By Dave Coen
Pick up almost any parenting book and you’ll see plenty of valuable advice, everything from reading to your child, teaching them kindness and generosity, and building resilience and courage. But one thing most parenting books don’t cover? Money. That’s unfortunate because your child’s level of financial literacy could make or break their success in their adult years.
Someone once told me that the best way to teach your kids about the value of money is to BORROW some from them!
Your kids are going to learn about money from someone. Don’t you want that someone to be you? If you don’t know where to start, here are some tips!
1. Be Their Role Model
If you’ve spent any amount of time with children, you know that more is caught than taught. If you want your kids to grasp the importance of handling money wisely, you need to let them watch you make financial decisions and model what you want them to learn.
The annual T Rowe Price Parents, Kids & Money survey shows that kids tend to pick up the good and bad financial habits of their parents. (1) If you spend money recklessly without a clear purpose, your kids will see that. If you rely on credit cards to cover expenses or argue with your spouse about finances, they’ll accept that behavior as the norm. Your actions set a precedent, so be intentional about how you model money management to your kids and let their watchful eyes be a motivator for you to change the negative financial habits you may have picked up.
2. Talk About It
Since many areas of personal finance aren’t visible, sometimes a silent model isn’t quite enough. That’s why it’s vital to start the money conversation now because talking to your kids about money regularly leads to kids who are more financially literate. (2) This doesn’t have to be a long drawn-out discussion. The financial education of our kids should start around the dining room table at a young age. Take advantage of your time together by asking questions to gauge their financial awareness. Let them in on your thought process when they ask you for money or a new toy and be open with them about how you make financial decisions. For example, when you’re at the grocery store, explain why you buy the off-brand cereal instead of the name brand. When you’re at the bank, explain why the bank keeps your money and you only take what you need from the ATM. These real-world scenarios help cement the whys and hows of money in your child’s mind.
And if you set the precedent of being open about finances now, while they are young, they are far more likely to keep coming to you for advice or assistance when they get older.
3. Let Them Try
For financial understanding to truly sink in, you need to let your kids experience their own successes and failures. For example, give your five-year-old some money to buy something at the store so they learn the value of different items and realize that to obtain something (a toy), they have to exchange it with something else (money). Try letting your ten-year-old figure out the cost of the new video game she wants, plus tax, and help her save her allowance for it. Let your teenager buy his back-to-school clothes on his own with a set amount of money.
As your child earns money, have them split it between three jars: one for saving, one for spending, and one for sharing. When the savings jar fills up, take your child to the bank to open up an account. Let them take ownership of their money and give them opportunities to make mistakes while the stakes are still low.
Ready To Start?
At the end of the day, you want what’s best for your child. But whether it’s implementing an allowance, putting money aside for college, or saving for other major milestones in your child’s life, it’s hard to know if you’re doing an adequate job. Most parents say they would take advantage of resources to help them teach their kids about money if they were available. (3)
We’d love for you to think of SageView Advisory as that resource. To talk more about how we can help you set your kids up for success and save for your family’s future, contact us today by emailing dcoen@sageviewadvisory.com or calling 800-814-8742.
About Dave
Dave Coen is a Financial Advisor with SageView Advisory and the CEO of College Planning America. Along with his retirement financial industry experience, he is a College Planning Specialist. He works closely with individuals and families to provide comprehensive financial planning that addresses all elements of their financial picture. Learn more by connecting with Dave on LinkedIn.
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(3) https://www.slideshare.net/TRowePrice/t-rowe-prices-10th-annual-parents-kids-money-survey, slide 109.
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