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Financial Literacy: Ongoing conversations with your children

You’ve been instilling important money behaviors for your children like a weekly allowance for completing chores or contributing to a savings account for every good grade. But is there more you can be doing as a parent to pass financial literacy best practices on to your kids? It’s a question we get from our clients a lot and the short simple answer is yes! But as a financial planner, I see a lot of different financial scenarios that young adults are exposed to. We can usually tell pretty quickly what their attitude towards money will be.

As your children become independent adults, it’s important to take an active approach to help them prepare for everything from a financial windfall, to the effects of inflation, importance of a well-balanced portfolio, and the power of saving.

Here are some ideas we’ve seen success with that you can start implementing today!

  1. Lead by Example: Children learn by observing and mimicking the behaviors of the adults around them. Monkey see, monkey do, right? Demonstrating healthy financial habits will have a direct impact on the relationship your kids have with money.

  2. It’s never too late to start: The earlier you start talking to your kids and modeling good financial behaviors, the more time you give them to develop those responsible habits. The earlier you start investing on their behalf, the stronger their financial future will be.

  3. Use real money: Whether you’re paying an allowance or giving just because, use real money. Give your kids cash or let them see the money in their checking/savings account instead of outright buying toys, rewarding in V-Bucks, or another gaming currency, etc. Allow them to see the money leave and the impact of their decisions and purchases. It can be a great opportunity to teach about priorities or an incentive to… bringing us to number 4.

  4. Earn money: Helping children understand the value of a dollar and being compensated for hard work is a lesson you want them to learn before they enter the “real” world. Encourage them to do extra housework, yardwork, or start their own small business to earn the extras they want or to save in preparation for their future.

  5. Discuss financial decisions: Although you don’t want your children to absorb the stress of very real financial troubles, it’s important to talk to them like the little adults they are. When they ask for something at the store, explain that the item isn’t in your budget at that time and why. Maybe it’s because inflation affected the cost of eggs and you’re going to pay an extra $6 for them this week. Whatever the situation, be honest! You’ll be getting them used to the lingo and how outside factors drive decisions.

  6. Set financial goals: Encourage your kids to set a financial goal for themselves whether it’s saving a certain amount of money that year or saving up for a big purchase. Be sure to share one of yours too!

  7. Teach the concept of delayed gratification using a Roth IRA: Guardian Roth IRAs are a great way for children to begin building tax-free funds for their retirement future. They can learn about taxes, investments, the importance of starting early, and delayed gratification.

  8. Make it fun: Incorporate a game whether it’s Monopoly, Act your Wage, or the stock exchange game you played in high school economics. When you can make a “boring” topic fun, kids are far more likely to engage in and absorb the information you’re teaching. Kids love to copy their parents so talk to them about buckets. We often reference putting funds/investments in “buckets” to invest conservatively, moderately, or aggressively so let them separate their money into save, spend, and give and allow them to decide the denominations for each. Or do the $5 savings challenge with them – every $5 bill you each receive you must save it.

There isn’t a ‘one size fits all’ approach to teaching kids about money. Whatever you decide, make it light and align it with your family’s beliefs and values. If you’d like to learn more about how we can collaborate to set your children up for future success, I’m here to help!



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