Money can feel like a taboo topic in a lot of households. In fact, more than 60% of parents are uncomfortable talking about money with their kids and therefore avoid having discussions around money entirely.
Our upbringing can play a large part in shaping our relationship with money and that same mindset often carries over to our kids. Some parents might even feel insecure about their current financial situation, but these talks don’t have to be scary. A healthy money mindset in the home starts by getting the whole family involved in these conversations.
Wealth Advisors Kevin Rex and Patrice Bening took the Modearn™ stage at Morton Wealth’s 2023 Investor Symposium to discuss some of the tools parents can teach kids of all ages to be financially savvy. See below for some tips on how they can start developing a healthy relationship with money and manage their finances responsibly.
Tip #1: Start financial education early, as children begin forming money habits as early as age two.
Tip #2: Help kids (mainly between the ages of 8 and 14 years old) distinguish the difference between wants/needs and encourage delayed gratification. For example, give them the option to eat at home rather than dine out to help save up for that family trip to Disneyland.
Tip #3: Use cash instead of a credit card from time to time to help them understand the value of a dollar.
Tip #4: Introduce your teenager to an allowance. This isn’t a one size fits all model. Finding the right allowance for your child based on their needs and goals is a good opportunity for them to manage their own money.
Tip #5: Show them how to use a credit card responsibly and build their own credit. Parents can start off with a gas card and slowly introduce other spending limits once their child gets comfortable with the concept of credit.
Tip #6: Encourage transparency about financial matters and foster a safe environment at home to discuss money. A few ways to do this would be to share their 529 account statement to show activity and growth or even your paystub so they can see how much you earn, how much you contribute to your 401(k), and how much goes to taxes.
Tip #7: Try instilling the bucket approach when your child gets some birthday money or an allowance. This is a fun and easy tool to educate them about goal setting as well as helping others. The motto we like to use is “give-save-spend,” and this helps them decide how to divide what they earned.
Stay tuned for more Couchside Conversations episodes! We have topics coming up like…
- The Problem with Most Financial Advisors
- Protecting Your Family Using Insurance
- Owning a Home/Investment Property
