As the father of two elementary-age boys, raising financially smart kids is a subject near and dear to me. Like many parents, at times it can feel like my wife and I are waging war against the constant barrage of ‘stuff,’ like the latest Xbox, iPhone or athletic shoes that our boys tell us they just need to have. Coming into the holiday season when marketers foment every kid’s wish list into a begging frenzy, it’s a good time to give your children and grandchildren a lifelong gift that will always hold its value – teach them to be financially savvy.
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Be a good financial role model:
Children learn from what they see their parents doing, and how they learn to handle money is no exception. According to the Charles Schwab 2011 Teens and Money Survey, 82% of the teens polled said that they learned to manage money from their parents and 77% say their parents are good role models when it comes to money management.
You don’t have to divulge all of your finances to your brood, but it’s important to talk to your children about money from an early age. For younger children, take them grocery shopping to learn what things cost. Ask them to compare prices of similar items and find the lowest one. For older children, show them you’re saving too. Let them know that you’re cutting back on eating out or unnecessary shopping because you’re saving for a new car or family vacation.
Build their financial muscles:
There is a lot of debate about whether parents should give their kids an allowance, pay them an allowance for doing chores or whether they should get an allowance at all. There’s just not enough space here to go through all of the pros and cons.
Whatever camp you are in, handled correctly, an allowance provides your kids everyday opportunities to practice money management skills. They learn first-hand what things cost; to make and live with their spending decisions; how to save for bigger purchases and how to share some of their good fortune with others. This ongoing practice will pay off later when they get their first credit card or want to save for a home.
Motivate learning with engaging apps:
Learning about money can be fun when it’s designed to be engaging and wrapped in great graphics. Two of my favorite apps are Kids Money and Savings Spree.
- Savings Spree, winner of the Parents’ Choice Gold Award, is a fun way for your children to learn all about money. The game provides virtual experiences to earn money, rewards good spending choices and encourages them to think about investing their money or make charitable donations.
- Kids Money replaces the instant gratification of spending money now with the accomplishment of saving for a larger purchase like a new bike or iPad. They enter their goal amount along with the amount of money they are saving each week. They can also add any gift money they have received to the goal. This app keeps track of the amount saved and shows how long it will take to reach the desired goal at their savings rate.
Invest in their favorite company stock:
What better way for your kids to learn about investing than owning a part of their favorite company? I love Oneshare.com because along with receiving a share of Disney or Build-A-Bear, your child will get a stock certificate from their favorite brand. Having something tangible, like a certificate, makes owning and following a stock easier to understand. While it can be fun to cheer on a stock that’s going up, I think an equally valuable lesson can be learned if it loses money.
Go on a corporate-annual-meeting field trip:
There are many publicly-traded companies with their corporate headquarters in the DC metro area. Companies like Under Armour, Rosetta Stone and Marriott call the DC area home and hold their annuals meetings here. If you’ve never been to a shareholder’s meeting, take the opportunity to experience one with your kids.
If you can’t make it to a meeting, request an annual report. Many are beautifully prepared with engaging graphics and photographs. Read it over with your kids, then talk about how the company is doing, what challenges it faces, and what terms like ‘revenue’ and ‘cost of goods’ mean. Ask them if they think the company is a good investment and why. For a more complete list of local publicly traded companies, refer to the Washington Business Journal’s 100 Largest Publicly Traded Companies in Washington.
As I wrap up this segment in my Best Practices for Living a Healthy Financial Life series, I hope you’re inspired to teach your children the priceless lessons about money and finances.
If you missed the other segments, I encourage you to read The Best Practices for a Healthy Financial Life:
- Getting Started
- Creating Your Personal Financial Plan
- Sharing Your Risk
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- Emerging Markets: A Safe Haven for Asset Allocators? - June 14, 2019
- Big Tech May Be Under Attack- Can They Keep Their Scale, And Use It For Good? - June 10, 2019
I plan to finish The Best Practices for Living a Healthy Financial Life series next week with a topic appropriate for Thanksgiving – Giving Back.