Sharing Financial Wisdom with Your Kids
By Ziyah Esbenshade, CFP®, APMA®, CRPC®
When is the best time to talk to your kids about money? For most parents, the answer is simple: as soon as you can. Talking to your kids about money can help them learn how to be financially responsible, self-supporting adults. To get the discussion flowing, consider using these conversation starters depending on your child’s age.
Begin with basics for your preschooler. Look for opportunities to teach values that will help your child develop positive financial attitudes and behaviors later in life. For example, the concept of sharing with others is something most young children can grasp. Talking about what you’re thankful for and involving kids in philanthropy can help instill gratitude. After all, children primarily learn about money from modeling their parents’ behavior.
Explain financial building blocks to your elementary school student. As your child progresses through school, start introducing the difference between needs and wants. Present the concepts of cost and quality to teach your child how to discern value. Give your child the chance to make some simple financial decisions that involve delayed gratification, such as setting aside a small allowance to buy a toy. Teaching children to strengthen their willpower and giving them age-appropriate autonomy is a foundation that can help them flourish financially in adulthood.
Understand that your middle schooler may be watching more than listening. Kids tend to be peer-oriented in the preteen years and may be less receptive to parental advice. Keep talks short, but don’t abandon the mission. Remember that your actions speak volumes about your values.
For example, if your child hears you continually talking about a new car purchase or sees you frequently shopping for nonessential items, he or she may pick up similar attitudes and behaviors. Consider involving your child in donations or charitable work you are passionate about or encourage him or her to support a cause of their own.
Encourage your high school student to think about the future. Now is the time to discuss college costs and encourage saving for college expenses. Talk to your child about what you plan to contribute and what portion you expect them to pay. Discuss whether student loans will play a role and their potential impact down the road. Conversations about college and majors can include frank discussions about the job market and future income potential. Discuss day-to-day financial responsibilities as well, such as how to maintain a checking account and debit card and how to protect accounts from fraud.
Help your college student prepare for independence. Counsel your child about the importance of living within their means and establishing and maintaining a good credit record. Explain how to use a credit card appropriately (and how to avoid fees and other credit troubles). As graduation nears, discuss your expectations for your child’s transition from student to working adult. Offer yourself as a resource for guidance on how to seek fulfilling work, negotiate a good salary, and navigate the world of employee benefits.
Inspire your college graduate to embrace adulthood. Once your child becomes financially independent, be thoughtful about how you approach money topics. Let your newly employed college graduate know you are willing to offer support and guidance yet steer clear of making decisions for him or her. Allow your child space to decide their financial goals.
Continue sharing advice based on your experience, such as the importance of saving for retirement early, having appropriate insurance, or building a financial safety net. Encourage your child to establish a relationship with a financial advisor who can provide an objective perspective and tools to create a financial plan unique to their goals.
It’s worth it. If you want to help your child develop financial competence and independence, start the conversation early and keep it going. Sharing your financial values can enrich your relationship and instill wisdom that will serve them well into the future.
Ziyah Esbenshade, CFP®, APMA®, CRPC®, is a Private Wealth Advisor and Senior Vice President with Pell Wealth Partners, private wealth advisory practice of Ameriprise Financial Services, LLC in Rye Brook, New York. She specializes in fee-based financial planning and asset management strategies and has been in practice for 20 years. To contact her, visit pellwealthpartners.com, call 914.253.8800 or visit our office at 800 Westchester Avenue, Suite 300, Rye Brook, New York 10573.