The Psychology of Money: Three Reasons Why Talking About Money Early and Often is Key

We all have emotions around money. For adults, thoughts about finances may lead to stress, shame or pride. Are we born with these emotional responses to money or did we develop them over time?

Turns out, our thoughts about this topic are actually influenced by our environment. Children tend to have positive emotions associated with money like curiosity and excitement. Because of this, experts like Julie Beckham, Rockland Trust Financial Education Officer, recommend talking to kids about money early — and often — to help build a healthy emotional relationship with finances that will set them up for long-term success.

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Based on her experience interacting with thousands of elementary school students through her Ms. Money and the Coins program, Julie shares three reasons why you may want to talk to your young children about money.

1. Nurture Their Curiosity

While parents often try to encourage curiosity in their kids, money is often talked about in hushed tones and treated as top secret. Destigmatizing these conversations can open an additional line of dialogue that will benefit your child long term.

“At some point, all kids will have to deal with money — how to spend their paycheck from their first job, saving up for a car or college, or moving out on their own and taking on bills,” said Julie. “While it feels uncomfortable, when money is treated like a secret, kids learn to feel ashamed for not knowing more about it and that they can’t come to their parents about questions.”

2. Increase Financial Literacy

Young kids want to know how money works and there are age appropriate ways to teach them. Starting with basics about how much things cost and why money decisions are made can give them a positive financial role model. These conversations can, and should, build over time to help increase financial literacy.

Some examples of ways to introduce financial literacy to your kids include:

• Explaining why you might buy a sale item in a grocery store one trip, but not when it is full price.
• Helping to set up a lemonade stand and encouraging your child to choose a charity to donate some of the proceeds to.
• Building a savings plan with your child for a game, toy or other “want” they have.
  
  

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3. Start Instilling Good Habits and Financial Confidence

On her podcast No Shame In This Money Game, Julie spoke with Belinda Rosenblum, CPA, Money Strategist and President of OwnYourMoney.com, about the limiting beliefs that we often create around money, and how those beliefs are formed as early as elementary school.

By opening up discussions about finances, you can help the children in your life solidify their natural excitement about money and start to build good habits, like saving an allowance for something special.

Helping to reduce a child’s stress about money reduces the likelihood that the child will grow up thinking money is evil and only causes problems, which can limit motivation to invest or save. Those who are confident in their money abilities may feel more in control, helping them to reach longer-term financial goals.

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