A recent survey of American teens showed that 57 percent of respondents wanted to learn more about money from their parents or guardians. Meanwhile, 35 percent said they learned about money from social media, and 34 percent looked to websites and articles.1
Talking to your children or grandchildren about money is essential regardless of their ages, and the kinds of conversations you can have can change over time. As you think about how to approach financial conversations with the younger folks in your life, there are some guidelines to keep in mind along the way.
Money is not only a big topic but also one that can feel difficult to speak about. Even financially successful people might be at a loss when it comes to explaining financial matters to children. The good news is that you probably know more than you realize, and there are practical ways to convey these lessons. In fact, you may be able to start earlier than you think.
Preschool To Kindergarten
Children are naturally curious. When you’re doing ordinary errands like going to the bank or paying for goods or services, they might ask about what you’re doing. Think of these as teachable moments to help them understand how money works.
Introduce your children to coins and bills early on. Maybe you have a change jar in the house. A simple exercise like exploring the shapes of the coins and counting them can be a good first step. You could even make it a game. If your child likes to “play store,” that can be a time to introduce the values and names of various coins and teach counting shortcuts.
Elementary And Middle School
Once the children reach grade school, establish some boundaries around money. Explain the difference between needing and wanting things, like toys and video games. Explain that the thing they want costs money, which isn’t an unlimited resource.
You can also involve children in your everyday financial behaviors. Tell them why you are paying with your debit card instead of your credit card or vice versa, and explain the difference between those cards. If you are paying bills, invite them to watch you write a check or make a payment online. Explain that these actions take the money from your accounts and give it to the companies you’re paying. When grocery shopping, show them how you compare prices and look for value in the items you select.
In addition, earning an allowance, being paid for household chores, receiving gifts, or engaging in other minor money-earning activities are all learning opportunities for young people. You may want to include a budgeting exercise in this process, encouraging the child to set aside their piggy bank or change jar for “fun money” and designating other funds for certain necessities or supporting a local fundraiser.
As you introduce budgeting, don’t be afraid to return to your own budget to model good behavior. By grade school, children should have enough experience with addition and subtraction to follow along as you pay your bills.
If your child receives an allowance, it’s also time to teach them how to use that money. Part of the responsibility of having an income is using it wisely, so let them know that they can save up for something they want. Having a goal for something like a new bike or purchasing a gift for a friend might be a great way to focus them on the importance of keeping and maintaining a budget.
As your child gets older, they may begin taking on odd jobs around the neighborhood. However enterprising your child might be, now’s a great time to help them to open a savings or checking account—or both. Building this history will be very helpful once they are old enough to be considered for car loans, credit cards, and other forms of consumer debt.
HIGH SCHOOL AND COLLEGE
Providing a teenage child who is at least 18 years of age with a credit card can be controversial. It can undoubtedly be perilous for those who are not yet ready for that level of responsibility. But those who are ready can benefit from your guidance on using and paying off credit cards before they leave home. Understanding fees and interest charges, especially how they differ from savings or checking accounts, can be a valuable lesson. Specialized credit cards meant specifically for students might be one way to meet your teen’s needs.
College. Many critical financial conversations can take place as a student approaches this milestone and begins to take on new levels of responsibility. What loans might be taken out? Who will pay for them? What scholarships or grants might the student qualify for, beyond the Free Application for Federal Student Aid (FAFSA)? Will a part-time job be a part of their college experience?
Finally, consider bringing your young adult along for visits to members of your financial support team. Introduce them to the people you work with on these matters, including your accountant, tax preparer, and other professionals and consultants. Most will be happy to provide your child with an explanation of what they do for your family. A financial professional can also help answer questions young people might have about saving for college and other matters, including fielding questions you might not know the answer to. This is something that we frequently do for our clients. We are happy to have your child or grandchild sit in on one of your appointments. We also schedule appointments specifically for the purpose of talking to your children or granchildren about money. We have helped many families to help their children to start investing.
LEARNING AS A LEGACY
Teaching your children to seek out experts when they have questions is often a valuable lesson. What your children learn from you and others about money, starting from a young age, can be a legacy you leave behind that will serve them throughout their lives. Want to help your children or grandchildren to learn more about money? Call us at 303-806-0988, we are happy to help.
1. FinancialAdvisorIQ.com, July 26, 2021
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.