It’s not fun—or that exciting—but parents need to talk about money with their children. The question is, how do you teach them to be wise savers and spenders? We reached out to area financial professionals to get their tips on how to talk money to kids.
Once kids are working, talk to them about saving into a Roth IRA. Roths are fantastic tools for young savers. If they need the contribution back they can remove it without penalties. If they want to have money for a home or education, Roth IRA’s can be a great tool for that. This was the way I got my children to start thinking about saving. Now, they work really hard each year to get $2,000.00 into that account. My son’s goal is to have 1 million in a Roth by the time he wants to retire. Imagine that 1 million dollars tax-free. –Angela Bender, AMJ Financial Wealth Management
Ongoing and open conversations about the costs of operating a household. This includes discussions of what a mortgage is and how it works, credit and debit cards and how they work, checking accounts and balancing a checking account. Inevitably, most children will ask the parent how much they make and this may make the parent uncomfortable to disclose, but while explaining the household expenses the parent should also discuss savings needs as well, so that at the end of the day all the income is utilized for household expenses and future savings. Of course these numbers are after taxes, which should also be discussed. –Daniel Lash, VLP Financial Advisors
Start the dialogue with kids early and encourage them to always think in terms of the three buckets: savings, spending and giving. –Eileen O’Connor, Hemington Wealth Management
When a child is 10 or 13, allow them to ask for an increase in their allowance only twice a year. They will learn how to negotiate, and that money is a serious topic of conversation. –Brenda Blisk, Spire Investment Partners
It is important to talk to children about competing spending priorities. When I was in middle school, my parents told us that they would upgrade our family vehicle, but as a trade-off, we kids would have to take packed lunches everyday instead of them giving us money to buy lunch. We had to agree to the plan and “do our part” to help with the additional vehicle expense. –Victoria Henry, West Financial Services
Teach and talk to your children about needs versus wants, and have them pitch in for wants. For example, you need shoes, but if your child wants an expensive pair of Ugg boots, for example, perhaps they pay the difference, or at least pitch in. If they are saving part of their allowance, they should have money to be able to do this. It is important to remember that you as a parent are being watched and observed constantly, and the best way to teach your children money responsibility, is by leading by example. The last thing I would say is for parents to go easy on themselves. This is hard work. We will all make mistakes, and that’s OK. Consistency is more important than perfection. –Anne McCabe Triana, Curo Private Wealth