It’s no secret that today’s standard high school and college curriculums are missing a few very important details. One of the most overlooked areas is basic financial education. Discussing finances with your children can be a difficult topic to broach, but it is critical to their success in the long run.
One common misconception of having “the money talk” is the idea that kids must be sheltered from financial issues. In some instances this is absolutely true, but having a basic discussion about finances and instilling good values in your children is important. “The money talk” shouldn’t be seen as taboo, but rather as an opportunity to guide your kids and help them navigate potentially tricky financial issues and decisions that arise.
Here are some tips to help as you approach “the money talk."
Chances are that at some point in your life, you’ve experienced highs and lows in your finances. No need to hide it! These experiences provide a learning opportunity for your kids and allow you to be open and frank about the reality of financial decisions—they can handle it.
If you ran up debts in your past and had difficulty paying these back, this serves as an excellent teaching moment. Learning from those you respect can be just as effective as learning the lesson on your own.
Also, this may go without saying, but be careful not to spread falsehoods about your current financial situation. Remember, your kids can handle it and will almost always know when you’re not being completely honest with them.
2. Talk in values, not figures.
If you’re hesitant to share your financial situation with your children, that is normal. You are certainly not alone on this, but it doesn’t have to be scary. The good news is your kids don’t always want to know (or need to know) every detail of your financial life. Don’t sweat the small stuff—instead, focus on teaching them the basics. Ask yourself, what do they need to know, and what is often missed in standard education? Children should have a solid understanding of concepts such as saving, budgeting, paying down debt, developing healthy spending habits, and compounding interest.
3. Use real-world experiences.
Life is full of sporadic but important financial lessons that can be found in everyday experiences. It’s up to you to look for these opportunities and expand on them with your children.
If you’re going to the bank, you may consider taking your children with you. This is a great time to demonstrate how transactions work and, if applicable, how an ATM works. To take it a step further, you may even begin the discussion on how money can generate interest.
When your children start their first jobs and start receiving paychecks, this is a convenient time to discuss the importance of budgeting, paying bills, and taxes. Talk through what their goals are for each paycheck and how much they may need to save in order to accomplish these goals.
If you are planning a family trip, consider letting them in on the budgeting. Showing them your budget, planning activities you want to accomplish with this budget, and building a trip around this information will help make financial planning seem tangible to them. This may also be a good time to remind your kids that goals often require sacrifice, and not every trip activity will be accomplished.
Try giving your kids an allowance and taking them to the grocery store. The grocery store can be a clear example of “needs” vs. “wants.” Your children need nutrients but most certainly would like to have a few candies as well. However, with a set allowance, they won’t be able to afford them all!
In closing, whether you realize it or not, you play an important role in your children’s financial future. In their early years, they rely heavily on you for financial advice to help them form healthy financial habits (and the occasional $20 bill for the movies). At DWM, we feel it is essential to educate your children about finances early on, so they can be better prepared for the future. That’s why we created our new Emerging Investor program to help younger folks invest early on and get started on the path to financial freedom! To learn more about this exciting new program, check out the full description here: http://dwmgmt.com/blogs/123-2017-11-29-20-49-47.html.