What You Really Need to Teach Your Kids About Money
We’ve talked time and time again about teaching your kids about money. But many financial experts and investment advisers stress that aside from the allowance debate and taking them grocery shopping to teach them about pricing, there are three important things that every parent should be teaching their kids about money. Those are: teaching them to set future goals, teaching them that wealth doesn’t always lie on the surface; and that money matters are a family affair.
Setting Future Goals
“Every single financial decision should be made based on the necessary steps to accomplish the future goal,” says Ian Arrowsmith, the vice president of investment at Scarborough Capital Management.
He says that while it’s important to teach kids about things such as pricing groceries and working to earn their allowance every week, it’s about setting future goals and knowing where you’re going to be financially in your future that’s important. And along with all those small details, parents need to also teach them about the big picture, such as teaching them to save their allowance for that big ticket item instead of spending it on pop at the store; or teaching them about buying in bulk and storing and freezing foods so that the budget takes less of a hit later.
Wealth isn’t Always Worn on the Sleeve
Driving a BMW, wearing the newest Coach bag, and being spotted in only the best designerwear are all sure signs that someone is swimming in money, right? Wrong, says Brian Parker, certified financial planner and managing director of EP Wealth Advisors in L.A.
“Defining wealth by what you see can be very misleading,” he says. “Ferrari owners can struggle to make payments, and multimillionaires may choose to ride their bike to work.”
Defining wealth by what’s on the surface can also be dangerous, too. Worrying that being wealthy means wearing the newest bag on your arm instead of putting money in the bank can lead to financial ruin and soon, children could grow up not having either if they’re led to believe this misconception.
The financial matters of a household are the family matters of a household, says Sheryl Garrett, certified financial planner and founder of Garrett Planning Network.
“I would have loved seeing my mother take charge of financial decisions or even discuss them with me,” she says. “I believe my father did a good job of this, and my mother supported him. But to a young person, seeing your mother be in charge, make important financial decisions and discuss these with us would have been wonderful and very empowering.”
She believes that leaving the financial decisions and responsibilities to one person alone makes it seem intimidating to others in the home, and as though it’s something that one has to be specialized or especially skilled in.
It can be difficult to know how to approach money matters with your kids, and there’s definitely more to talk to them about than what’s been covered here. Still, we believe that of all the many different things to teach them, these three points are certainly some of the best.