The responsibility of raising confident, capable, and well adapted children is not easy, and requires patience, tenacity, and occasional support from family, friends, and mentors. One topic that is often forgotten, but critical, is financial literacy.
Dr. Jim Grubman, a noted phycologist who works with families and their advisors, believes that our financial health is not measured by the amount of money that we have, but by our relationship to that money, whatever its tangible value may be. "Balance," he says, "is the key to a healthy relationship with money." Where money attitudes and behaviors are off-balance, financial woes frequently follow. Here are a few suggestions in helping your child develop healthy money attitudes now, to set them up for success in the future.
- Self-assessment: Being honest about the money skills you do or do not possess will help you form a more complete picture of the traits you want to pass on to your children, and those you hope to help them avoid.
- Start when they are young: A trip to the grocery store is an opportunity to talk about how much things cost, how to make good spending choices, and how to stick to your budget.
- Use questions as an opportunity to teach: Try to avoid the convenient answer of "we can't afford it" and take the more difficult, but potentially more rewarding path, by saying "no" based on values and choices. "I think that is cheaply made and isn't a good value" teaches more than "we can't afford it."
- Setting a good example: Many parents are interested in impressing a set core of money values upon their children e.g. the value of money well-earned. Practicing responsible spending and saving will show your children, by example, the best way to approach finances.
- Give them a hands-on experience: One method many parents use is giving their children an allowance. A good age to start is around five. Have your child save at least a third of the allowance, whether into a piggy bank or a savings account.
- Set your child up for investing and education success: Consider starting a college savings account, such as a 529, for your child. Make regular contributions and encourage your child to put some savings into the account as well. By the time you're tapping that account for college, your child should have a good grasp of investing concepts, and an appreciation for how saving and investing early and regularly can help build up a balance to fund a financial goal.
Teaching financial intelligence to your children may seem like a daunting task, given all of the other responsibilities that parents have. But it's important to remember that you are not alone. There are many resources available; family members can be a great support, as can friends, teachers, and even your financial advisor.
Jennifer Peterson, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).