As parents, we make daily decisions about spending, saving and debt. And whether we realize it or not, our kids notice. These decisions shape their future beliefs and foundational knowledge about money, and can have huge repercussions for their financial stability as adults.

Parents have a lot of clout when it comes to their kids’ financial attitudes. One recent Leger survey of 1,500 Canadians found that 65 per cent of people said their parents’ relationship with money influenced their own relationship with finances. In the U.S., an academic study showed that 70 per cent of college students said their parents were the most significant influencers on their money management behaviour.

No pressure, right?

The lessons and attitudes that kids take from their parents are picked up in all kinds of ways: Some are obvious, such as listening to a stressed-out parent complain about bills; others are more subtle, such as whether they see their parents paying their bills on a regular basis.

A lot of what kids learn comes from observing. Our kids might not seem like they’re paying attention, but believe me, they are, even if it’s subconscious.

The most evident example of this is what we choose to spend money on. What we do and don’t spend on are reflections of our values around money, and how we prioritize our spending needs or wants.

Kids also observe us managing our finances. Seeing a parent log onto their online banking, check their bank account balance, review credit-card transactions and pay bills tells them that managing money is part of everyday life. I remember my dad sitting at the kitchen table completing tax returns. It was a tangible demonstration of financial responsibility.

Children also observe how we share money with others by making donations and chipping in to support others, be it sponsoring someone for a charity run or putting money in the Salvation Army kettle at Christmas.

Kids are experts at hearing everything their parents say, even if they choose to ignore some of it. What kind of conversations about money are happening in your house?

Day-to-day discussions about which bills are due and who will pay them demonstrate that managing money is simply another thing you do as an adult, and that it’s a shared responsibility. Discussing whether a family vacation is affordable this year or whether to buy a used car instead of a new one shows kids that it’s important to be thoughtful about big purchases.

Then there’s the how do you talk about money aspect: Is the tone positive or negative? Is the conversation stressful? Calm? Are there disagreements? Shared goals? Negative feelings such as fear and anxiety that become associated with money during childhood can be hard to shake as an adult.

Parents can also influence when and how their kids get first-hand experience with money. It’s one thing for kids to watch and hear how we deal with money, but it’s a whole other matter for them to manage it themselves. Giving kids money of their own is the best way for them to figure out how to deal with it.

Many parents start with an allowance or paying kids to do work around the house. It doesn’t have to be a lot of money – a small amount makes it even more important for them to strategically plan how they will spend it. Having a part-time job is even more instructive, since kids will get a better sense of what it takes to earn money and experience the joys and pain of spending.

The key is to allow kids to make mistakes with their money when they are young and have their parents around as a safety net. At the same time, they shouldn’t be bailed out when they overspend – instead, let them understand that when it’s gone, it’s gone, so they think carefully before tapping that debit card for an impulse purchase at the corner store.

Now that’s a powerful message.

The Globe and Mail, May 12, 2024