3 Money Conversations to Have with Your Kids
BY STEVEN GALLO, CFP®
Recently, the FINRA Investor Education Foundation ran a study with results showing that financial literacy was a strong indicator of positive future financial outcomes for people (Williams, 2020). Another study indicating how critical the knowledge and skills needed to managing money are, shows where the root of the problem may lie. Financial literacy is not a subject that primary schools tend to teach well, if they teach it at all. These lessons are best taught at home. In 2017 T. Rowe Price ran a survey that indicated 69% of parents have reluctance when it comes to talking about money with their children (T. Rowe Price, 2017). The only way to close this disconnect is to start talking about money with our children and you need to have some ways to get a conversation going. We can help you with that….
Here are three topics to get your conversations started as you teach your child how to build a solid financial future:
- The Difference of Needs vs. Wants. We live in instant gratification, want-driven society and it is crucial to have a discussion with your child about the differences between a “need” and a “want.” We “need” food, shelter, clothing, and security to survive – whereas “wants” are something we desire but do not depend on to live. Teach your child that “needs” should be built into their budget, but it is also important to plan for the money for the extras or for the “wants” in life. You can have both, in some cases, if you plan accordingly.
- Earning Money. One of the first positive experiences that your child can have when it comes to an understanding of finances is the act of earning money. Whether earning an allowance for chores done or help around the house or for a part-time job after school, earning money through effort helps your child associate value/happiness by way of income for the work done. It is a simple concept that, learned early, can have a profound impact.
- Saving Money. Saving money is a habit and it’s best to instill good habits early. Learning to pay yourself first by saving 10% of your income at a young age will pay dividends (no pun intended) throughout a lifetime. You can teach younger children about saving money through the use of a piggy bank, and older children through opening a savings accounts and setting up various goals that can be achieved in a realistic timeframe.
Teaching kids while they are young can help them build a strong and positive relationship with money. That positive relationship can jumpstart the desire to earn money, save, and build up a secure future. If you would like more personalized financial guidance as you educate your kids about money, please contact us for a complimentary consultation.
Securities offered through LPL Financial, Member FINRA/SIPC, Investment advice offered through Independent Advisor Alliance, a registered investment advisor, Independent Advisor Alliance and Marzano Capital Group are separate entities from LPL Financial.
Williams. (2020, October 29). New Research: Financial Literacy Is Significant Indicator of Positive Future Financial Outcomes and Behaviors | FINRA.org. FINRA. https://www.finra.org/media-center/newsreleases/2020/new-research-financial-literacy-significant-indicator-positive
- Rowe Price: Parents Are Likely To Pass Down Good And Bad Financial Habits To Their Kids. (2017, March 23). Retrieved from https://www.troweprice.com/content/trowecorp/us/en/press/t–rowe-price–parents-are-likely-to-pass-down-good-and-bad-fina0.html?id=26658