Have You Had the Financial Talk With Your Kids? We’re Here to Help
By Shamez Kassam, CFA, MBA
A child’s first word always brings such joy and celebration, but it seems that once they learn to talk, it’s hard to get them to stop! Although they love to talk, some conversations can be quite a challenge to have with your children. I’m not talking about the birds and the bees; I’m talking about dollars and cents!
A recent study found that 58% of parents worry that their kids will spend their money too easily; 49% worry their children won’t realize the consequences of overspending; and 46% worry that their kids will have a harder time learning the value of money. (1) So although every parent wants their child to succeed financially, building a strong financial foundation doesn’t just happen—it takes intentionality. Even if it feels awkward, and whether they’re a toddler or about to graduate high school, the time to talk to your kids about money is now.
Your children will learn about money somehow and from someone. To protect them from learning harmful habits, you want that someone to be you. Wondering where to start? The following tips will help you get off on the right foot.
Talking to Preschool and Kindergartners
One of the most important lessons to teach your preschool- and kindergarten-aged kids is that “good things come to those who wait.” Learning the value of delayed gratification can have a huge impact on your child’s entire life.
An easy way to start teaching delayed gratification is to show your kids how to save money for toys they want.
And believe it or not, piggy banks are not the best way to do this. You want your child to be able to see their savings growing right in front of their eyes. So instead of a piggy bank, consider using a clear jar instead (or better yet, one of those clear electronic money-counting jars with digital displays).
The key to success when working with young kids (or children of any age, for that matter) is to make your money lessons fun. Play money-related games, do money experiments, mix in some friendly competition—figure out what sorts of activities capture their attention and concentrate on those.
Talking to Elementary and Middle Schoolers
Once your child reaches elementary and middle school age, you’ll want to start focusing more on the value of money.
One way to do this is to take your child shopping and explain your purchase decisions to them. For example, tell them why you choose a generic brand over a name brand (e.g., because it tastes the same, is cheaper, and leaves you with money left over to save for something special).
You can also teach your child the value of money by starting an allowance. If they have to work for their money, they’ll value it more. They’ll also learn to prioritize when deciding how to spend their earnings.
Talking to High Schoolers
By the time your child reaches their teenage years, they should now have a solid foundation in money management. But your job isn’t done yet—there’s still a lot left for them to learn!
If you haven’t already, make sure to open a checking and savings account for them. This will help you teach them how interest works. Once they get the basics down, you can transition into more advanced lessons, such as the power of compound interest over time (and how their savings can snowball if they start early). Consider also giving them the gift of stock in a company whose products they use. This will provide an introduction to the stock market and also help them get used to prices stock prices moving up and down in the short term, and higher over the long-term.
One of the best ways to help these lessons sink in is to encourage your child to get a part-time job. That way, they can experience everything firsthand.
Lastly, don’t forget to teach them about credit. You might think credit cards aren’t for kids (maybe you got into trouble using credit cards and don’t want the same for your children). But if you don’t teach them how to use credit cards wisely, who will?
Before you release your kids into the “real world,” they should understand that they can only spend what they have. If you open a credit card for them while they’re living with you, you can train them to build credit while paying off their balance each month.
The Most Effective Way to Teach
If you’ve finally had the money talk with your kids, great job! But don’t think your job stops there. Leading by example is critical to accompany the financial knowledge you’ve imparted; otherwise, those lessons might go in one ear and out the other!
Perhaps you’re thinking to yourself, “Sure…but I don’t know the best ways to handle and invest my own money.” Don’t worry—that’s what professionals are for. Financial advisors exist to teach non-financial experts the best ways to grow and protect their wealth. Partnering with a financial advisor can help you maximize your finances and talk to your kids about money at the same time.
We at Northfront Financial want to partner with you to equip your children for a secure financial future. If you’re looking for more guidance in talking to your kids about finances or in fine-tuning your own financial plan, call 403-571-8960 or email firstname.lastname@example.org.
About Northfront Financial
Northfront Financial, based in Calgary, Alberta is a boutique full-service financial planning firm serving professionals and business owners. We pride ourselves on being a different kind of investment firm. This stems from our humble roots, entrepreneurial spirit, and a culture of integrity and professionalism. Our goal is to offer the best investment products, services, advice, and ideas the financial industry has to offer from our experienced team, which includes individuals with the Chartered Financial Analyst (CFA), Chartered Investment Manager (CIM), and Certified Financial Planner (CFP) designations. To learn more about Northfront Financial and how we can help you, visit our website and schedule a complimentary appointment.