10 Ways To Grow Kids Into Financially Responsible Adults
April 5, 2024
In 1978, a two-year-old made his TV debut on The Mike Douglas Show. 41 years later, he has been mildly successful: tied for first place in PGA Tour wins, is second in men’s major championships, is the fifth player ever to record a career Grand Slam, and worth over one billion dollars. Most would say Tiger Woods is golf literate!
Imagine if you were working on crushing the ball down the middle of the fairway and finessing wedge shots at the pin not long after diapers. The habits needed to be good, great, or the world’s best would be solidly instilled.
The same can be said for financial literacy and kids. It is a crucial aspect of maturing as it empowers them to make informed and responsible decisions as adults. By instilling good money habits early on, parents can set the stage for them to have a secure financial future.
Do not wait to have “the talk”, and do not think it is ever too late to start.
April is Financial Literacy Month! To assist, here are ten discussion points you can leverage:
#1 The color (basics) of money.
Start at square one and build from there — with the basics. Explain what money is, the different types (e.g., dollar bills and coins), and the intrinsic value. It is okay to let kids know it really does not grow on trees and introduce them to the concept of earning money through work.
#2 Saving for a rainy day.
Teach kids the value of saving money. Not everybody understands and certainly not everybody does it. Explain the difference between short-term and long-term goals, and how to save for each. Adults may save up to buy weekly groceries while saving to buy a home, share how they can do the same for what they need, then want. Setting aside a small amount of their allowance in a savings account or piggy bank develops good habits. Be certain to talk about delaying the immediate urge to spend in lieu of saving for something special down the road.
#3 Making it all fit.
To further accentuate the last point, explain why budgeting is a skill they need to learn. Share how it works with what they desire: toys, snacks, and even that raggedy doll in the machine with a claw. Help them create a budget showing income — allowance, odd jobs, birthday money from Grandma — and expenses like that doll I mentioned. It teaches responsibility while reinforcing life is full of choices.
#4 The J.O.B.
Have open conversations about how money comes to us — typically by working for it. Talk about what they “want to be when they grow up”, the value of an education, and learning skills that pay the bills. Tell them it is fine to explore what exists and to not limit themselves.
#5 I want it all.
Sounds awesome but, for most, we must make prudent decisions. There is a difference between wanting something and needing something. Explain that some expenses — food and clothing — are essential needs, while others — toys and gadgets — are optional wants. This sets the stage for responsible spending.
#6 This or that.
Making smart choices is vital. Impress upon them that they will need to ask themselves if a pending purchase is really needed. Help them understand that every choice has financial implications.
#7 Plusses and minuses.
Share with them the concept of credit and debt. Explain credit involves borrowing money, and debt is the result of owing money. Talk about responsible borrowing — credit — and the landmines of accumulating debt.
#8 The eighth wonder of the world.
Investing may be a topic for older children but can be shared, nonetheless. Talk about how investing is the process of setting aside money with the intent of earning a positive return over the long haul. Start with how it works with savings accounts and build to market returns in varied products like stocks, bonds, and annuities.
#9 He ain't heavy, he's my brother.
Teach the value of giving back to others, their church, and the community. Explain how charities work. Doing for others is a life lesson that starts early and perpetuates itself as time passes. Time, treasures, or talents — it is about paying it forward.
#10 The future is bright.
The unexpected can happen. Protecting one’s assets by way of life insurance is doing so with “love insurance”. Most of us put policies in place to take care of our loved ones after we pass, to the degree we desire. You cannot build a house without a solid foundation. Before looking to get rich we must be assured we can take care of the basics of life, and life insurance does so for pennies on the dollar.
Have the conversation to build financially literate children today and repeat it often. It starts at home and grows from there. All that we wished we knew earlier in life can come early in life for kids — but only if we start today.
ARTICLE BY: John Behn, 1891 Financial Life SVP Sales and Distribution
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