Even before your children understand how money works, they can start picking up on your attitude and feelings about finances, and that can have a lasting impact. But avoiding talking about money with your kids altogether could be even more detrimental to their future financial success.
“Deep down, most people believe that money is a bad thing, that kids need to be shielded from [it],” Ramit Sethi, self-made millionaire and author of the new book, “Money for Couples,” tells CNBC Make It.
“You don’t shield kids from riding a bike. You don’t shield kids from trying a tomato. So why would you shield them from something that is far more important than either of those examples?” he says.
When you talk about money with your kids, there is a “horrible phrase” Sethi says he would “ban” from households: “We can’t afford it.” Here’s why.
‘Saying no is a good thing’
Many of the individuals Sethi has spoken to on his “Money for Couples” podcast recall hearing “we can’t afford it” from their own parents when they were growing up.
“And they really believed it,” Sethi says. “So even when they have a good job and they make good money 30 years later, they still feel scarcity around money.”
A positive relationship with money has nothing to do with how much money you actually have, Sethi says. Teaching your kids this phrase can unintentionally make them fearful of spending any money down the line, even when they are technically able to afford the thing they want.
Instead of saying you can’t afford something, Sethi suggests echoing the norms and culture you set within your family to explain your decision. You could say, “In our family, we choose to spend money on healthy food instead of popcorn with butter,” he says.
Alternatively, “not everything has to have a massive explanation,” he says. It may not satisfy a child begging for a toy at the store, but planting the seeds for your children to understand you can’t and shouldn’t spend your money on every little thing you want to impulsively buy will benefit them in the long run.
“Saying no is a good thing,” he says. “I love saying no, and sometimes no is all you need to say.”
Help your kids engage with money
In addition to talking about money, Sethi encourages families to get their kids involved with financial tasks so they can build a positive foundation for their relationships with money when they get older.
Let them watch you pay the bills or even click the “pay” button, he suggests. And try not to gripe out loud about how high the electric bill is or how expensive your rent is. Instead, let your kids know that this money is providing the roof over their heads and the electricity to play their video games.
“As teens, they [can] help plan an entire family trip or help purchase a family car,” Sethi says. “That is how they start to learn about taxes and trade-offs. That’s how you equip them to be successful in the real world.”
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