This article appears in Atlanta Business Chronicle.
Teaching children about money and finances can be an essential life skill to set them on the path to financial success. Parents typically play a crucial role in this process, as they are often the first educators on the subject. We recommend parents start having conversations about money and finances with their children early, so they can develop a healthy relationship with money and make smarter financial decisions in the future. Here are some tips parents can use to discuss finances with their kids.
1. Start early and keep it simple
Parents can start teaching children about money as early as preschool age. At this stage, the focus could be on introducing basic concepts like the value of money, counting and saving. Then, parents can gradually introduce more complex concepts like budgeting, investing, and debt as children age. When talking to kids about money, it’s important to use age-appropriate language and to keep things simple.
2. Lead by example
Modeling good financial behavior can be one of the most effective ways to teach children about money. Parents should be transparent about family and personal finances and explain how they monitor, evaluate and manage money. This can include talking about how they budget, save and invest. By leading by example, parents can help children develop a positive attitude toward money and encourage them to make smart financial decisions.
3. Use everyday opportunities to teach
Everyday opportunities can provide valuable teaching moments for parents. For example, parents can take their children grocery shopping and explain how they are making choices based on prices and quality. When paying bills, parents can explain what they are, how they are paid and why they are important. Children can also be involved in family budgeting by setting goals for saving and spending.
4. Encourage saving
Saving money is an important financial habit that should be encouraged early on. Parents can help children set savings goals, such as saving for a toy or a new bike. They can also teach children about the different types of savings accounts and the long-term benefits of saving money. By encouraging saving, parents can help children develop delayed gratification habits and build a strong foundation for their financial future.
5. Teach about credit and debt
Credit and debt are important financial concepts that parents can help their children understand before they become adults. Parents can explain what credit is, how it works and the importance of obtaining and maintaining good credit. They can also teach children about debt, including the dangers of taking on too much debt and the importance of paying off debt. By teaching children about credit and debt, parents can help them avoid common financial pitfalls and make smarter financial decisions in the future.
6. Emphasize the value of hard work
Teaching children about the value of hard work can also be a valuable lesson in financial capability. Parents can encourage their children to earn independent spending money through chores or part-time jobs. By working for their own money, children can learn the value of money and the importance of hard work. Parents can also explain the difference between wants and needs and how working hard can help them achieve their goals.
7. Attend financial literacy workshops and webinars
Attending workshops and presentations on financial literacy can provide additional resources on budgeting, investment planning, debt management and more. SignatureFD’s Wealth Planning 101 webinar answers some common questions on how and when young earners should start saving for retirement and the potential impact taxes can have on their income and ability to accrue wealth.
8. Make it fun
Lastly, making financial education fun and engaging for children can increase their understanding. Parents can use games, books and apps to teach children about money and finances. For example, they can use a board game to teach children about budgeting or a savings app to aid them in tracking their savings goals. By making financial education fun and interactive, parents can help children develop a positive attitude towards money and build a strong foundation for their financial future.
Teaching children about money and finances can be an essential life skill that parents can provide as early as preschool. By starting early, leading by example, using everyday opportunities to teach, encouraging saving, teaching about credit and debt, emphasizing the value of hard work, attending workshops and webinars, and making it fun, parents can give their kids a head start to making smart financial decisions.
Are you interested in learning more about talking money with children? Contact us today.
SignatureFD is a financial advising firm headquartered in Atlanta, Georgia. We believe in helping our clients achieve wealth beyond money. Our team of investment, financial planning, and tax experts are committed to proactively helping clients take control of their financial lives and achieve their goals.
Colin Sturgis, CFP, is a partner and wealth advisor at SignatureFD. He works with clients and their families on various investment, tax, and estate planning strategies. He holds a Master of Science in personal financial planning from Georgia State University.
