How to Help Future Generations with Financially Savvy Strategies

Wisdom comes from experience. Most people would do some things differently, equipped with a broader perspective, for example, opening a 401(k) account at the first opportunity rather than waiting. The financial knowledge a parent or grandparent shares with their loved ones in younger generations can help them make smarter decisions and avoid costly mistakes. It’s never too early to talk about good money habits, and the benefits of open communication can greatly outweigh any awkwardness. Here are some financial topics to discuss with different age groups.

Introduction to Managing Money: Ages 5–13

During their early years, most children have limited interactions with money and a basic understanding of saving the cash they receive in a personal piggy bank. A great way to transition to the next level of money management is through allowance, small payments in exchange for helping around the house or in other ways.  These funds, along with those received on birthdays and holidays, can support a lesson about allocating amounts for spending, saving, and even donating. This is also an opportunity for parents to help their children open a savings account, allowing their money to grow with interest over time.

Education on Money Matters: Ages 14–17

During the formative ages of 14 through 17, teenagers show early signs of independence.  Many earn money through off-the-books jobs, shoveling driveways, mowing lawns, and babysitting.  Employment at grocery stores, restaurants, and summer camps often follows as having money to buy clothes, gaming systems, and the latest sneakers becomes important to them.  They begin to understand the link between the cost of their material wants and what it takes to earn and save for them. Those pursuing college may apply to schools. During this time, kids can learn about college expenses, including tuition, room and board, books and supplies, meals, and spending money. Parents can set clear expectations about who is responsible for what. Involving young people in the student loan process and demonstrating how to apply for aid helps them develop a better understanding of the larger financial picture.

Entering Financial Independence: Ages 18–22

Regardless of career path (college, trade, etc.), most people between the ages of 18 and 22 take some steps toward financial independence.  This is also when many make money mistakes. Young people in their first professional job may purchase items they can’t afford, run up credit lines, and excessively spend on entertainment, travel, clothing, and socializing.  By imparting their knowledge about situations such as buying a car, creating a budget, and saving for retirement, parents help their young adult children build a foundation of financial smarts that enables them to thrive once they leave home.  Here are some key points for each scenario:

• Buying a car—Parents should discuss the aspects of purchasing new versus used cars, and provide an overview of different loan and financing options, including leasing.  They should identify cost-saving opportunities and encourage young people to ask questions and negotiate pricing.
• Creating a budget—This may be the first time a young person has been financially responsible for themselves.  Parents can explain budgeting and how to consider living expenses and potential student loan costs, while allowing for spending.  A conversation about carrying and managing debt to establish credit is also relevant.
• Moving—Moving is among the most stressful life events.  The costs and complications surrounding it can be shocking for someone who has never experienced it.  Parents can prepare their young adult for the expenses they will encounter, such as:

• Moving company: truck or trailer, cost per mile, insurance, storage (if needed)
• Housing: first and last month’s rent, security deposits, etc.
• Utilities: electric, heat, water, cable, internet

• Saving for retirement—At this stage, it might appear that adult children want little input from their parents.  However, parents who share their experience and encourage an open dialogue about money matters are providing an invaluable service to their children.  Parents shouldn’t hesitate to mention retirement savings early and often, highlighting the value of a financial advisor. Young professionals who are diligent about saving for retirement will understand the benefit and appreciate it in the long run.

Financial habits start early. Teaching kids the value of money—and how to manage it—can shape their future, helping them avoid debt and build confidence.  Parents play a powerful role by talking about money openly and setting a strong example.  If you want guidance on improving your own financial plan, contact an SHP Financial advisor today to schedule your complimentary review.