Financial Parenting: 5 Important Lessons for Your Young Children
As a professional financial advisor, sometimes I find it impossible to leave my work at the office. That’s not to suggest that my colleagues or clients have unrealistic expectations when it comes to my time. Rather, given what I do for a living, I’m keenly aware of the need to help my three young children develop a healthy relationship with money.
Like most parents, I’m constantly aware of how my actions today will impact my kids down the road.
While I know that money cannot buy happiness, I strongly believe that teaching my kids how to understand and handle money will enhance their future experiences in the world. As a result, I’ve found many teachable moments in their young and rapidly growing lives.
I’d like to share five special memories that served as financial lessons I believe are important to teach your kids.
1. Saving 101
My clients frequently ask me when they should begin talking to their children about saving money. Several experiences with my kids have me convinced that it is never too early to start. For example, my 6-year-old recently asked if he could open a bank account. My immediate thought was, “Do we really need another account to track?” But I paused and reflected for a moment.
He was holding a jar filled with small bills and coins of his birthday and chore money. How could I possibly deny my son the satisfaction of opening his own account? I decided instead to applaud the idea and reward him with a small matching contribution. Even at his tender age, his proud expression as we left the bank, statement and lollipop in hand, said it all — an important lesson had been learned.
I did not need to wait very long for another teachable moment as my son quickly posed his next question, “How big will my account be at the end of the year?”
I explained that the money in his account was safe, and that the bank would pay him interest for all the money he saved. Then I explained that companies also need money to help them grow, and that they often get this money by selling small shares of the company to investors.
We discussed how investors generally earn more over time than people with bank accounts, but that some money could be lost as well. When we explored what company shares he might like to own one day, Disney was (of course!) at the top of this first grader’s list.
3. Work and independence
A few years ago, my 9-year-old discovered that the heap of recyclables we placed at the curb each week could be returned for cash. When he asked why we didn’t do the same, I mumbled something about not having the time.
However, realizing that one of the most important goals of a parent is to raise an independent child, I decided to embrace his “business plan.” Soon, we were lugging cans and bottles to the local recycling center each month. As word spread of my son’s new “business,” grandparents, friends and neighbors added to his stash.
While far from my favorite activity, participating in this green initiative was well worth the effort. Not only did it help my son make the connection between work and money, he enjoyed the independence associated with deciding what to save and what to spend. We now refer to him as Mr. Money Bags as he rarely leaves the house without a $10 bill in his pocket — and often returns with most or all of it intact.
4. Spend your money on what matters most
I recently read a book review that started with, “There are two things that are perhaps the best gauges of your heart and what you really believe: Your wallet and your calendar. How you spend your time and your money speaks volumes about you and your character.”
I strongly believe in this sentiment and do my best to ensure that my spending patterns send the right message to my children.
When my 12-year-old daughter requested that we spend what I felt was a ridiculous amount to see her favorite band, my initial response was, “Absolutely not!” This led to some passionate negotiating.
I reminded her that saying no is not always about not having the funds, but rather whether it makes sense to spend them. She relented, but I kept thinking about it and ultimately decided to splurge — as a special reward for her outstanding performance in school. I wouldn’t say that the show was worth it, but the precious time to bond with my pre-teen daughter certainly was!
5. Give Back
I’d like to suggest that each of my children has a heart of gold every second of every day. But let’s face it, they are kids and being selfish (at least some of the time) comes with the territory. I’m hoping to change that and believe that instilling a sense of altruism in them requires that we, as parents, do more than simply write a check to charity.
I’ve found that several of our brightest and best family experiences — now traditions — are participating in the Autism Speaks Walk, supplying a Thanksgiving dinner to a family in need, purchasing Toys for Tots and attending a local fundraisers. I am confident that my kids are learning the deep satisfactions of helping others in our community and beyond. “It is better to give than to receive” is arguably the most important and enduring financial lesson of all.
Just remember that children are naturally curious about money. If you stop and listen to them, you’ll find your own opportunities to create financial memories that will last a lifetime.