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

Why you need to swim like a shark

I recently met with prospective clients. We had a great conversation and ended an hour and a half meeting with handshakes and a smile. After the meeting, I felt really great about our conversation and the caliber of the couple I had just met with.

How to say "Livin' the dream" -- and mean it

Ever notice how pretty much every time someone says those three little words, “Livin’ the dream,” it is in a dull, lifeless, tone and with more than a hint of sarcasm?

Millennials -- How will you be able to retire?

Here’s the good news: if you start saving now, you will more than likely have more money in retirement than the generation right in front of you, Generation X, who are busy playing catch up. Here are some goals to strive for to help you achieve a better financial future than you may have anticipated. Even implementing a few of these items will go a long way towards securing a strong retirement.
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: