Part of being an enlightened parent is being thoughtful about how we teach our kids about adult life. Of course, you want to prepare them to make good choices as an adult, especially when it comes to finances. And, you may either feel not equipped, or you may be concerned about passing on your own bad habits.
So, how do you teach kids about smart financial decision-making? What lessons should you teach? Is leading by example enough? Raising a child to be money savvy doesn’t have to be hard, especially if you have valuable lessons to pass down. But it will take a little reflection on your own financial know-how and a commitment to make passing on these aspects of adult life conscious, rather than doing it unconsciously, as happens in most families.
Kids look to us to learn about life and they pick up far more from us about what we do than from what we say. Accordingly, we can best teach our children to be money savvy by modeling the habits we want them to take on for themselves and by involving them in the process. A good place to start is by being transparent about your financial habits when the opportunities arise.
For example, you could have a monthly financial meeting and include your kids, and each month review your household income and expenses, like a business owner would when reviewing their profit and loss each month.
Another practical tip that my family has used to great success is to introduce the concept of taxes as early as possible. My wife and I brought this concept to our oldest child at Halloween, when we required her to give up 1 of every 5 candies to a different bag that would be given to us, as parents and providers of the house, clothes, food, etc.; and would be given to the children’s home as charity (also not a bad lesson). While the initial outrage was significant, our daughter has already come to understand how taxes need to be figured into financial planning.
If taxing your children is not your preferred method, perhaps you might consider giving your children an incentive to save and invest. Our children almost always receive a monetary gift for their birthday or certain holidays. Instead of giving the money to them outright (a trust planning concept), I offer them a choice of saving some. If they choose to save, then I match whatever they have saved that month. As an aside, we had a brief disagreement with our oldest who originally thought this meant I would double her money every month. NO!
Over time, we have watched our children give some thought to the financial process and think with a longer perspective.
When you do your estate planning, involve your kids in the process by having a family meeting once the planning is done to explain the planning and introduce your child to us, as your personal legal advisor who they can turn to in the future, when needed.
Modeling sound financial decision-making for your child is an excellent opportunity to take a deeper look at your own financial habits. This is a good time to take an honest look at your finances to make sure you are on track to meet your goals.
Assess your financial health and consider taking steps now to secure your financial future. Practice what you preach and know that your children are watching, so make sure you are modeling habits you’d be proud for them to develop as they enter adulthood.
If you need guidance in assessing your own financial health and habits, start by coming in to meet with us for a Family Wealth Planning Session™. As your Personal Family Lawyer®, we can guide you in creating a comprehensive financial plan that protects and preserves your wealth while meeting all your financial obligations. Before the session, we’ll send you a Family Wealth Inventory and Assessment to complete that will get you thinking about what you own, what matters most to you, and what you want to leave behind.
This article is a service of A. J. Yolofsky, Personal Family Lawyer®. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.