Often parents are reluctant to talk to their kids about money–and understandably so! It’s a complex topic and it can be daunting. Where do you even begin? Should you have a joint account with them? How long should you monitor their money for? We’re sharing our best advice for tracking your kids’ money, having those tough conversations about personal finance, and more.
The Money Conversation
Putting off the money discussion won’t make it any easier, so starting sooner rather than later is best. As soon as your child is old enough to spend money, they’re old enough to have the money conversation. It’s a good idea to be honest with your children about finances–it helps them learn. For example, when you talk to your teenagers about the cost of college, you can share your own experiences. Did you borrow to pay for your education? Did you work through college to support yourself? Was the student loan debt worth it? They’ll appreciate the honesty and it may help inform their choices.
Many parents take the approach of instructing their kids that money falls into three categories: money for spending, saving, or donating. This is a great way to prompt your children to think about their larger place in the world, any privilege they may have, and how they can give back in their community.
Joint Accounts & Tracking Money
So should you set up a joint account with your kid? How do they work? Typically, a joint account functions just like a standard account, but multiple people have access to it. Each person on the account can both contribute to and withdraw from it as well as check the balance regularly. Sharing a joint checking account with your teenager can be a one way to start monitoring their money and teaching good financial habits, keeping in mind this is the first step to their financial independence and they might want you to keep a distance from their daily financial choices. You should also encourage them to start saving as soon as they start working by helping them open an IRA. You’ll need to establish open lines of communication so they can talk freely about their spending and saving. Set expectations up front and provide guidance about budgeting.
One downside to keep in mind is that your teenager may become overly reliant on you filling up their account whenever they need money. You’ll want to talk with them about the importance of personal responsibility and balancing their budget before setting up the account. As we mentioned, having clear expectations is key.
When is it time to give up the joint account? This varies depending on you, your kid, and the kind of relationship you have. In many cases, by the time they turn 18, they’ll be ready to have their own bank account, although maybe parents stay on joint accounts past this age. Particularly when they’re headed off to college, they may have expenses they want to keep private from you. Helping your children build a strong financial foundation as they grow will make it more likely they can manage their finances more independently as they go through college and beyond.