Let's talk money: How to talk to your children about the cost of living

One of the realities of the last two years is that the cost of living is constantly on the increase. Heating, food and rising interest rates mean that many families are having to cope with a tighter family budget. Talking to your children about the cost of living can be tricky, but it's an important subject when it comes to preparing them to manage their finances in the future. We spoke to Tahereh Pazouki, Founder of Magrid Learning Solutions, on how to explain the cost of life to your children. Happy reading!

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Tahereh, with social media being present today from an early age on, children tend to have ever more desires for material stuff they see online. Seeing Online-influencers as their heroes, they want to imitate their styling, way of living and travelling. However, parents must teach their children healthy ways to earn and spend money. As the founder of Magrid Learning Solution, which enhances early development, visual-spatial, cognitive, and mathematical abilities in children aged 3 to 9, we would like to share your knowledge on teaching children about the cost of living and a sensible way to manage money.

1. How do you think you can best explain the cost of living to a child?

Yes, in today's culture raising the subject of money with children can be challenging especially considering the new heroes and models that have emerged on social media.

It can be embarrassing for parents to tell their children they can't afford, and they may fear that even their own children may judge, so they often avoid the subject.

It is essential to have a conversation about money with children early on, as they will have an easier time understanding it. Even a 2-year-old can already understand basic concepts. Just because they cannot talk, does not mean they don’t understand. Toddlers already have a crystal-clear grasp of their environment and are quite competent. Infants begin to form their capacity for logic at a very young age, they will be able to learn and comprehend our actions if we take the time to explain them. To help children understand money, it is better to describe what you are doing as a parent, including the money stuff. For example, while you're in the grocery store, imagine you are hosting a dinner for 5 with a budget and share your logical thinking.

Reading aloud to children helps, even if they don't fully grasp the concepts or words. As a parent, you should speak out, explain the reasoning behind things, and keep them informed. This approach also contributes to developing their language skills, vocabulary, and reasoning abilities from an early age.

When kids reach around 4-5 years, you can begin including everyday discussions of money and financial topics. Together, you can teach your children good money management skills by making a grocery list, creating a budget, and researching potential places to buy items at a discount.

Having a chat with your child about money is like telling a tale, and it should be age-appropriate and engaging. Speaking at their level, elucidating concepts, and using relatable examples from their lives can make the discussion age appropriate.

Use a lighthearted tone and make a play role where the parent is the child, and the child is the parent. By doing so, you can help your children grasp the idea of the cost of living in a way that makes sense to them.

How do you explain that money is limited and that you can't spend more than you earn?

Money is often a taboo subject, but it is essential to teach children about the value of work and saving money. People avoid discussing it and drawing comparisons, even though it is necessary to understand that not everything is within one's reach.

I think that there's no better way to learn than by doing.... Starting with an allowance at a young age can help them understand the importance of setting priorities and making decisions without imposing harsh teaching methods. As children grow older, they will learn to use their allowance to buy things like books, toys, and school supplies.

The allowance should not be solely treated as a reward, but rather as an opportunity for children to grasp the value of work and the importance of saving money... Being aware of financial constraints is crucial for financial education. Parents should lead by example and teach their children the consequences of overspending.

When teaching money skills, start with real paper and coin money, as credit cards are abstract to them. Toddlers and preschoolers need to learn how to handle money with their hands, even if they are not yet able to count or understand numbers.

I must say, that thinking of a society where money will be dematerialized, is a bit scary, as teaching money concepts will become even more challenging.

It's interesting for them to learn about appropriate money management and earning from a young age on, and of course, they should always keep the topic in a positive light.
Tahereh Pazouki

How would you explain the concepts of inflation and cost?

Kids understand so much more than we give them credit for.

Talk about inflation and how much everything costs. For instance, a particular sort of candy that your child usually buys for EUR 3 now costs EUR 4.

In a play role, you are a store owner, you can explain inflation to your youngster by highlighting the shortage of your favourite candy, increased production and delivery costs, and the need for higher prices.

By drawing pictures with them, you can discuss the costs of things like housing, furniture, cars, and fuel, making the situation feel more relatable.

When talking about the cost of living, it is also important to mention the notion of choice versus desire. What are your suggestions?

Social media has significantly influenced people's desires, leading to unreasonable demands for items like designer trainers, smartphones, and apparel.

Parents should help their children differentiate between wants and needs to avoid spending excessively on unnecessary items. By comparing prices and preparing a grocery list, they can save money and get other treats.

If your adolescent wants a pair of trainers that cost EUR 250, you should tell them how much more they can get for that amount...Perhaps if you go for a more affordable trainer, you'll have more funds to spend on other clothing items.

Maslow’s pyramid of needs, a good tool to explain the importance of certain things.

Teaching kids that finding cheaper items doesn't always mean sacrificing quality, but sometimes it's worth it to buy second-hand or during sales. By purchasing higher-quality items, they can save money and spend less frequently.

It's important to share the thought process behind your own purchasing decisions with your kids, such as choosing high-quality garments over less sustainable ones. By doing so, you can save money and focus on what truly matters.

Income, savings, credit, and loans, finding the right words.

To explain income, children can learn, for example, to sell lemon juice in summer and earn money daily. Some of this money can be saved for future needs, larger purchases, or emergencies.

Piggy banks can be used to teach children to save small amounts of money daily and watch their savings grow. Savings are money that is not spent but saved for future purchases.

Sometimes people they want to buy something, but they don't have that money saved up. Then credit and loans are possible, but only after a promise to repay the lender and any applicable interest.

Growing up, my father would give me loans and then every time I was getting my allowance, or I was doing some chores, I would pay him back with some interests. The first time, I was no more than 6 years old. We would set up a contract and signatures behind the reimbursements, this is how I bought my first bicycle and then my first phone.

My father acting like this, made me feel so grown up and responsible, I grasped the concepts of money and even at school I would think, I know a lot more then my classmates.

For the parents reading this article, could you give them some advice on how to approach the subject of the cost of living with their children?

Start as early as possible.
Talking about money should be an everyday conversation and not a onetime shot.
Celebrate milestones.
Encourage positive financial habits.
Encourage questions and be ready to give accurate answers.
Be patient in your explanations, do not make money an anxious subject.
When discussing finances, aim for a light-hearted, humorous, and approachable tone...

tahereh@magrid.education

magrid.education

LetzMath Sàrl
6A avenue des Hauts-Fourneaux
L-4362 Esch/Alzette

Book recommandation:

Talking to My Daughter: a brief history of capitalism, Yanis Varoufakis

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