by: Faith Doyle, MBA, CFP®
You know what kids think is cool? MONEY. Well, not money per se, but they really like to get new stuff, and they like what money can do for them. But how do you take this complex topic and make it make sense in kids’ minds to help them develop a healthy relationship with money? This is so important to do because it sets a foundation for how they will view money for the rest of their lives. Here are four ideas to try to help ensure that children have a good head start when it comes to finances.
- Share Your Money Successes and Failures.
Talking about success is easy, but there are valuable lessons to be found in failure. For example, you can talk to your kids about a time when you made a bad money decision, or when you made an impulse buy using your credit card and how you then had to scramble to pay it down later. Admission of mistakes can create an opportunity for you to figure out the solution as a team. This can help the kids start thinking of ways to be strategic when they face a money challenge (or any other challenge) later in life. It also shows kids that it’s okay to make a mistake. This will allow them to feel more comfortable coming to talk to you about their own mistakes. It is also a great time to remind them that mistakes are how we learn.
- Include Your Kids in Monthly Family Financial Activities and Decisions.
This can be as simple as making a meal plan and budget for the weekly grocery run as a family. The kids can help in the store to try and stay within the budget. This is great for younger kids. Slightly older kids, like tweens and teens, can get involved when you pay the family’s bills. Seeing the budgeted and unbudgeted expenses will give them a realistic idea of what they will have to deal with in real life. This can help them understand that money is a limited resource, and ideally they will be less likely to take it for granted. It can also help them think through the unexpected expenses that are part of life.
Show your kids how much you save for retirement, and encourage them to save for retirement as soon as they start working and are able. Help them to understand that saving for retirement is like paying bills for your future self. If you aren’t saving for retirement, talk to your children about what bills you can reduce as a family to allow you to save for retirement.
- Ask and Listen, But Be Careful Not to Preach. Make It Fun!
You don’t need to spend hours talking to your kids about money. You don’t even have to do all the talking. In fact, conversations about finances will go better if you can get the kids’ opinions on what you should do. Maybe they’ll give you a great idea or a different perspective on solving a problem. Think about topics to discuss with your kids at the dinner table: budgeting, savings, goals, retirement, unexpected expenses, emergency funds, etc. Play board games like Monopoly and Life that involve money decisions, and let the kids make their own choices. Allowing them to make their own decisions gives them confidence and allows them to learn important lessons in a safe environment.
- Consider How You Give Them an Allowance (What is it Tied To?).
One thing a friend taught me is to think about how you incentivize your kids with their allowance. Most of us received an allowance as kids, and many of us pay our kids allowances that are often tied to chores. The kids do their chores and earn money. But what if you told them that as an adult you don’t get paid to clean your house, do your own laundry, or wash your dishes? As members of the household, they need to help with chores.
We do get paid to do tasks outside of our homes. If we work hard and get good grades and a good degree, we may have the potential to make more money. So why not tie academic pursuits and exercise to allowance? I’ve used this strategy with my kids, and it has worked like a charm. I pay my kids to read books every day, to exercise, and to make good grades. My daughter is a bookworm who is several grade levels ahead in reading, all because I incentivized her to focus on her studies. Good grades lead to better opportunities at better schools and potentially higher paying jobs. And health is wealth, so taking good care of your body can save you money in the long run.
When it comes to talking to your kids about money, the biggest thing is just getting started. Money is something we all deal with, so why not take the stress out of it? The earlier you start, the less stressful it can be for the kids, and they will have a deeper respect for money and how to use it wisely.
Webb Investment Services 82 Patton Ave Ste. 610 Asheville, NC 28801 www.webbinvestmentservices.com 828-252-5132 Any Opinions are those of Faith Doyle of Webb Investment Services and not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services, Inc. Webb Investment Services is not a registered broker/dealer and is independent of Raymond James Financial Services.