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How to talk to children about money

Parents tend to postpone the financial education of their children, arguing that they should enjoy a carefree childhood as long as possible. But children do need to take financial decisions at an early age, and so talking to them about these issues is necessary, according to K&H Bank.

In a financial awareness competition organized by K&H Bank for children, the results show that barely more than one third of the participants responded to all or almost all the questions correctly, a press release sent to the Budapest Business Journal says.

The majority of the participant children were familiar with basic financial terms, but in some cases even basic elements of financial knowledge were lacking, K&H says. This indicates that parents do not discuss financial matters with their children.

K&H Bank summarized some of the issues in which children should become involved:

- Parentsʼ salaries: Sharing real-life data about expenses and incomes, and planning payments, can help children use their revenues wisely later, and present realistic salary expectations at job interviews;

- Let children experiment: Many parents see pocket money being "wasted" if their child spends it carelessly. But if we control the way they spend it, children will not learn to take decisions independently and spend responsibly;

- What exactly is an investment? Many see investment as simply a purchase of a useful product, like buying a book which will contribute to the development of a career. More applied examples are needed to clarify terms;

- Money, time, resources: Adults and children are similarly attracted to buy desired goods immediately. Children must be taught that getting hold of a product may bring quick satisfaction, but that sometimes it is worth saving money for something more valuable in the long term;

- Johnny has a cooler phone: Parents tend to avoid this issue, but this will not settle it. Talk about sensitive issues openly and thoroughly and make sure the child has understood the answers.