Edit ModuleShow Tags

The financial facts of life


Published:

By default, parents are usually the primary source of a financial education. However, many young people may receive allowances—or even sizable inheritances—without a sound base of knowledge in saving, budgeting, investing and financial planning. To help the children in your life develop a responsible attitude about money, it might help to consider these points:

Be a Role Model

There is a significant relationship between the way children view money and your own spending habits. Instead of viewing money and personal finance as a forbidden topic, discuss your own financial goals and plans. The level and amount of information shared is up to you, but bring the younger generation into at least a portion of your plans. How you deal with money issues—from the monthly bills to planning the family vacation of a lifetime—are important and long-lasting lessons about money management and the value of money.

Encourage Savings and Investments

One of the simplest ways to encourage a responsible attitude about money is to encourage children to save. This could include designating a portion of a child’s allowance to a savings account, or making gifts of cash directly to an account in their name. Discuss account statements together, and stress the concept of “paying yourself first” with dedicated, regular deposits. For younger children, set modest, attainable savings goals. For older children, encourage the development of a long-term savings plan for the purchase of a large-ticket item like a computer or car. Consider an occasional “matching grant” to encourage regular deposits and help keep goals visible. Take the time to explain basic investment types such as cash instruments, stocks and bonds. Make investing interesting by engaging in conversation about companies that provide popular children’s products such as toys or clothing.

Develop a Sense of Financial Empowerment

Developing responsible spending habits means encouraging well-thought-out choices. Guide and advise rather than dictate how money should be saved and spent. Keep goals visible with pictures or create charts that plot the growth of funds needed. Take children on window-shopping trips to compare prices and products and adopt the mind set that every trip to a store is an exercise leading to a potential purchase. To limit impulse buying, consider instituting a rule that prices and products are compared at a minimum of three locations.

Give Unto Others

Involve children in your financial decisions regarding philanthropy. Discuss the merits of gift applications you may have received and weigh the advantages and limits of each. Explain the tax advantages of charitable giving but, at the same time, stress the altruistic goals of giving. Even a contribution to a canned food drive or the creation of a holiday basket for a needy family can grow into a family-wide event. By helping children contribute time or money to a charitable cause, you can teach them that money is important in ways other than personal consumption. 

Developing a sound knowledge of basic financial practices can often go a long way toward helping the children in your life achieve lifelong financial security.
 

Edit Module
Julie Stone

Julie Stone, CIMA is a vice president and senior investment management consultant at Morgan Stanley Smith Barney in Denver. She has been building solid portfolios for over 22 years.

Get more of our current issue | Subscribe to the magazine | Get our Free e-newsletter

Edit ModuleShow Tags

Archive »Related Articles

Today's legal industry faces a myriad of tech-related challenges

A new generation of tech-savvy lawyers are offering new options to clients, even as online industry presents the legal profession with new challenges, Fennemore Craig Managing Director Troy Rackham says.

Crossing the T: Battleship strategy for business

The fleet that has “crossed,” however, can fire all weapons at Ship 1 then 2 then 3, etc. It has at least six times the firepower. I can draw two business lessons from this military strategy. Perhaps you’ll have more.

GenXYZ: Our Top 5 Young Professionals

The GenXYZ top five were chosen based on professional achievement, as well as community involvement or impact, obstacles surmounted and each candidate’s personal story.
Edit ModuleShow Tags

Thanks for contributing to our community-- please keep your comments in good taste and appropriate for our business professional readers.

Add your comment: