways to tackle this tricky parenting topic in a way that makes sense for kids, whether they’re preteens or younger.

Cassidy Fleck, a licensed mental health counselor who owns Amherst Family Counseling, said by the time the topic of kids and money comes up in her office, it’s already become a concern for the family.

“Finances are a huge source of stress for children and adults,” Fleck said.

When it comes to talking about money with kids, generally speaking, Fleck said the briefer, the better—as kids view money in a totally different way than adults do.

“One pitfall is parents tend to be very wordy when they’re trying to explain, or they get emotional as far as making the kids feel guilty about the value of money and how hard they work,” she said. “The best way to get children to appreciate money is to encourage positive behavior and set up small scenarios for them to be successful with managing money.”

This can be as simple as giving kids age-appropriate tasks for which they earn a set amount of allowance, such as cleaning up their toys or loading the dishwasher.

“There’s definitely a feeling of self-respect and autonomy when they’re able to purchase that toy they’ve been saving up for that they’ve earned money toward,” Fleck said.

Anthony Alleca, CFP, is a financial advisor with Edward Jones Investments, father of five and mentor to high schoolers through Hamburg High School’s National Academy of Finance.

“This is a big issue I deal with all the time,” Alleca said. “I think the key is to start early before they’re teens and preteens to give them the basic piggy bank and give them the idea of what money is about and how it works.”

In a child’s early stages of life, give them an idea of what saving looks like, Alleca said, whether it’s from an allowance they earn or money they get as a gift. You can do that by opening a savings account in their name.

“These are basic things we can do to start early,” he said. “As they get older and more mature, you can talk to them about things like investing and credit cards.”
The older children get, the more challenges that arise when it comes to money.

“One of the issues I’m seeing more than anything, whether it’s my kids or the generation as a whole, is the immediate gratification culture,” Alleca said. “So, we have to start teaching them to delay gratification and explain to them what the power of saving looks like.”

The most important thing is for parents to have a plan in place before broaching the subject with their children, Fleck said.

“The most constructive conversations are where parents have thought about it a little beforehand, and both mom and dad or whoever’s in the home are on the same page,” Fleck said. “Then they can support each other in enforcing boundaries or giving reminders to stay focused on what they’re working toward.”

And having a plan doesn’t have to be excessively elaborate. It can be as simple as starting with a sticker chart for chores. Strategies like that can be huge, Fleck said.

“With younger kids, what can be really helpful is visuals,” Fleck said. “It gives them a little bit of choice in the process and makes it collaborative and exciting as opposed to punitive.”

Speaking of punitive, Fleck said using the guilt-trip method will likely never get the result you want it to.

“A lot of times, guilt tripping doesn’t work and sets up negative energy between parents and the child,” she said. “Don’t dwell on trying to get this child to be emotionally on the same page; their world view is different and the way they process emotions is different.”

The money conversation will change as children grow and mature. Fleck said preschool age can be a good time to introduce the basics like money and chores.

“If you’re opening the conversation up early and addressing it, the child feels like they’re contributing,” she said. “Really clear rules and expectations with money can help a family function better and help alleviate anxiety. When kids grow up in a household where the conversation is open about money, they learn their needs are being met and they’re able to better distinguish between needs and privileges.”

Alleca agreed, saying that in addition to clear expectations, there should be consequences, if need be.

“If my kid has a phone and they break the front, well you’re going to pay for it because we’re not going to keep buying you a new phone,” he said. “They need to understand the cost of things. It’s very important that they learn about the value of money.”

Rebecca Rouse of Clarence has two daughters, ages 9 and 11, and says in her household, they follow the Dave Ramsey envelope system. Ramsey, author of “The Total Money Makeover: A Proven Plan for Financial Fitness,” developed this budgeting system with the idea of prioritizing income to meet various categories of expenses in the home in physically separate envelopes.

“What we normally do is the Dave Ramsey envelope system, with save, spend and give,” Rouse said. “Some goes into savings, some goes into the spend envelope and 10 percent always goes into the giving envelope.”

Rouse said that method has been helpful for teaching her kids about money because it’s something they can visually see happening.

“It’s been a practical way for them to see this is your money for the things you want to save for, or spending and giving, and so on,” she said. “That’s been helpful for them to see it and know where their money is. It helps with goal reaching.”

Another method Rouse and her husband use when it comes to finances and her children is simply trying to lead by example, living within their means.

“If we don’t have the money, we don’t spend it,” she said. “I know that translates a lot into what they’re seeing. We’ve been intentional about teaching them the value of saving and driving home the importance of ‘If this is what we want, then this is what we need to save.’ Whether they like it or not is a different story, but they’re understanding it.”

Alleca said building a financial foundation in children can make all the difference when they’re adults.

“If we talk about the basics in early childhood, all we’re doing is enhancing those foundations as we go along,” he said.

5 tips from the pros

Money can be confusing, regardless of age. So, when having those conversations with your children, keep it simple with these tips from the experts:

Start early
Fleck said after the age of 4 is when those very basic concepts can start being introduced and built upon as the child gets older.
Meet kids at their level. “Stick to the basics,” said Cassidy Fleck, a licensed mental health counselor who works with families. Don’t use wordy, hard-to-understand language, and keep the conversation neutral, not emotional.

Teach them about want versus need
“There’s a disconnect between kids recognizing privilege and, ‘What is something my parents have to provide me?’ ” Fleck said. “How do we teach responsibility and some kind of understanding of the value of money so kids can understand where their parents are coming from? For example, parents providing food and the clothes on their back are basic needs, but these designer tennis shoes fall outside of that.”

Use visuals
Fleck said something as simple as a sticker chart can not only help a younger child start to grasp the concept of money, but it turns the process into a collaboration and can make the experience fun as opposed to just a chore.

Have a plan in place beforehand
When the adults in a home are on the same page about the money issue, kids can be more successful with understanding the basics of finance, including spending versus saving, Fleck said.

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