Time to read: 5 Minutes
As a parent, it’s your goal to provide your child with the resources, tools, and skills they need to be happy and successful. And while money largely shapes the experiences we’re able to share with them and the way you provide for your children, helping them create good spending and saving habits is something that we often overlook. Many families don’t begin talking about finances at all until their children are adults or they begin estate planning.
However, we are of the belief that it’s never too soon to start talking to your children about money, and that the sooner you start, the easier these conversations become. Keep reading to learn how you can start these conversations and build the foundation for financial success with children of any age.
Talking About Finances with Children.
Because money and finances are considered extremely personal or taboo topics, many parents shy away from discussing money with children who are likely too young to fully grasp the importance of money and the role it plays in our daily lives. However, much like with anything else, habits are created early, and children are often more receptive to listening to advice than teenagers or adults.
The key is open, honest, and transparent communication at an age-appropriate level. Explain to your children how money is earned, what it is used for, and why you choose to buy certain things but not others. This can start as simply as explaining the prices of different items at the grocery store, showing them how you scan and pay for the items, and explaining where the money you used to buy the items came from.
You may also want to have early discussions about saving and spending. If your child earns an allowance, makes money doing chores, or gets money as a gift for holidays or birthdays, talk to them about how much money they received. Share examples of what they could buy with the money they have but also explain that they can save for more expensive items they might really want. Some families may require that a certain percentage of the money is allocated to savings or a college fund and check the account on a fairly regular basis to show their children how the money has added up.
This can also include sharing other values, like why you make charitable contributions and what goals, like a vacation, your family may be working towards.
These early lessons help children see the value of saving money, not just spending it.
Instilling Good Habits in Teens.
Many parents don’t realize they haven’t started having conversations about good financial habits until their teenage children have their first jobs or notice them spending any money that they do get irresponsibly.
Teens may not be as receptive to feedback as young children, but it’s still incredibly impactful to have conversations where they can benefit from your guidance, or even rules, around saving and spending.
Sit down with your teenagers and explain how to make a basic budget, share a story about a time you saved up for something you were really excited about, or even the opposite: speak candidly about a time you wished you had saved better and missed out because of it.
Next, help them come up with a plan for spending, saving, and investing their money. Depending on their goals, they may want to make contributions to more than one savings account (short-term purchases, like a prom dress vs. long-term purchases like a car). If you want to and are able, you may even offer incentives to save, like matching contributions to a college fund.
It’s also a great time to explain how investing works and introduce them to the concept of compounding interest. Encourage them to open a Roth IRA and share how small, regular contributions made at this stage of their lives will make a big difference years down the road.
Giving Advice to Your Adult Children
Many families, especially ones that haven’t struggled financially or where children have naturally adopted reasonably responsible behaviors, never have in-depth conversations about money. Parents may only realize this when doing estate planning or when they realize their adult children are making financial mistakes or missing opportunities to grow their money.
Adult children may not be open to hearing advice – but many will welcome the chance to learn more about investing, creating a financial plan, and how to work towards certain goals.
Oftentimes, the key to approaching these conversations is to offer guidance, rather than criticize their current structure. Tell your children you want to explain how you’ve structured your money, ask if they know about certain saving or investment vehicles, and offer to answer any questions they have.
Remaining open, honest, and transparent will make your children more inclined to ask questions during these initial conversations and in the future when they need advice.
We also recommend having conversations about finances as part of the estate planning and generational wealth transfer process so you can feel confident you’re passing down your values and habits to create a lasting impact.
At The Tranel Financial Group, we care about the families behind the finances. That’s why we want to support the ongoing financial health and well-being of your entire family, including that of future generations.
For help navigating difficult conversations and creating a sustainable financial plan that supports your goals, contact us today!
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Note: This content is for informational purposes only and should not be considered financial or tax advice. Please consult with your financial or tax advisor for guidance tailored to your specific situation.