Wisdom develops over time. It’s common for people to reflect on things they know now, that they wish they would have known when they were younger, like the years it can take to pay off maxed-out credit cards plus accrued interest. Parents should pass this knowledge to their kids to help them avoid similar missteps. Discussing money can be tough, but in the context that is right for the audience, it can help today’s youth and future generations make informed financial decisions. Here are some financial topics parents can raise with different age groups.
Advice for Ages 5-13
Most children have had little interaction with money from the formative years to the tween stage, so the concept of managing it is likely foreign. Allowance, or small payments in exchange for helping with chores around the house, can be a great way to begin the conversation. The money kids receive for gifts on birthdays or holidays can also support a lesson about saving versus spending, and how to allow for each. This is a great time for kids to open a savings account with a parent’s help and observe how their money grows with interest over time.
Financial Knowledge for Ages 14-17
Many teenagers start to earn money between the ages of 14 and 17, from mowing lawns, dog walking, and babysitting, to their first jobs working at grocery stores, restaurants, and summer camps. This is a defining stage where they are self-focused but also when they show their first signs of independence. The desire to have money to buy things like make-up, video games, and a collection of stylish kicks emerges. They start to make the connection between the real cost of their material desires and what it takes to earn and save for them. If they take a college-prep path, they may visit schools and apply to them. This presents an opportunity for parents to discuss the cost of tuition, room and board, books and materials, meals, spending money, and who is responsible for what. Involving young people in the student loan process and showing them how to apply for federal student aid helps them learn financial responsibility.
Entering Financial Independence between Ages 18-22
Regardless of whether high school graduates go to college, trade school, or choose a different path, most people in this age group take some steps toward financial independence between the ages of 18 and 22. It is also common when young people start their first professional job to purchase items they can’t afford, run up lines of credit, and spend too much on entertainment, travel, clothing, and socializing. To prepare their young adult children to live alone for the first time, parents should arm them with the knowledge and tools to make sound decisions. Here are some important topics to broach:
- Buying a car—When discussing the best car-buying practices, parents should advise about the plusses and minuses of new versus used. They should talk about different loan and financing options, and the ramifications of leasing. They should identify cost-saving opportunities, encouraging young people to ask questions and push for the best pricing.
- Creating a budget—For young people who have never been financially responsible for themselves, this may be their first encounter with debt. Parents can explain the importance of carrying some debt to establish credit and how to create a budget to cover living expenses and allow for spending while paying off student loans.
- Moving—The cost of moving can be shocking because it entails so much more than a truck. Moving means procuring new housing and often utility costs. An apartment in an urban area with a high housing demand might require the first and last month’s rent and a security deposit. Some brokers charge finder’s fees. Moving company prices vary and factors like mileage, rental time, insurance, and storage can impact the overall cost. Parents can help their kids financially plan for their move and teach them how to compare moving companies and services.
- Saving for retirement—While it may seem like kids in this stage of life want little input from their parents, the wisdom from years of experience can be invaluable and impactful. Parents shouldn’t hesitate to mention retirement savings early and often, and explain the value of a financial advisor. Young professionals who learn the best way to be diligent about retirement savings will benefit in the long run.
Positive financial influence can mean the difference between a lifetime of unhealthy debts and a balanced debt-to-income ratio with regular contributions to a retirement plan. As children learn the value of money, knowing how to manage it can be overwhelming or even overlooked. Parents can empower their kids to take charge of their finances in their adult life by talking to them about it regularly from an early age. They can also set an example. Click HERE to sign up for a complimentary financial review with an advisor at SHP Financial to learn how to improve your portfolio.
