With children, many parents have the "sex talk," but leave out the "money talk." And if parents don't talk to their kids about the ABCs of finance, who will?
Many experts say the best place to begin teaching the birds and the bees of money is with a child's allowance.
"Chores are contributions to the family," said parenting consultant Derek Randel, who coaches parents on the subject of allowance and others.
His approach: make them do the basics for free, but do give them an allowance so they learn money management skills.
"Kids think money grows on trees. There’s no budgeting. Dad’s the bank," he explained.
Randel said parents have to look at their own budget and how much the family can afford. He’s seen amounts from a few dollars to $70 per week. Whatever it is, he said, make it a set amount and stick to it.
"If they know they can come to you and say they need $10, then you’re not teaching them at all," he said.
Children learn the lesson when they realize that money has limits.
"If they don’t have enough to buy something, now you can discuss budgeting and money," said Randel.
But it can be frustrating to say no and make kids stick to a budget. A recent survey by American Express found that for many families, talking to kids about an allowance can be as stressful as negotiating for a new car.
So when it comes to an allowance, how do you have the "Money Talk?"
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Some tips from the experts:
- Set Responsibilities: Determine what the children will pay for -- movies and lip gloss, for example -- and what the parents will cover.
- Set the Amount: A little less than what they need is one strategy. That way, children can work at extra jobs around the house to earn more.
- Stick to a Payday: Children will learn that paying bills on time is important.
And if a child's allowance is tied to chores, never pay unless the work is done.
There are options for parents worried about cash. Prepaid re-loadable cards make it impossible for kids to overspend, while overdrafts on debit cards can run $35 dollar per mistake. That would be a big bite out of any child's allowance.