There is no such thing as too early in talking to your kids about money.
Yes, we understand your worry. Talking to kids about money might seem too early, too drastic, or too much to take in for a child. But as a parent, you should understand that unless you take steps early on to prepare your kids for future financial decisions, there's a good chance they end up like many American adults today. According to Bankrate's 2024 annual emergency savings report, only 44% of U.S. adults can pay an emergency expense of $1,000 or more from their savings.
And for your information, talking about finances to a child is not just about teaching them basic math or investing. It is actually a holistic approach that also includes good financial values and responsible stewardship, most of which are good skills for someone to have early on. Lisa Detanna, Private Wealth Advisor, Managing Director, and Senior Vice President of Investments at Raymond James, with her vast experience as a wealth advisor for family offices, multigenerational families, and high-net-worth clients, has laid out a pathway to accomplish this. Her advice is simple, actionable, and rooted in decades of experience helping families tread through the challenges of wealth management.
Why the Need to Start Them Early?
Introducing a child to the concepts of wealth management at an early age may appear premature, but Lisa believes that early education can significantly reduce future mistakes. "Teaching kids about money early on isn't just about telling them to save or invest. It's about giving them a solid start so they make fewer mistakes as they grow up." The foundational knowledge they will learn about finance is something they will carry with them throughout their lives, growing and maturing along with them. Thus, it becomes a comprehensive strategy to safeguard their future.
1. Make It Fun
"First of all, we have to make it engaging for the child," Lisa shared. By introducing concepts of money, saving, and spending in a fun and interesting way, children can learn the basics of finance from an early age. This could be as simple as playing games that involve counting and using money or reading stories that incorporate financial lessons. Lisa's own children's book, "Treasures in the Winter Vault," is an excellent example of making financial education entertaining and meaningful for kids, teaching them about the value of money, the importance of doing the right thing, and the joy of giving back.
2. Build Open Conversations
One of Lisa's key strategies is encouraging open and honest conversations about money within the family. These discussions can help them understand financial topics better and make them more accessible to children. According to Lisa, "By talking openly about budgeting, saving, and the family's financial goals, parents can help children understand the value of money and the effort it takes to earn and manage it." These conversations will then lay the groundwork for a healthy financial mindset that will last a lifetime.
3. Set a Good Example
Children learn a lot by observing the adults in their lives. Setting a good example of how you manage your finances is crucial. This means making thoughtful spending decisions, saving regularly, and investing wisely. "When children see these practices, they are more likely to emulate them," Lisa added. "Show them how you work on a budget, involve them in family financial planning, and share your experiences of financial successes and failures in a way a child would understand. These are all incredibly educational and will help a lot in the process."
And to start them on their own experience, you can try to set up a savings account in their name and help them budget for a special purchase. These hands-on experiences will help your children grasp the practical aspects of financial management and the real-world implications of their financial decisions.
4. Teach Good Financial Values
As children grow, Lisa advises gradually increasing their financial independence and responsibility. Encourage them to earn their own money through chores or part-time jobs or involve them in more complex decisions. These experiences teach valuable lessons about hard work, decision-making, and the consequences of financial actions.
5. Instill Them the Value of Giving
Last but not least, and is actually the most important of it all, children should be taught to give back to people. "Philanthropy is a powerful way to teach children about compassion, gratitude, and the impact they can make in their community," Lisa points out. It helps them understand that wealth isn't just for personal gain; it's a tool that can be used to make a positive impact on the lives of others.
To Wrap it Up
Guiding a child to wealth is more than just teaching them how to manage money; it's also about instilling good financial values, building a sense of responsibility, and preparing them to make wise financial decisions throughout their lives. By starting early, making learning fun, and setting a strong example, we can equip the next generation with the tools they need to not only manage their finances effectively but to use their wealth to make a positive difference in the world.
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