How to talk to your kids about money

Whether it’s talking about the birds and the bees or explaining the death of a loved one, parents know that difficult conversations are essential for their kids’ emotional and intellectual growth. For many parents, talking about money is one of the hard conversations they least want to have with their kids.

According to a 2015 T. Rowe Price study, over a quarter of surveyed parents say it’s not important to include kids in discussions about family finances; 41% report that they sometimes avoid talking to their kids about money.

But the sooner parents teach children about money, the more effective they’ll be in raising financially successful adults. So how do you start the conversation in a way that will be meaningful, comprehensible and engaging?

Here are some ideas for how to talk to your children about a variety of financial concepts.

Guide them through a budget

Many parents use an allowance as a way to teach children about money. You can take it one step further by helping them create a budget for their cash.

Use real-world examples of monthly expenses — like a soccer uniform, a birthday present for a friend, new school clothes, or favorite snacks — so your kids can see what a dollar is worth. By including real-life examples, you’ll share with your children what it takes to maintain their lifestyle.

Help set long-term savings goals

Most kids want something new — shoes, video games or gadgets. Why not have them save enough to make the purchase themselves?

Once you show your children the cost of what they want, introduce the idea of creating and putting into place a long-term savings plan. To track allowance and save toward goals try the app Bankaroo, thought up by an 11-year-old girl and developed by her family.

By helping your kids create a savings plan using concrete examples that actually matter to them, you pave the way for them to think about more complex goals, such as saving for college.

Explain borrowing

Children might not even realize that your family has financial obligations to consider, such as getting a mortgage for your home. To explain the concept of a loan, provide your children with an example they can relate to, like borrowing money for lunch.

Ask your children to imagine that they loan a friend a few dollars to buy lunch, and the friend pays it back after a little while. The friend throws in a bag of chips as an extra “thanks” for the loan. A mortgage is like that — the bank loans you money to buy the house and requires that extra “thanks” in the form of interest. (Interest is a tricky concept, but snacks help.)

And if that friend doesn’t pay back the loan, your child isn’t going to want to lend him lunch money in the future. Similarly, banks hesitate to lend money to people who haven’t paid off loans in the past.

Play money-themed games

An activity that shows, instead of tells, how money works would be helpful for many families, especially for parents who are hesitant to talk to their kids about money. Kids want to have fun, so capitalize on this by using age-appropriate games, apps and toys that teach financial skills.

Try Pay Day or Cashflow for Kids, games that simulate real life financial strategies and situations in an engaging way. There are also classic options such as play cash registers, Monopoly, or the Game of Life app based on Milton Bradley’s 1860 board game.

Starting early is key

Your child’s future is the most important investment you’ll ever make, so start the conversation early. The trick is to start small and at home, using everyday examples to teach your children about money. Over time, you’ll be able to explain more complex topics, such as saving for college and buying a home.

And eventually the investment will pay off: You’ll be more likely to see your children grow into happy, financially confident adults.

Megan Terzian is an associate financial planner with Mosaic Financial Partners in San Francisco. Learn more about Mosaic’s Financial Fitness Challenge. This article first appeared in NerdWallet.