You’ve tried to prepare your children intellectually and emotionally, but have you taught them financial responsibility? You can help prepare them for the financial decisions they will face as adults.
Here are a few ideas to keep in mind along their journey to adulthood:
Financial literacy should start early.
Age-appropriate learning starts with handling money, managing an allowance, opening a bank account, and understanding how money is used. Expose your child to how you earn money, where you spend it, and why you invest it.
Money talks and so should you.
Many everyday transactions can lead to discussions about money. At the grocery store, talk with your kids about comparing prices and staying within a budget. At the bank, teach them that the automated teller machine doesn’t just give you money for the asking. Show your kids a credit card statement to help them understand how “swiping the card” actually takes money out of your pocket.
Some people don’t like to talk about money. But making your wealth a regular topic and relating it directly to your children’s lives helps them incorporate money into their thinking. Be honest about the challenges you’ve had to overcome and the lessons you’ve learned from financial mistakes.
Teach by example.
An allowance program, where payments are tied to chores or household responsibilities, can help teach children the relationship between work and money. Your program might even include incentives or bonuses for exceptional work. Aside from allowances, you could create a budget for clothing or other items you provide. Let your kids decide how and when to spend the allotted money. This may help them learn to balance their wants and needs at a young age, when the stakes are not too high.
Your children can benefit from understanding the importance of living within your means. Share the family budget with them, explaining the tradeoffs you’ve adopted. Knowing the difference between needs and wants, and between assets and debts, will help your kids prepare to manage wealth responsibly.
Discuss their life goals.
Even as your children prepare to set out on their own paths, you can help them understand how to leverage their wealth through thoughtful use of investments, annuities, trusts, and charitable gifts. Helping them understand the importance of conservative stewardship can pay dividends for generations.
As you teach your children about money, don’t get discouraged if they don’t take your advice. Mistakes made at this stage in life can leave a lasting impression. Also, resist the temptation to bail them out. We all learn better when we reap the natural consequences of our actions. Your children probably won’t be stellar money managers at first, but what they learn now could pay them back later in life – when it really matters.
It’s never too early for professional advice.
The team of Financial Consultants at Alliant Retirement and Investment Services can show you and your children the right tools needed to manage your wealth. Call or email us to discuss how we can help prepare your heirs for fiscal responsibility.