More Than 1 in 4 Americans Never Talked About Money Management With Their Parents, Survey Finds

Two parents and a little boy drawing and writing together.
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It is not uncommon to feel hesitancy when thinking about discussing finances amongst family members. Key findings in a GOBankingRates survey on financial literacy reveal that more than 1 in 4 Americans have never talked about money management with their parents. 

There are many reasons why people don’t discuss money with their parents. Parents may feel money is a stressful subject, too complicated to explain or simply a private matter. They may try to avoid discussing it with their children, ultimately doing them a disservice that makes it difficult to establish financial literacy later in life. Let’s look at what happens when families do not discuss money together and how parents, and children, can reverse the cycle and normalize talking about money at every age.

The Real Cost When Families Don’t Discuss Money

When Britt Williams Baker was 7 years old, she started learning about compound interest from her dad. This may sound like a complex subject to learn at age 7, but Williams Baker said her father taught her about it through starting a “Daddy Bank.”

Through the Daddy Bank, Williams Baker was able to receive a 5% monthly compounding interest rate as long as she was able to calculate the interest herself. Williams Baker said she also learned about the value of a dollar from her mother. 

“If I wanted a new toy, I had to pay for half of it with my saved allowance,” Williams Baker said. “It taught me to evaluate whether I really wanted something since resources were limited.”

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Britt Williams Baker is now the co-founder of Dow Janes, a company that provides financial education to women. Williams Baker said she teaches women how to take control of their finances, but most of these women are not starting their financial journey at age 7. They are beginning at age 30 or 40 because they didn’t receive the proper education when they were growing up.

A lack of education and practice, as early as childhood, can cost adults in the long run when it comes to building a healthy relationship with money and understanding finance. 

Michael Liersch, Ph.D. in behavioral science and head of advice and planning for Wells Fargo Wealth and Investment Management, said hesitancy to discuss money management within families often stems from the fact that most people haven’t had much practice. As such, parents tend to fear that they’ll approach it the wrong way with children.

Hesitancy, however, is not a good reason to avoid having this conversation. Once you start talking about money, Liersch said the discussion allows kids to gain an understanding of their family’s values and meaning as it relates to money. 

How Parents Can Talk To Kids About Money

It’s never too early for families to start talking about money with their children. Katie Ross, executive vice president for American Consumer Credit Counseling (ACCC), recommends setting the foundation for financial literacy across these age groups.

Kindergarten Through Second Grade: Money Is Finite

For children ages kindergarten through second grade, Ross said the first thing to teach them about money is that money is finite. 

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“Money doesn’t just come out of nowhere,” Ross said. “Now is the time to emphasize that people work for their money and keep it in the bank.”

Consider setting up a “Mommy Bank” or “Daddy Bank.” Put a small amount of money into this account. Children can check in on the balance and figure out if they have enough money to buy something they want. If there’s not enough money in this account for it, kids will learn they need to keep saving.

Third Grade Through Sixth Grade: Smart Spending Decisions

As kids head into third grade, their next lesson will be how to make smart spending decisions with a limited amount of money.

Ross recommends practicing this kind of smart thinking by having kids make a list of five things they need. Ask them to rank these five items in order of importance. Then, encourage kids to make a list of five things they want and rank those wants the same way they did with needs. 

Next, parents may assess their lists. Put in an estimated cost for each item and show your children how much each item costs.

“This will open their eyes and help kids make smarter choices when spending their own money earned or received,” Ross said.

During these years, parents may also show kids what happens after they are able to successfully save money. Ross recommends that parents stress the importance of setting a goal with savings. A good example is saving for a new toy or video game. Set a goal for being able to buy this item with the money set aside in savings. Once kids reach this goal, they’ll enjoy playing with the new purchase even more because they diligently saved up to earn it.

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Seventh Grade Through Senior Year: Credit Cards 101

As kids grow up to become teenagers and approach their college years, it’s critical that they understand how credit cards work.

“Teach them about bill deadlines, interest, common credit card terms and emphasize the fact that a credit card isn’t free money,” Ross said. 

If parents aren’t comfortable with the idea of their teen taking out their own credit card, Ross said to consider adding them as an authorized user on your credit card. This allows teens to practice using credit cards and parents to watch over their actions. 

How To Keep Talking About Money With Family

There are even more ways parents can continue teaching their children responsible money habits than those listed here. Liersch said other opportunities to discuss money as a family include talking about planning a family vacation and discussing the price of “firsts” like your child’s first bicycle to demonstrate finance in a relatable way. 

Another easy way to start a money discussion? Let kids take the lead!

“One idea to encourage a family money talk is to arrange an interview and allow kids to ask their family questions about money. How much does a house cost? How much does a car cost? What’s the most outrageous gift you can think of?” Liersch said. “Conversely, parents can ask their children questions.”

The objective of talking about money with family is not to position it as a discussion to dread or a chore to get through the motions of doing one time. Make it a fun learning experience because money, and a healthy money relationship, is learned at home. 

“We inherit our money relationships from our parents. If our parents have a scarcity mindset, we will often have our own scarcity mindsets as adults. If our parents avoid talking about money with us, we will avoid talking about it with our partners,” Williams Baker said.

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Once you begin talking about money, it’s critical to normalize the discussion. Regularly talk about money at the dinner table and remember that children learn by example. The sooner parents can start teaching their kids about money and finance, by example, the better it is for everyone.

“Over time, the language of finance and money will become second nature,” Williams Baker said. “People will be empowered when they grow up and manage money on their own.

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