5 Ways to Start Talking to Your Kids About Money

It's never too early to get started.

April is Financial Literacy Month, so it's the perfect time to begin a conversation about healthy financial habits with your kids. Of course, this is easier said than done. More than 4 in 10 parents said they're reluctant to discuss finances with their children, according to a T. Rowe Price survey.

There could be a lot of reasons for that, but having a solid plan in place can make things easier. Here are five tips to help you get started.

1. Keep things age-appropriate

This one should be obvious, but it bears repeating. You might be able to explain the basics of interest rates on loans to your teenager, but your four-year-old might feel overwhelmed by this information. So think about what they already know and how you can build up from there in a way they'll understand.

You don't need to turn it into a serious lecture about finances or the importance of savings accounts. Just don't shy away from discussing money when it naturally comes up. Talking to your children about their own values and helping them establish their own financial priorities can also go a long way. This can get them thinking about the long term and teach them about the importance of budgeting.

2. Explain the ‘why’ behind your decisions

When you choose to purchase one item over another or to forgo buying something you want but don't really need, explain your thought process to your children. This will give them insight into why you handle your money the way you do and what factors they ought to consider when deciding how to manage their own funds.

3. Include kids in family decision-making

When appropriate, consider including your children in family financial decisions. For example, they might decide what brand of a product you buy at a store or how you spend some of your time on a family vacation.

When your child makes a decision, ask them about why they chose what they did and guide them to key financial concepts, like price comparison and the importance of saving.

4. Give them a chance to practice

Giving your children an allowance is a great way to enable them to practice their money-handling skills. They can choose which goals they want to save for and how they'll budget for them over time. And if they run into trouble, you can use it as an opportunity to talk about what went wrong and what they might do differently next time.

You might also consider opening a savings account for your child. Many banks offer special accounts for minors that enable them to earn a modest rate of interest. Some are linked to parental accounts, so you can monitor their spending and transfer funds to them as needed.

5. Be honest about what you don't know or haven't done well

It can be tough to talk to your children about your financial mistakes, but doing so can help your children avoid the same errors. Explain what happened, why you regret what you did, and what you wish you'd done differently.

You also shouldn't be afraid to admit if there's a financial concept you struggle with or don't fully understand. Show your child that it's OK to ask questions and seek out the answers together. Talk about what you're learning and how you plan to put it into practice with your family's finances.

Talking about money with your children may not be easy at first, but you should get more comfortable with it over time. Allow it to be a part of your regular household discussions and encourage your child to ask questions if there's anything they don't understand. It may not seem like it at the time, but all those little conversations will add up over time and may give your child the confidence to manage their money well when they strike out on their own.