Becoming a parent is a life-changing event, one that brings overwhelming emotions. You’ll probably experience joy at the sight of your precious child, relief that he or she made it out of the womb, and for many, fear and anxiety because you somehow have to turn that seven-pound little human into a happy and successful adult in a world that is changing drastically!

As parents there are numerous things we have to teach our children, beginning with the basics of how to eat and use a toilet to more complicated things such as making decisions and getting along with others. As a society, we are excelling in some areas of parenting, but falling behind in others. In a recent National Financial Capabilities Study, only 24% of Millennials (age 23-35) were able to answer the first three financial literacy questions correctly, and a mere 8% answered them all correctly. (1)

Most parents agree that we need to do a better job teaching our kids about money. Last year, T Rowe Price reported that 80% of parents didn’t think schools were doing enough to teach kids about financial matters. (2) However, parents cannot abdicate all responsibility to the schools. Raising children and teaching them to navigate the world is first and foremost a parent’s responsibility, and it’s easier to start when they’re young than try to catch-up when they are teenagers.

Practice What You Preach

The first step in teaching your kids about finances is letting them watch you make financial decisions and modeling what you want them to learn. The same T Rowe Price study mentioned above found that 69% of parents are very/extremely concerned about setting a good financial example for their kids. The vast majority, eight out of ten, feel that they are setting a good financial example, but two-thirds also admit to doing things that wouldn’t qualify as setting a good example.

A significant 40% said that when it comes to talking to their kids about finances, it’s “Do as I say, not as I do.” Anyone who has raised kids knows that won’t cut it. The first step in teaching your kids about money is simple: Show them.  

Start the Conversation

Sometimes a silent model isn’t quite enough, and some areas of personal finance aren’t very visible. That is why it is critical to talk to your kids about finances. Unfortunately, talking about money is a long-standing cultural taboo. A 2013 study found that 63% of Americans would rather share their body weight with co-workers than their bank account balance. (3) Often this reluctance to discuss financial matters spills over into the home as well.

Forty-nine percent of the parents in the T Rowe Price study said they rarely or never discuss family finances with their children. Eighteen percent admitted to being very/extremely reluctant to discuss financial matters with their kids, and 72% of parents experience at least some reluctance to having such a discussion. Many parents even say they would rather discuss drugs or sex with their kids than money. (4) But how are kids going to learn about money if you avoid talking to them about it, as 41% of T Rowe Price respondents admitted to doing? Most parents don’t expect their kids to understand the dangers of drugs just because they have never seen their parents shoot up. Some things require more in-depth discussion and openness, and finances are one of them. And if you set the precedent of being open about finances when they are young, hopefully they will still come to your for advice or assistance when they get older.

Let Them Try

For financial understanding to truly sink in, you need to get your kids involved. Learning theory and research have consistently shown that the more active a learning experience is, the greater the learning gains and retention. (5) Most people have to do something to really learn it.

How does this work with kids? The Financial Consumer Agency of Canada has some creative ideas for every age level, such as letting them divide their allowance into different categories, set short-term and long-term goals, and helping them understand what things are worth. Practically, give your 5-year-old some money to buy something at the store so they learn the value of different items and realize that in order to obtain something (a toy), they have to exchange it with something else (money). Try letting your 10-year-old figure out the cost of the new video game he wants, plus tax, and help him save up his allowance for it. Let your teenager buy her back-to-school clothes on her own with a set amount of money. Don’t be afraid to let them make mistakes either. Sometimes learning the hard way is the best way to grow, and it’s better for them to learn those lessons when they are young and the consequences aren’t as severe.

Imparting financial wisdom to your kids is a challenging process that takes years. So, if you don’t feel like you’re doing an adequate job of teaching your kids about money, you’re not alone. Even if you are doing a good job, you probably agree with the 77% of the T Rowe Price survey parents who said that they wished there were more resources available to help them teach their kids about financial matters.

Here at Black Spruce Financial, we I believe that every child can learn critical financial lessons at a young age that will set them up for future success. I want to provide you with the tools to help you on this journey. To set up a meeting, contact me at 416-553-5004 or gino@blacksprucefinancial.com. Together we can make sure that this next generation enters adulthood with the knowledge necessary to build a secure financial foundation for their bright futures.

About Gino

Gino Scialdone is a financial advisor and the owner of Black Spruce Financial, an independent wealth management firm serving independent business owners. Having grown up in a family business and owning a business himself, Gino has a unique understanding of the challenges and needs business owners face. Offering a comprehensive array of wealth management and financial planning services, he strives to provide sound and creative strategies that meet a business owner’s short and long-term needs. Based in Toronto, Gino serves clients throughout the greater Toronto area and southern Ontario. To learn more, connect with him on LinkedIn or visit www.blacksprucefinancial.com.

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(1) http://gflec.org/wp-content/uploads/2015/01/a738b9_b453bb8368e248f1bc546bb257ad0d2e.pdf

(2) https://corporate.troweprice.com/Money-Confident-Kids/images/emk/2015-PKM-Report-2015-FINAL.pdf

(3) http://www.countryfinancialsecurityblog.com/cfsi-april-2013/

(4) http://www.dailyfinance.com/2009/06/11/parents-would-rather-talk-with-their-kids-about-sex-than-money/

(5) http://www.joe.org/joe/1994august/a6.php