As a Certified Financial Planner™ and father of four amazing children, I’m smack-dab in the middle of a very frustrating situation that I believe may have a lasting impact on today’s younger generations. Unfortunately, most kids are not exposed to even the most basic money management principles in the home or school.
As adults, how can we expect our children to make informed money decisions when they haven’t been taught these principles at a young age? Most kids will eventually learn by doing, which can create disastrous consequences if the education or lessons don’t sink in until it’s already too late.
We talk openly about money, debt, investing concepts, and spending scenarios in our household. However, I believe that if we want our children to make sound financial decisions during their adult years, we need to start educating them about money-related concepts now.
As adults, each of us must make money decisions daily. So why should our kids be any different? But, if we open the door to transparent and honest conversation with our children, I believe today’s younger generation will be far more prepared to enter the “real world” than we were when we entered our young adult years.
Discussing Money Management for Kids
We’re each confronted with ordinary life events, including several of those shown below. As parents, leaders, and mentors, we need to equip our children with the knowledge to become successful and more well-rounded individuals when they eventually leave home. Consider some of life’s more common money-related decisions and how educated you were when you were first deciding these variables:
Paying Bills: Should I use cash or a credit card? What is a credit card? What bills will I likely have to pay when I’m an adult (whether I want to or not)? How does budgeting tie into this?
Housing: Should I buy or rent? How much can I afford? What is a mortgage? In addition to the cost of my house or apartment, what other monthly expenses will I have to pay (i.e., insurance, taxes, ongoing maintenance, etc.)?
New Car: Should I buy new, used, or lease? What’s the difference? How is my insurance premium determined? How much will gas and repairs cost me?
Checking & Savings: Do I need either of these, or is a credit card good enough? How much do I need to keep in checking and savings?
Investing: Why does this matter for a young adult? What’s the point of investing, and how does compound growth work over a long period? What type(s) of investment accounts should I be using?
As basic as these concepts might seem, they probably sound like a foreign language to your teenage children and grandchildren.
Consider setting up a routine family dinner – maybe once a month where all of the money barriers are removed from the conversation and honest communication can occur. Let’s spend time teaching our children about the importance of knowing the actual value of the dollar, risks associated with debt, the importance of investing to meet future goals, etc.
Money doesn’t have to be the elephant in the room. I challenge everyone to lay it out on the table and have candid conversations about what it is, why it’s important, and how it works, common stumbling blocks, and fears.
At Birchwood Financial Partners, we work with our clients to help them feel empowered and knowledgeable about the financial decisions they are making every day. If you are wondering how a financial advisor can do the same for you, we invite you to learn more about our firm, our team, our processes and services.