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Welcome Josh from Family Faith Finance with some words of advice on financial parenting.  Take it away, Josh!

Many American adults graduate from college without understanding the basics of financial literacy. They may have taken out student loans without knowing exactly what they were agreeing to or gone into credit card debt without really understanding the terms of their agreements.

The solution for many people is to start teaching kids about money — and the earlier, the better.

After all, if kids learn about money from a young age, they will more easily grasp these concepts and be less likely to make these types of errors. But for some parents and children, the answer might not be that simple.

Why It Might Not Work Out

Teaching kids about money is a great idea in theory. But teaching finances too often and too early — particularly sensitive financial information — can actually cause distress in children. There are certain things that children simply do not need to know about money, and sharing these items with children could potentially cause them significant anxiety.

It’s important to talk to kids about money in an age-appropriate way that mirrors their maturity level and developmental stage.

Some parents have a tendency to overshare about their financial problems, leading one psychologist to coin a new term: “financial incest.” This occurs when parents share all of their financial worries with their children, use money to control their children, or challenging your children to handle finances such as having your kids make important financial decisions as a learning exercise.

Parents should be careful about what they share with children.

Withholding certain information from your children about money and finances is important to protect their development, and doing this right could help avoid money anxiety in the future.

How to Do It Right

While over-teaching finances can be detrimental to a kids’ overall well-being and growth, correctly teaching kids about money can help them as they learn to navigate the world of loans, credit cards, and bank accounts on their own. It’s important that any financial lessons you teach your children are appropriate for your child’s age level and maturity. Additionally, they should be designed to help them build their own financial future — not to relieve your own stress.

How do you teach these lessons without screwing them up?

By teaching your children about money in small ways when they are young, you can limit the chance of inducing money anxiety later on. This could give them a base of confidence for the future, and it leaves you open to expand further as they age. This should help them make smarter decisions about their finances when they are older without turning them into worriers.

These are all very important steps to becoming independent adults.

Putting it in Perspective

Explaining how credit cards work could keep them from getting stuck with massive credit card debt in the future; however, you could also scare them away from credit cards by teaching them too early.

Opening up a bank account in their name as a teenager would introduce them to banking, and this step would go much smoother if they already have a basic understanding of finances. On the flipside, if you hammered finance into your kid at an early age, then they might not be very excited to have their own bank account. However, setting up a simple piggy bank to inspire them to save up some change over time would be a great, age-appropriate lesson in saving money.

Another example, talking about compound interest with a six-year-old is probably a bad move, and telling your twelve-year-old that you stay up at night worrying about retirement might only provoke anxiety in your child. Instead, you could wait until they are older to teach these lessons.

As parents, it’s our job to help prepare our kids for the world — and to keep them safe from things that may hurt them like stress and money anxiety. While there are many potential benefits to teaching kids about basic financial literacy, there are a lot of potential drawbacks in the form of negative life lessons.

After weighing the pros and cons of teaching your kids about money, do you believe that it makes sense to talk to your children about finances?

Josh Wilson is the owner of a start-up personal finance blog, Family Faith Finance. Feel free to check out his blog and learn more about his journey through life.

1 COMMENT

  1. I definitely feel it’s important to talk to kids about Finance, but I agree age appropriate is important. My kids are quite young. At least before they are teens I prefer to focus on games that have a financial aspect and a basic piggyback rather then the direct approach.

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