If you’re like most parents, the minute you hold your new child in your arms, you start thinking about all the things you’re going to do with them and the lessons you will teach them along the way. Most parents want to see their kids grow up to be responsible, empathetic, independent, and polite. (1) And while no one will argue the importance and value of these traits, have you ever thought about putting financial literacy at the top of the priority list as well?
As a society, we are excelling in some areas of parenting, but falling behind in others. In a recent National Financial Capabilities Study, only 24% of Millennials (age 23-35) were able to answer the first three financial literacy questions correctly, and a mere 8% were able to answer them all correctly. (2)
Do you have a plan for how you are going to teach your kids about budgeting, saving, or building credit? It’s easier to start when they are young than to play catch-up when they are teenagers. Here are some strategies to consider that will empower your children to make better financial decisions as they move through life.
Be An Example
Anyone who has children knows that more is caught than taught. If you want your kids to grasp the importance of handling money wisely, you need to let them watch you make financial decisions and model what you want them to learn.
A recent T Rowe Price study found that 8 out of 10 parents feel that they aren’t setting a good financial example for their kids. (3) If you spend money recklessly without a clear purpose, your kids will see that. If you rely on credit cards to cover expenses or argue with your spouse about finances, they’ll accept that behavior as the norm. Your actions set a precedent, so be intentional about how you model money management to your kids, and let their watchful eyes be a motivator for you to change the negative financial habits you may have picked up.
Spark Intentional Conversations
Sometimes a silent model isn’t quite enough since many areas of personal finance aren’t visible. That is why it is critical to talk to your kids about finances. Unfortunately, talking about money is a long-standing cultural taboo. A 2013 study found that 63% of Americans would rather share their body weight with co-workers than their bank account balance. (4) Often this reluctance to discuss financial matters spills over into the home as well.
Forty-nine percent of the parents in the 2017 T Rowe Price study said they rarely or never discuss family finances with their children, and 69% of parents experience at least some reluctance to having such a discussion. (5) Many parents even say they would rather discuss drugs or sex with their kids than money. (6)
But how are kids going to learn about money if you avoid talking to them about it? Most parents don’t expect their kids to understand the dangers of drugs just because they have never seen their parents take drugs. Some things require more in-depth discussion and openness, and finances are one of them. And if you set the precedent of being open about finances when they are young, hopefully they will still come to you for advice or assistance when they get older.
Let Them Practice
For financial understanding to truly sink in, you need to get your kids involved. Learning theory and research have consistently shown that the more active a learning experience is, the greater the learning gains and retention. (7) Most people have to do something to really learn it.
How does this work with kids? If you do a simple online search, you will find countless creative ideas for every age level, such as letting them divide their allowance into different categories, setting short-term and long-term goals, and helping them understand what items are worth.
On a practical level, give your five-year-old some money to buy something at the store so they learn the value of different items and realize that in order to obtain something (a toy), they have to exchange it with something else (money). Try letting your ten-year-old figure out the cost of the new video game he wants, plus tax, and help him save up his allowance for it. Let your teenager buy her back-to-school clothes on her own with a set amount of money. Don’t be afraid to let them make mistakes either. Sometimes learning the hard way is the best way to grow, and it’s better for them to learn those lessons when they are young and the consequences aren’t as severe.
Imparting financial wisdom to your kids is a challenging process that takes years. So if you don’t feel like you’re doing an adequate job of teaching your kids about money, you’re not alone. Even if you are doing a good job, you probably agree with the 77% of the T Rowe Price survey parents who said that they wished there were more resources available to help them teach their kids about financial matters.
We Want To Help You
At ATL Global Advisors, we believe that every child can and should learn at a young age the critical financial lessons that will set them up for future success. We want to provide you with the tools to help you on this journey. Email me at firstname.lastname@example.org, call 770-800-2851, or click here to book your no-obligation introductory meeting. Together we can make sure that your children will enter adulthood with the knowledge necessary to build a secure financial foundation for their bright futures.
Kevin Myers is a financial advisor and managing partner at ATL Global Advisors, an independent financial services firm serving transportation and logistics employees in the greater Atlanta area. With more than two decades of industry experience, he specializes in providing private wealth management services to business owners and their families, with the goal of helping them realize their financial dreams. Learn more by connecting with Kevin on LinkedIn.