Being financially literate is not something that happens by accident. It is not a skill we are born with. And it is not something that most Americans have mastered. I believe the biggest reason for that is because talking about money is taboo. It is frowned upon. Many families are not talking about money and finances at the dinner table, they are NOT teaching it in our schools. So how do we make sure the next generation is taught how to properly manage their finances?
As a parent, I know it can be overwhelming to think about how to open or start a conversation about how to handle money and finances with your kids, but it doesn’t have to be. As parents, it is our job to serve as a positive influence in their lives to get them on not only in life and love - but also financially. Here are five things to consider as you embark on helping your children or grandchildren understand the importance of being responsible with their finances.
Financial Wellness Starts with The Basics
Start discussing money with even the littlest ones by including them in the conversation every day. When you put together your grocery list or set up the budget. This will allow them to connect money with something tangible. It will not be some abstract concept that they can't see or touch. I always ask my kids questions to make them think and help them understand. A question as simple as "We have 5 dollars to buy a treat, should we pick ice cream or cookies?" and then "why". These are the conversations that help children to understand that money is finite and that there is a trade-off to every decision we make regarding money.
Be Honest About Money
I believe in being honest with everyone in my life, especially my kids. This will go a long way to opening the door about personal finance and may even allow them to call for help later on when they need it. At the grocery store, share with them how much is allotted for groceries as a part of the overall budget. And when you get the inevitable question "Can we buy this? or Can I have that? remind them of the limit and how that item doesn't fit into it.
Additionally, if you have older kids and there are things in your financial past, such as going into debt, which may be something you are not proud of, share that with your kids. Being honest with them is very valuable and will help build trust. As I mentioned above, the more open and honest you are with your kids, the more open they will be with you, and they may need to call for help one day in the future. Being truthful about your own finances is a great place to start building that trust.
Talk About Values
Kids have an insatiable imagination, something I hope to never dampen in my own kids. But this giant imagination also tells them that they can do EVERYTHING and although we as parents may want that for them, financially it's not always possible. Encourage your kids to think about what is important to them in the future. Ask leading questions like "Do you want to own a house or rent when you grow up? or "Would you rather go on nice vacations or drive a fancy car?"
It is our job to help them visualize what they want for the future and it’s a crucial component of talking to your kids about money and financial goals. Talking about what THEY value and hope to have in their future allows them to have a long-term view, which is critical for saving, budgeting, and overall financial wellness.
Establish Family Goals
As a family, talk about your budget and set goals together. For instance, you can set a weekly grocery limit of $150. Before going to the store, have them help look for sales online or find coupons to keep your cart under budget. Involving your children in any capacity with the family finances is a great hands-on way to educate them and give them a chance to see real-life examples of how their financial habits will impact them in the future.
Lead By Example
There may be certain financial topics that you are not as knowledgeable about, and that’s okay! this is an opportunity to learn alongside your kids. Showing your kids that you are interested in learning while growing your understanding of financial topics will heighten their interest in it as well.
Talking to our kids about money may seem like a daunting conversation to have if you don’t know how to approach it properly but I assure you, it is PARAMOUNT to their success later in life. Broaching the subject sooner rather than later will reap many benefits for you and your kids. Ultimately, we want our kids to have the knowledge and skills they need to handle their finances responsibly as they grow up.
As parents, it’s our job to instill this knowledge in them and to open the door to an often-taboo subject so that you can help them get off on the right foot with their finances. All habits, including financial habits, are formed young. It’s critical that you start early and start the conversation today. Make your kids feel comfortable talking about finances with you by using these tips.
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||About the Author
James M. Comblo, CFF
is a Partner and the Chief Compliance Officer at FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients accomplish their dreams both with investments and their personal lives. To learn more about him click here.
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