Mother’s Day Money Tips for Kids
Just like most everything in life, when it comes to money skills, children learn an awful lot from their parents. Many of our clients actively involve their kids and grandkids in their philanthropic giving and have family meetings to ensure everyone learns about asset allocation, diversification and the necessary financial skills. Hoping to put their children on the right path, they often ask us for advice on how to teach children to manage money wisely.
This Mother’s Day, we consulted two veteran wealth managers and Aspiriant partners, Sandi Bragar and Mary Ellen Krueger, who both were recently named to the Top Wealth Advisor Mom list by Working Mother Magazine. They talk to their kids a lot about how to make sound financial decisions.
“We talk often about money in our family and are transparent about finances with our daughters,” says Mary Ellen, a director in wealth management. “If you’re open to them, you’ll find opportunities every day to talk to your kids about money.”
“My husband and I use family dinners and road trips as venues for talking about in-depth money matters with our kids,” adds Sandi, managing director of Planning Strategy & Research. “Examples include how much my husband and I make and how much our family spends; when and why does a person need insurance; and what is retirement and when does a person need to start saving for it (My youngest was relieved to learn that she has plenty of time to plan!). We strive to have these conversations in a matter-of-fact tone, using examples and language that is appropriate for their age levels.”
Sandi and Mary Ellen’s children are between 9 and 14, and this is how they educate them about money every day.
Focus on personal and family values
They start by instilling a sense of the value of money by encouraging the children to think about work and what matters most to them as individuals and for everyone in the family.
“We tell our kids stories about how we grew up and highlight how hard our parents and grandparents worked,” Mary Ellen shares. “We tell them about our first jobs and how we earned money for many of the things we wanted. My father-in-law grew up on a farm, and he describes all the farm chores he had to do every morning before and after school; chores he did not get paid for because the work was expected of all the family members.
“My husband picked sweet corn at the farm when he was a kid and sold it door-to-door from his wagon, eventually growing the “business” to the point where he had other kids selling corn for him,” she continues. “Even though our kids don’t live on a farm or have an opportunity to pick corn before school, we want them to experience hard work and the feeling of accomplishment one gets after successfully completing a hard job.”
Sandi did a family values exercise “to determine our top individual values, and then used those to define family values that we use as a framework for making family money decisions.”
Remember everything is a trade-off
Both of them provide their children with some sort of allowance to get the children thinking about budgeting and prioritizing spending.
“I think the concept of trade-offs is very important to learn early,” says Mary Ellen. “You don’t have unlimited money, so you have to prioritize and budget. These are hard skills for many adults, but the sooner you learn and practice, the easier it becomes.”
Sandi agrees, “We recently bought a new car and made the kids (who would have rather done just about anything else) go car shopping with us so that they could see what it’s like to interact with the sales folks and be part of the process of assessing what trade-offs we were or were not willing to make.”
Sandi started giving her children “practice money” when they were eight years old. “This functions as an allowance, but they receive it quarterly, which has helped them learn basic budgeting skills. Additionally, we remind them they can use their practice money to buy whatever they want, which has helped them learn ‘want’ versus ‘need’ for items we won’t buy for them,” she explains.
“Now, our older child is making money from weekend umpiring work and babysitting. As a result, we’ve asked him to pitch in on the cost of luxury items and experiences. For example, he paid 10% of the cost of his recent eighth-grade trip to Washington, D.C., which he had a year to save for. I believe he enjoyed the trip even more because he worked hard for it.”
Mary Ellen adds, “When it comes to saving for important goals, my husband’s grandfather taught him to ‘pay yourself first.’ A cliché maybe, but something we try to live by and pass on to our daughters. We tell them an education is something we value, so we prioritize saving for it. Because we allocate money to their college accounts every month, we have less to allocate to other things.”
Understand compound interest
One way to encourage children to save is by showing them how compound interest works in their favor. Ordinary savings accounts, college savings plans and taxable investment accounts are great ways to start robust conversations about financial returns.
“No one has ever been more excited about $15 a month interest than my son!” says Sandi, who believes it’s important that children become familiar with statements. “Next up, we’ll open custodial brokerage accounts to take their investment education up a notch.”
Mary Ellen uses her girls’ 529 college savings plans to teach them about investing. “I like that the statements show earnings since inception so the girls can see both the contributions we’ve made and the earnings on those contributions. We can teach them about the power of compounding and that money invested in stocks doesn’t always go up every quarter or every year. We ask them questions like, ‘What is your 529 invested in? What companies are in the S&P 500? What is the MSCI EAFE? Why is it important to have money invested in different countries?’”
Give to others
As the mothers help the children prioritize their spending, they emphasize the importance of giving to others in their community.
Part of the practice money for Sandi’s kids is earmarked for giving so her children can gain experience in deciding which charity to give to, when and how much. “Along these lines, my son received a $25 Kiva Card for his bar mitzvah, and giving (lending) money in that manner has broadened his perspective and his appreciation of how far $25 could go in the world. It also triggered my daughter to get in on the action because she wanted to help make other people’s dreams come true in this manner.”
Mary Ellen and her husband are open with their kids about the causes and organizations they support and often involve them in deciding which organizations to give their time and money. “Our daughters enjoy giving to charities in which they have an opportunity to participate.” Her daughters have volunteered for Heifer International and Blessings in a Backpack.
Children need financial role models
Children learn best by witnessing people exemplify strong ethics and wise decision-making. And that is especially true when it comes to financial management. When children see the adults in their life manage money wisely, they will follow suit. That goes for everything from paying bills on time to weighing the pros and cons of every major financial choice.
“A Mother’s Day story wouldn’t be complete without mentioning my mom who has been my role model,” says Mary Ellen. “My mom worked as a banker since I was in kindergarten. I’m sure it wasn’t always easy in those days as she had to navigate not only the cultural challenges of being a working mom in the banking and finance industry, but she also fought breast cancer while never missing a sporting event or extracurricular activity for my brother or me. She was our family’s financial guru, managing our family finances and demonstrating a strong work ethic. My goal is to raise my daughters to be empowered to make smart financial decisions, as my mother raised me.
“It isn’t always easy,” she continues. “We talk about money so often my eldest frequently gives me an eyeroll, followed by, ‘Mom, I know … diversification is important … don’t spend more than you make. I got it, Mom.’ We could do better about making our daughters do more weekly chores, but I think we’re on the right path.”