By Tom Breiter, Integra Capital Advisors
When it comes to parenting, there’s no lack of milestones to walk through and important lessons to teach. Whether it’s passing on your values on work ethic, treating others with respect, or wise decision making, it can often seem overwhelming and downright intimidating, especially if it’s a topic we aren’t well versed in. Nowhere is this more true than with finances.
In the 10th annual T. Rowe Price survey on parents, kids, and money, (1) 22% parents admitted they never discuss money with their kids, and 42% are reluctant to talk about finances as a family. This is despite the fact that 79% of parents believe that financial conversations with their kids make a difference in the long run. The breakdown may be due to not knowing where or when to start, or even lack of confidence in how to manage money yourself. If you are unsure how to teach your kids about money, we’re here to help. Here are 6 topics to cover when having the financial talk with your kids.
1. Wants Vs. Needs
In a child’s mind, every want is a need, but if you don’t teach them the difference between the two, they won’t grow up to understand financial priorities. Give real examples of wants and needs, even as you go about daily life together. Show them wants you’ve had to say no to in order to take care of needs, and share with them the perks of having financial discipline, like living with less debt and having the freedom to pursue opportunities.
2. The Importance Of Saving
As adults, we take it for granted that everyone understands the importance of saving, whether you do it or not. But your kids, who have had everything provided for them, may not realize how integral saving is to their financial success. It can be difficult for a child to have the long-term perspective that saving requires, so give them practice with earning and saving money to put toward a short-term or long-term goal they have. It’s also important to show them the impact starting early can have on the rest of their life to motivate them to sacrifice now to gain later.
3. The Value Of Generosity
Money can quickly turn into a greed or materialism issue, and the last thing you want your kids to become is money-obsessed in an unhealthy way. Opening their eyes to those who are less fortunate and exposing them to organizations whose sole purpose is to help others will show them that money isn’t just nice to have, it’s something you can use to invest in others. Work with your child to find a local charity that lines up with their values and interests and encourage them to give a portion of their allowance regularly.
4. The Big Financial Picture
When your kids become adults, there will be no lack of opportunities for them to spend or invest their money. But by showing them that everything has a cost and then teaching them how to weigh that cost, you are giving them a leg up and wisdom to turn to when future decisions arise. For example, when your teenager starts dropping hints about wanting to buy a car with the money they have diligently saved and they want to spend every penny getting the best possible, show them the math of what that money could turn into if invested differently.
5. The Truth About Credit
This generation of kids is growing up seeing their parents wave a plastic card and get goods in return. What they don’t see is the hard work and discipline that goes into earning the money that eventually pays off that card. It’s not surprising, then, that 45% of college students have an average credit card debt of over $3,000. (2) Teaching your kids about credit—both good and bad—will help prevent them from making financial mistakes that haunt them for years or decades. While they are still under your roof, impart the discipline and responsibility of debt and take small steps to help them build a credit score. Let them learn the ropes by loaning them a small amount of money and requiring them to pay you back at regular intervals or setting them up with a secured credit card.
On that note, be sure to highlight the consequences of a bad credit score. By putting wants ahead of needs, lacking discipline, or being irresponsible, they could prevent their future selves from buying a house, getting a loan, or finding low insurance premiums. Your kids will still need to learn these lessons for themselves, but at least they won’t be walking into the credit world with their eyes closed.
6. Be Honest
As our kids go through different stages and situations, we constantly throw life lessons at them, like hard work pays off, to make a friend you have to be a friend, or pick yourself up and try again. But do you know what’s really powerful for your kids to hear? Your own stories of mistakes, successes, and what you learned through it all. Do you wish you had learned how to budget when you were a teenager? Tell them that. Have you had a bad experience with debt? Don’t cover that up. Your kids need to know that they can come to you with money questions, and your transparency will open that door.
Need Some Extra Help?
If you feel overwhelmed with the task of teaching your kids about money, you probably agree with the 72% of parents who wish they had someone to help them. (3) Imparting financial wisdom to your kids is a challenging process that takes years. The important thing is to start the conversation, even if you don’t feel prepared. As your child grows and needs more in-depth financial knowledge regarding things like 401(k)s, taxes, mortgages, or inflation, we can help.
At Integra Capital Advisors, we want to partner with you to equip your children for a bright financial future. We work primarily with clients who desire our personal yet structured process for planning and investing that relieves them of the day-to-day worry of the financial markets with freedom to pursue what they value most and allows them to feel confident and reassured. We call this process the “Waypoint Formula.”
Call us today at 941-778-1900 or email firstname.lastname@example.org to plan your path to financial freedom and set your kids up for success.