The AICPA does have some tips for parents to get those conversations rolling. Here are four key strategies included in the study:
- Don’t wait. The report notes that the best way to educate kids on money is to start early. “As soon as children are able to express a want, it is time to discuss basic ideas, like delayed gratification, that underpin budgeting and saving towards a goal,” the report states. The AICPA advises parents to slice off some of that birthday gift money and open a savings account in their child’s name, and have them clip coupons for grocery shopping – even for kids under 10 years of age.
- Create “teachable” moments. Engage kids on the subject of money on terms they can relate to. For example, show them financial statements from their college savings plans. Point to the interest earned and explain the concept of compound interest. Show them how long-term savings can increase thanks to interest earned, and apply that example to their wish to buy a toy or game.
- Make it a regular conversation. The AICPA study says that only 13% of U.S. parents regularly discuss money with their kids. For the remaining 87%, that’s a big mistake, the group says. “The more you discuss good financial habits, the more likely your child is to make them a part of their daily life as they get older,” the report says.
- Lead by example. Kids know instinctively if parents aren’t “walking the walk” when it comes to personal finances. Explain the importance of savings and budgeting and stick to your guns at key moments. “If you cave easily when they pitch a fit over a toy at the store, you’ll have a hard time convincing them that delaying gratification to stick to a budget is the way to go,” the report says. “If your kids hear you lamenting a lack of money but see you blow the budget on a whim to go out to eat, you’re sending mixed signals. More important than having the talk is walking the talk.”
The AICPA also advises visiting its website 360 Degrees of Financial Literacy.