Recap of GFC's April 2008 Seminar, "Kids and Money"
Last month, we hosted a seminar entitled "Teaching Kids About Money" at our office in Berkeley. For those who were unable to attend (or for those who need a quick refresher) we have summarized some key points from the presentation.
Teaching our children how to form healthy saving and spending habits can be challenging for a number of reasons. However, before you begin the process, it is important to:
- Speak with your spouse or partner to ensure you're both in agreement on the overall message, and the specific details underlying the plan
- Put yourself in your children's shoes, and anticipate their reaction to your "rules" or "beliefs" so you're prepared to deal with their concerns and priorities
- Ask them about how they feel about money. This will give you a gauge as to where the teaching process needs to begin
In grammar or grade school, I'm sure we all remember that "reading, writing and arithmetic" were at the top of the list with regards to future academic success. But, what about financial well-being? Isn't that as important as a solid "book" education? Some of us were never given the tools with which to learn how to manage money, instead relying on parents, friends or other family member(s) to teach us, or becoming educated if we decided to enter the world of finance. However, the reality is that it's up to us as parents, guardians and/or grandparents to prepare our children to face real-life financial challenges before they reach adulthood.
Teaching your children about money may seem daunting, but it should be viewed as paving the way for them to achieve financial independence. Answering your children's questions honestly and in terms they'll understand can help them develop on sound financial footing. Here are a few basic tips to get you on the right track:
- Explain to children that money is earned. Consider paying them for helping with certain chores (beyond their normal household responsibilities - i.e. give them a "bonus")
- Use a piggy bank to help teach about savings and interest. Set a savings goal to encourage your children to save some of their allowance. Calculate how much is saved each month and chip in a certain percentage as interest
- Consider taking your children to the bank to open a savings account requiring a lower minimum deposit
- If you extend credit, issue an IOU, set a repayment schedule, and charge interest
- Once your children begin earning their own money through part-time jobs, introduce them to investments such as stocks and mutual funds. Perhaps even purchase a small number of shares in one of their favorite companies (i.e. Toys R Us, Disney, Nike, etc)
In addition to these basic guidelines, is also important to:
- speak generally about income and expenses (and not specifically about your finances),
- emphasize that one's choice of work is the main determinant of their pay,
- teach that spending discipline is something everyone needs to learn, no matter how much they make,
- talk about needs versus wants,
- discuss how different families have different values, resources and objectives,
- make it clear to older kids that they will be expected to provide for themselves and their own families, and most importantly,
- PRACTICE WHAT YOU PREACH - the message will only resonate if you do what you say - and this is probably the most difficult challenge of all because it requires the greatest amount of consistency.
We owe it to our children to start them off on the right track at a young age by teaching them how to become financially responsible adults.
If you were able to attend the Kids and Money seminar, please give us your feedback! We would love to hear your thoughts on not only this seminar, but other topics of interest.
