If there’s one thing I’ve learned in all my years as a retirement planner, and as a father to four children between the ages of 7 and 24, it’s that talking about money is really important. When you talk to your children about money it not only helps prepare them for a healthier financial future, but it can also help strengthen your relationship and provide opportunities to spend time together. Plus, talking about money when your kids are young builds a foundation that will help you have honest conversations about money as you both get older. In this blog, I’ll share my tips for talking to children at different ages, from preteens to teenagers, about money.
Talking to preteens about money
Preteens always seem to be looking for ways to make money. Rather than the traditional route of throwing together some chores to earn allowance, I like to use the opportunity to develop business skills. What’s more classic than a lemonade stand? There’s a fantastic game available on Amazon Echo devices that brings this experience into the year 2021, and satisfies tech-savvy preteens. Just enable the Lemonade Stand skill on your Amazon account, and you and your kids can start getting in the small business skills mindset. In this game, you learn to consider supplies, weather, price point through a fun, interactive game while preparing for the real thing. When my daughters actually executed their lemonade stand after spending months honing their business plan through this game, I was shocked at how much money they made.
Inevitably, children want to spend their earnings. After her successful lemonade stand, my youngest daughter was eager for a ride to Target so she could spend all of her profits on LOL Dolls. Instead, we talked about saving. That’s one of the benefits of having a retirement planner as a father, I suppose! This was the perfect opportunity for me to talk to the girls about making a plan for their money. It’s never too early to talk about tithing and charitable giving. You can open a UGMA account for college savings to start learning about interest. Then of course, it is always important to allow the children to spend some of their hard-earned money so they can really appreciate the value of their hard work.
Talking to teens about money
I always ask my clients what their first job was. My first job was washing dishes in my family’s restaurant. When you get your first paycheck, you realize something is missing. When you were babysitting or mowing lawns you might get paid in cash, but once you get a real job, you have your first exposure to income tax. That’s why the teenage years are an excellent time to start teaching your kids about tax planning. It’s also important to talk about what they get in exchange for those taxes to help soften the blow. I want my kids to understand where their money is going, so I start the conversation there.
Then, we talk about saving. Most teens have something that is really important to them. Maybe that is a cheerleading camp or a new car. Identifying that experience or item is a great opportunity to set a savings goal. Often the experience of going to the camp or driving the car will feel that much better if the teen had a part in saving and paying for it.
Any time the process of saving for a big item can help foster a relationship between the child and a parent is wonderful. I had a client who said when she and her siblings would turn 14, their dad would go buy an old not non-running Mustang and they would spend two years together getting that car working. I love this story because it shows how my client’s father used a milestone event like a first car to provide a relationship building experience with his kids.
Talking to adult children about money
Once your children are 18 and older, the topics get considerably heavier. Talking about the importance of planning for the worst can really help your children not only be better prepared, but also develop a realistic mindset that will allow them to make smart financial planning decisions throughout their adult life. It opens the door for having conversations about your own inheritance planning, too.
If your adult children are not married, and if they had an issue and became incapacitated, you have to get a court order to act on their behalf to make medical decisions or make their payments, because of HIPAA rules being so strong. So I really advise any of my clients in this situation to put together POA documents even if their children are only 18 or 19.
Once your children enter their twenties, take the opportunity to talk to them about life insurance. Life insurance is relatively inexpensive when you’re younger. I have a unique experience of knowing firsthand how important life insurance can be to a young family. My first wife passed away when she was 38 years old. Our life insurance plan helped me and my young family to make ends meet during a very difficult time for us. Without life insurance, I’m not sure how we would have been able to survive those years.
I’d love to hear from you about how you’ve talked to your children, of any age, about money. What has worked and what hasn’t? Email me at Mike@trsfamily.com or give us a call at 888-500-5830 to tell us your stories.
By Mike Whitmore