Teach Your Children Wealth
Stress Is a Major Factor That Affects Our Health and HappinessKathy Longo, CFP®, CAP®, CDFA Thursday, 19 January 2017
According to a recent Stress in America survey conducted by Harris Poll for the American Psychological Association, money has been the number one source of stress in our lives since the survey began in 2007, beating out work, family responsibilities, and health concerns.
Could developing healthy money habits and good financial skills help your children have happier, less stressed adult lives? Nathan Dungan, founder and president of Share Save Spend, developed a financial education program conducted with parent/child pairs designed to help families balance spending with sharing and saving. The study showed that teaching youth about money can decrease their materialism and increase their self-esteem. According to the study, these improvements remained present eight months after the intervention occurred.
“This research demonstrates that you can take proactive steps to reduce the priority a young person places on spending and materialistic goals”, says Dungan. “By engaging young people early and often about money and the role it plays in their lives, you can help them develop healthy financial habits and values, all critical elements for enhancing their well-being.”
Unfortunately, this information is not readily taught in our school systems, though that is improving in some areas.
So how do you as a parent help your children build these skills? The good news and the bad news is, it begins with you. The primary place our kids learn their money habits is from us. Many parents have great money values and habits, but don’t know how to engage their children and pass on their values. The following tips are intended to help you start those conversations and give you some ideas on how to help your children build these skills.
Step 1: Actions speak louder than words.
Our kids learn from what we do or don’t do more than anything we “tell” them. Do they see you donate time or money to charities? Do you talk about saving for a family vacation or another big ticket item? Do they see you research for the best price/value on an item that you are looking to purchase, or do you just buy the first one you see? Do you explain to them how you choose between different similar products at the grocery store? Is it based on quality, or price per unit? Kids need to learn how we make our financial decisions.
Step 2: Have conversations about money decisions.
The goal is to have frequent conversations, not one big lecture. Our kids may have a perception of what we think about money, but chances are, it is not correct. These conversations are an opportunity for you to share your values. Ask questions. Is the purchase something you need or something you want? Are there things that we want that we could save for if we gave up something else? Tell them a story of something you had to save for and how it made you feel to be able to earn enough to buy it. Then ask them what they would like to save for and why. Help them figure out how to save for it. What is a credit card used for? Do they know what credit is? What is an interest rate? Which is most important, sharing, saving, or spending? How does sharing money with others make you feel? Does money make you happy? Are rich people happier than poor people? What does rich mean? Do you know someone who is a good saver? What saving habits do you see in that person? How much money do you spend on _________? There are opportunities all the time to have these discussions. The next time your child asks you for something, see how you can start a conversation about why it would be important to have it. Is there anything you would need to or be willing to give up to have it?
Step 3: Practice, Practice, Practice.
Adolescence is the time our kids need to practice these skills. It is their opportunity to make mistakes that will not impact their life in a major way. Give them a set amount of money on a vacation or a family outing to spend. A man once told me his family went on vacation each year when he was a child and he and his siblings each got $25 to spend while they were there. The first year he spent all of his the first day. He cried and cried as he watched his siblings have money to spend throughout the vacation. He did not make the same mistake the next year. This little exercise teaches children to make decisions, prioritize, and depend on themselves. If you give them more, you have ruined the lesson.
Step 4: Teach your kids to earn.
Many families these days can afford to buy more for their children than their parents were able to. Allowing your children to have skin in the game will build confidence and teach them to be earners. An example on how to implement this is your child wants to go to an expensive camp, or on a trip to Europe with her music school. Carve out a reasonable amount for your child to earn towards the trip. Help your child think of ways they could make the money. Some thoughts are; extra chores around the house, babysitting, walking the neighbor’s dog, raking neighbors’ yards or mowing lawns, washing cars, helping a senior with basic house cleaning, etc. It will not only teach them a skill, it will increase their confidence. On a personal level, I learned at a young age that if I wanted extras, I had to earn it. Looking back, I was pretty creative and always found ways to earn money. As an adult, I worry less about having enough. It taught me to set goals and how t o achieve them.
All parents want their kids to grow up to be happy adults, yet most parents don’t realize how critical it is to teach them about healthy financial habits and values. Helping your children develop healthy money habits now will increase their chances for a happier life!
About the Author
Kathy Longo, CFP®, CAP®, CDFA
Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.