3 Ways to Instill Enduring Financial Values in Your Children
3 Ways to Instill Enduring Financial Values in Your Children
Leading by example is always a good idea, and the earlier you start, the better. These three lessons can get the whole family going in the right direction.
Passing down values related to family wealth is one of the most crucial, yet challenging, tasks for parents today. Children’s experiences with money during their formative years can shape how they save, spend and give for the rest of their lives.
What’s more, taking the right approach can ensure a family’s wealth is preserved through future generations. One recent study found that 70% of wealthy families lose control of their assets by the second generation, and 90% by the third. That’s a frightening prospect, especially when previous generations have taken so many steps to grow and maintain their wealth.
By setting a positive example and having meaningful conversations with their children, parents can teach three key lessons about money management.
No. 1: Teach them how to save
Helping children think beyond current wants and desires is no easy feat, which is why demonstrating the value of saving up for something is best accomplished through concrete examples and exercises.
Here’s one example. Plan an exciting family vacation a few months out. Establish that in order to save enough money for the trip, the family will need to limit the number of times they go out to dinner between now and then. This small compromise increases the perceived value of the vacation when it finally arrives.
Of course, there are many other examples and exercises to teach children the value of a dollar saved, such as using coupons at the grocery store or having a loose change jar in the kitchen. The key is to explain these concepts along the way, so children both hear and see best practices in action.
Many families also expose their children to long-term savings by bringing them to appointments with their financial adviser. Most children simply sit in the waiting room.
However, this trip gives parents an opportunity to explain that they are saving for retirement, planning for tax season or putting away money in a college fund. They can demonstrate that proper financial planning is important, complex and the reason they can provide a great lifestyle for their family.
No. 2: Teach them how to spend
Parents often debate the value of giving their children an allowance. When done in a disciplined way, an allowance can instill simple money management skills that children will carry with them for years.
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