Raising Children

Forming positive money habits for yourself was hard enough. Now you have the responsibility of helping your children adopt similar habits. Leading by example is one way but many times a more proactive and interactive approach may be helpful. After all, you don’t want to risk your own financial goals because your kids have failed to launch.

Looking for some books to get you started? Here’s a few options:

·      The Opposite of Spoiled

·      Blue Chip Kids

·      Yes, you can raise financially aware kids

If you don’t want your adult children swimming in credit card debt, missing mortgage payments, and constantly asking you for money, your best bet is to make sure these problems never arise by raising money-savvy children. This can be done directly through conversation or indirectly through your own behavior. Of course, both are easier said than done.

Children grow up spending their parent’s money, so it’s almost inevitable that at some point they will have a skewed financial outlook. After all, for children, all purchases are free, so why should they fret about the price tag or control their desires?

Do your best to make your children feel like they’re spending their own money; that they are part of the decision-making process. Most conversations around spending/using money can be a conversation about values. For example, accumulating money to invest for the long-term is not just about having the biggest pot of gold. It is about the patience and discipline needed to put your future self and family in a better position. Donating to charity isn’t simply a tax consideration. It is a realization that success comes with the responsibility to give back to ones community.

Use this as an opportunity to stress the values you want your family to identify with. This can be encouraged by giving them an allowance tied to some responsibility and allowing them to drive the decision making on how those dollars are spent/used. Once that goes to zero, there are no more dollars. This way, instead of you saying “no” to your children, they will learn to say “no” to themselves.

 

Launching Adults

Once your children get into the work force, you want them to get into the “virtuous financial cycle” where they are steadily building wealth.

They will hopefully become able to own a home, buy their cars, fully fund their 401(k) plan and their individual retirement accounts each year, and never carry a credit card balance.

The sooner your 20-something children get into this virtuous cycle, the easier it will be for them to meet their goals. To that end, encourage your children with your words and with your fine example.

A few financial incentives may also help. Tell your adult children if they scrounge together a house payment, you will lock in some additional dollars, or offer to subsidize their 401k contribution at 50 cents on the dollar.

This doesn’t mean you intend to fund their retirement instead of your own, but getting them started as investors sure seems like a smart idea.

Lastly, consider including your children in meetings with your advisor. If you don’t want them to know too many details, perhaps a one-on-one meeting with that advisor can make sense. Using a life event like marriage can be an easy way to nudge your son or daughter into their first “official” financial conversation with a professional. The benefit here is that it will be a professional you trust and you don’t have to be the one delivering the message. As we all know, source matters.

We believe money skills are equivalent to survival skills. Giving your family this gift is an investment in this and future generations. Below are some books that can help you and your family on your journey.

Happy investing.

Marcos