Thought Process Series: Teaching Your Children/Teenagers About Money
"Adulting" is challenging enough sometimes with trying to juggle your career, volunteering, social groups/activities, family obligations and the like. Why not give you kids a head start on being a successful adult and teach them amount money and finances when they are young and into their teen years?
Much like we each needed to learn about money and finances from someone or figure it out on our own, our children could really use some guidance. My boys will soon be 8 (Mason), 6 (Gauge) and 4 (Austin), and I often find that they teach me as much as I teach them. When they want a new "guy" or a new toy, they often suggest that we "just order it on Amazon"...but I think they fail to realize that no matter where you order something from or which store you go to, you trade goods or services for dollars earned.
We've started a system where if they do chores or help out around the house, they get an allowance. However, most of the time their allowance is being deposited into a UTMA account that will transfer into their possession when each of them turn age 18. Before deciding where to put the dollars, we talked about whether they would prefer to have half of the money to spend or whether they'd rather save it for the future. Right now, they all chose to save their dollars. :) In time, their "goals" might change and then we'll adjust their mix (saving/spending/giving).
In this Covid-19 world, my oldest Mason has been home working with Mom, a lot! As a result, he's heard lots of conversations around the stock market, the economy, emergency funds, investments and making future-focused financial decisions. We started playing a little game. Each morning before we'd start school activities and work, I'd catch him up on current events. Based on what was going on in the world, I'd ask him to tell me whether he thought the stock market would be up or down that day.
Here's the cool part:
- Mason is 7.
- He now understands that a stock is ownership in a company.
- He now understands that a bond is owning the debt of a company; he is the bank and they are paying him interest to use his money.
- AND, he is beginning to understand how current events impact the stock market going up (green is good!) or down (red is bad).
Financial Planning might be my full-time gig, but so is being a Mom...and hopefully a great Mom at that. When I started my professional life as a Certified Public Accountant auditing businesses, I wanted NOTHING to do with investments. I let my 401(k) auto-enroll me at a 3% contribution and had no idea what my money was going into the first 3.5 years that I contributed. Honestly, I didn't even care to understand...investments just wasn't something that interested me.
Today, I can honestly say that waking up to build portfolios isn't what fuels my passion, but helping people, guiding them, educating them...that's where my passion lies. So, even if investments isn't your "thing" or understanding the markets isn't of interest to you...find someone who is passionate about you and helping you to work toward your financial goals to help you and your children.
With several of my adult clients who are parents, I've started working with their teenagers. Mom or Dad has basically told said teenager that he/she is going to invest a portion of what they make from their part-time or summer job into a Roth (in many cases) and that quarterly we will have little educational sessions. About once a quarter, we do a brief investment review and I pick one financial topic to help education the teenager about (budgets, credit cards, debt/interest, stocks, bonds, markets, etc). Not only is it a good opportunity for parent and teenager to bond and help educate the teenager about important topics for adulthood, but we are also helping said teenager to start saving early for their future.
So, food for thought, the time to start teaching your children or teenagers about money and finances can happen as early as you are ready. Children are like sponges and I am amazed at how much of an interest my children have taken in the markets. Additionally, I am so incredibly proud of the teenagers that I have the privilege of working with...meetings with me are sometimes "boring" or "dreaded"..until we get going. Now some of those teenagers are asking when our next meeting is, I cannot wait to see what the future holds for them!
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. (05/20)