How to Teach Your Children About Money

'Before you spend, earn.' Wise words from William A. Ward, American motivational writer.

As adults, we know this to be sound advice. If you're a parent, it's advice that you want to pass along to your children. However, a recent T. Rowe Price Parents, Kids and Money survey found 57% of parents are reluctant to discuss money matters with their children. To help jump start these conversations, we asked our partners at Beyond Financial Advisors for their tips to teach kids of all ages about money.

Matt Ward says, 'Start them young!' Both Ward and Marc Rosenberg suggest introducing chores at an early age with a monetary reward. Rosenberg says, 'Let them connect the dots between working, earning, and purchasing.' Once they are paid, let the child decide what they'd like to do with the money that they've earned. You can lay out the choices for them and discuss the pros and cons of each: 1. Spend, 2. Save, or 3. Spend some and save some. An interesting idea that Ward uses with his son is to give him the option to give back 50% of what he's 'earned' for a double payout in one years' time. For older kids, who may have their eye on a larger, more expensive purchase, John Roland recommends offering to share a larger expense with your child. This gives them the opportunity to experience the benefits of setting and achieving a goal and builds the habit of saving.

Furthermore, Rosenberg encourages saving to teach the benefit of delayed gratification. In a world of Amazon Prime where you can get items delivered the same day, or streaming services like Spotify where you can listen to any song whenever you'd like, as many times as you'd like, the idea of delayed gratification is a concept that our children are not all that familiar with experiencing. In the 1960s, Stanford professor Walter Michael created one of the best delayed gratification experiments, 'The Marshmallow Test'. You can check out a similar example of the test here and share it with your kids, too. What would your children do in this situation?

Letting children get actively involved with finances is another great way to encourage smart money habits for life. Rosenberg suggests opening a small trading account with your child. You can match their contributions if you'd like, like an employer 401(k) match. Consider buying stocks in some of their favorite brands: Nike, Netflix, Apple, Disney, etc. Teach them how to monitor the performance and the strategy of buying low and selling high. Another way to get children involved is with credit cards. Because credit cards are an inevitable part of today's purchasing world, partner John Roland recommends getting older children, in their teen years, a credit card linked to your account. Set a monthly limit and monitor it with them. Each month, sit down to discuss those expenses and what the plan is for the month ahead.

All our partners agree that you shouldn't shy away from conversations about money with your children or make it a taboo topic. For example, let them watch and learn while you pay bills. Roland says this will help them understand budgeting and cashflow management, foundational elements for successful financial planning, so understanding it at an early age is important. Show them when you're writing checks, doing your online banking, or funding retirement accounts – all of it! Explain what you are doing and why.

In short, be intentional about teaching your children about money and finances. Show them by example how it works and the benefits of working hard, saving, and making smart financial choices.