How to Instill a Healthy Relationship with Money in Your Children

Bringing up the subject of money is never easy. Friends, family members, and even your own children might find discussing one’s money awkward. However, critical dialogues need to be had with your children in particular.

As a parent, I want my children to have a positive connection with money so that they may go on to be compassionate, responsible individuals. As a New Jersey financial counsellor, I can tell you that completing that final step may be more difficult than it seems.

Millennials between the ages of 23 and 35 were given five simple financial questions in a recent survey. Three out of the first five questions were properly answered by only 24% of those who took the survey, and just 8% got all five right.

Some parents find it difficult to educate their children about money since they don’t witness their parents balancing their chequebooks and paying their bills as they did in the past. It is possible to educate children about money in a hands-on fashion however. These lessons may have a long-term impact if they are learned early on.

The Foran Financial Group is a multigenerational family business. Start a dialogue about your financial strategy by contacting us.

Hands-on Money Education for Children (Ages 7 to 12)

Is trick-or-treating a tradition for your children? Is there a lesson to be learned here?

If you don’t want your children to gorge themselves on Halloween sweets in one sitting, turn it into a kind of cash instead. Five pieces of candy for a little toy, 10 pieces for the medium toy, or 15 pieces for a big toy may be exchanged for these items from your youngster. (These “prices” may be adjusted to your liking.)

In return, your youngster will learn about the value of a missed chance (i.e., giving up candy for something they want even more, like a toy). Because you won’t have to deal with a sugar crash, this is a win-win situation.

Creating a positive connection with money in your children at an early age may have a long-term benefit.

Teenagers will benefit from this hands-on money lesson (Ages 13 to 18)

Depending on their age, your children may be ready to manage their own finances once they reach the age of majority.

Prepaid debit cards for children may help them learn. These cards prevent your children from amassing debt, unlike traditional bank accounts and credit cards. In addition, many youth accounts include parental restrictions and in-app features. I’ve come across various applications that enable parents to assign and track tasks, pay allowances, and monitor how much their children spend. Kids may use the app to accomplish chores, save money, and even give to charity (with the agreement of their parents, of course).

When your children are teenagers, it’s critical that they have a good relationship with money, since they will soon be on their own.

How to Teach Your Children About Money

What’s the big deal about talking about money with your kids? Here are seven financial lessons that children should be taught in order to aid them in the future:

How to Tell the Difference Between What You Need and What You Want, Part 1

Even as a young kid, it is important to teach them the difference between necessities and desires. When you’re out shopping, use the occasion to explain why certain goods (like laundry detergent) are necessities while others (like ice cream) are desires.

Allow your children to spend their allowance how they see fit. For example, would you rather buy a $10 toy now or save up for the Nintendo Switch that you actually want in the long run?

How Unexpected Life Events Can Affect Your Budget is the second lesson.

Explain to your kid that life may change at any moment, and that these changes can have an impact on their financial well-being. – Some of these changes may be beneficial, such as finding a job in another state or tying the knot. Other life events might be sad or stressful, such as the death of a loved one or being laid off from your work.

Life changes may necessitate a shift in your financial priorities, so it’s crucial to have a strategy in place for how you’ll respond to any shifts in circumstances. Consider the impact COVID-19 had on your children’s lives: Having your parents work from home means less time spent with friends and family, and birthdays might be celebrated virtually instead of in person. Inform them of the financial effects the epidemic has had on your life.

Saving, budgeting, and establishing an emergency fund are all covered in this section of the course.

Creating a budget and establishing an emergency fund may help you save for your needs and goals (Lesson #1) and handle life’s unexpected adjustments (Lesson #2). You may demonstrate to your children that they are capable of achieving their objectives and dealing with the unexpected by doing these two steps together.

Create a fake budget for your kid if he or she isn’t old enough to handle their own money. It may be a valuable life lesson to give youngsters a fictitious income of, say, $1,000 and instruct them to utilise that money to cover all of their expenditures. Explain to them how they might utilise the extra funds to achieve their own objectives and desires..

Consider opening a teen bank account to assist your youngster understand these ideas in a hands-on way. A number of accounts offer built-in financial quizzes to assist users learn how to manage their money. Those who accomplish their savings goals get a one-time incentive from their parents, who may then divide the money among other savings accounts.

When it comes to saving, the sooner you start, the better off you will be.

Compound interest works like a magic wand, allowing you to accumulate riches over time. But when you’re a youngster, it might be hard to grasp.

With their allowance, their Halloween “treat money,” or a reward scheme, you may teach this lesson to your children. Consider saying that you’ll give them additional money as an incentive if they save all of their allowance (or Halloween candy) for the month. Keep doing this for each month so they can see that they have not only maintained but also increased their initial investment.

If you’re using a reward system, explain to your youngster that they may choose between a $10 item at the end of the month or a $15 toy if they wait. For each month that passes, keep repeating this procedure.

Volatility in the stock market is very normal.

The stock market is another difficult topic for children (and adults) to grasp. Children should be taught that the general market has expanded, but there have been periods of turbulence (such as in 2009 and in 2020).

Try comparing stock market volatility to the changing seasons by using weather as a comparison. As summer approaches, the temperature rises, but not in a linear fashion. 50 degrees one day; 46 degrees the next; 52 on the following; and so on and so on. Daily temperatures fluctuate, but the trend is for it to warm up over time.

Charts may also be useful in conveying abstract concepts, such as the volatility of the stock market. A chart of the S&P 500’s 40-year history is shown below:

Thriving in a Multi-Faceted World

Even though money is a major source of anxiety for many Americans, taking a few minutes to think about your long-term objectives may help you relax and begin taking steps in the right direction.

Whether it’s saving for a video game or a down payment on their first automobile, help your youngster create an expense plan. Afterwards, urge them to put the objectives on their phone or bathroom mirror as a reminder.

Do Not Be Afraid to Seek Help from a Professional

A financial adviser can help you create a sound financial foundation in the same way that a doctor would treat you with a stomach problem. Allow your youngster to accompany you to your next appointment with your financial adviser if they’re old enough to do so safely. All of my clients who are also parents know how much I value this advice. As a result of this:

  • Open the door to open conversation and provide you a secure place to express your goals and ambitions for your children.
  • Make your children more likely to be excellent stewards of your money.
  • Encourage your children to seek the advice of a competent financial expert in the event of an emergency.

Foran Financial Group’s Role in the Situation

Having a son myself, I always urge my customers to bring him along when we meet as a financial adviser in New Jersey. My experience has shown that some youngsters escape frequent financial problems because their parents instilled excellent principles into them. On the other hand, I’ve seen others blow through the assets they received as a result of being unsure on what to do with them.

We at Foran Financial Group aim to help you instil in your children a strong sense of financial responsibility from an early age. We’re here to answer any questions you may have regarding college savings plans or teaching your children about money management. Make an appointment with our team for a no-cost, no-obligation consultation now to get the discussion started.

LPL Financial, a licenced investment adviser, Member FINRA/SIPC, provides securities and advisory services.

Only residents of the states in which Foran Financial Group’s financial experts are fully registered or licenced may they converse or do business with them. Any offers or acceptances from residents of other states are prohibited.

It is not meant to give particular advice or suggestions for any person, but rather general information.

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