Raising Money-Savvy Kids


There is a concerning paradox that I’ve witnessed over the past few decades. Children are growing more sophisticated thanks to increasingly early exposure to technology and the pandora’s box that it opens to some very adult themes. But those same kids are woefully underprepared emotionally and judgmentally to cope with the resulting incessant marketing come-ons and distractions, not to mention peer pressure. Financial education should therefore start early, long before children leave the nest.

Here are some basic financial fitness concepts to consider teaching in your home:

What is money and where does it come from? As adults, we all know that money is a form of exchange for goods and services and there’s never quite enough of it. By taking them to a store — whether in person or online — your kids can learn about the value of money, and do comparison shopping. Matching their chores around the house with an allowance can be an effective way to tie income generation and responsibility.

Should I spend or should I save? A wise person once told me “Everything in moderation.” Spending is today’s reward for hard work, while saving is a way to reward your future self. Both are important to do, and critical skills for young people to embrace given the alarmingly low levels of savings most adults in the U.S. have accrued. Encourage your kids to set aside at least 20 percent of their earnings every single time they receive income.

To make saving exciting for your kiddo, identify a future use for a portion of the savings. That wireless Bluetooth karaoke microphone they’ve been pining for? Suggest they save for it and buy it with their own hard-earned money. To further incentivize their adopting a saving mindset, consider sweetening the pot with a “match” that you provide to boost their long-term savings.

How do kids decide what to buy? Initially, by sheer impulse. But if you help them to truly learn the difference between “needs” and “wants,” the door to spending prioritization will be forever unlocked… what a priceless gift to give your child! From then on, their spending decisions will be informed by a more thoughtful process.

As youngsters age into their teens, the topics you teach can get progressively more complex: think savings and investment accounts, an introduction to taxes and withholdings, building credit. But regardless of their age, communication with your child around money and finances is critical. According to a 2011 Capital One survey of high school seniors, 87 percent stated that their parents were their primary source of information about finances, but frequent conversations about finances were only reported by a fifth of the respondents.

Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Bend Wealth Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC
Any opinions are those of Stu Malakoff and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.

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