Setting the foundation for a lifetime of fiscal responsibility
While parenting styles and methods may differ, most parents share a common goal: to raise children to be healthy, happy, and independent adults. Preparing children for financial independence by instilling healthy habits and attitudes about money can go a long way toward achieving these goals.
Fortunately, you don’t need special training or a degree to equip them with the right tools. Teaching kids about the value of money starts at home with the behaviors you model every day, from the importance you place on budgeting and keeping spending in check, to what you choose to splurge on, and your family’s values around charitable giving and multigenerational wealth. To get started preparing your children for financial independence, consider the four tips below.
1. Begin teaching them when they’re young
The earlier children learn about the important role money plays in life, the more likely they will develop a positive relationship with it. Even very young children can master three basic principles: saving, giving, and spending.
To help them understand these principles, consider the “bucket” method when preparing children for financial independence. Set up three containers. When young children receive money for completing chores or from grandparents, allow them to make decisions about how much they will save, give to others, and spend on themselves. You can reward behaviors you want to foster by adding a small matching contribution to that bucket. This method of preparing children for financial independence is something kids can easily carry forward as they grow and begin earning money of their own as teenagers and young adults.
2. Don’t be afraid to talk about money
An effective way to begin preparing children for financial independence is by sharing your own experiences with money. For example, explain how saving money helped you buy a car, pay for college, purchase a home, or plan a recent family vacation. Talk about your values around spending and debt, why you choose to contribute money to certain causes or charitable organizations, and your thoughts about preserving wealth for future generations. The more you communicate, the greater the opportunity to prepare children for financial independence while instilling important family values about wealth.
3. Encourage participation in family finances
Consider including kids in family discussions about budgeting and spending, as appropriate, to help them understand that everyone has a role to play in keeping household finances on track. Encourage them to ask questions and share their thoughts and ideas. Participation in family finances can help prepare children for financial independence while developing greater respect for how money is earned and used within your household. It can also provide valuable lessons about saving, goal setting, and trade-offs.
As kids approach adulthood, their financial education may expand to include participation in family legacy and charitable planning decisions. Consider ways they can participate in decision-making if your family operates a charitable foundation or trust, or uses Donor-Advised Funds to make charitable contributions.
4. Embrace technology
Preparing children for financial independence doesn’t have to be all work and no play. Thanks to a broad range of age-appropriate technology tools, such as websites and mobile apps, children of all age groups can improve their financial literacy through interactive games and tutorials that teach important skills, such as saving, budgeting, and even investing basics. This can be a fun and informative way to get started preparing children for financial independence and set the stage for fiscal responsibility in adulthood.
For more information about preparing children for financial independence and ways to help preserve family wealth through multigenerational planning, listen to my latest podcast episode at Frank Wealth Insights. To learn how we can help you and your family pursue the Return on Life® you desire, contact us today for a free consultation.
About Return on Life Wealth Partners
Return on Life Wealth Partners is an independent Registered Investment Advisor (RIA) founded in 1994, with headquarters in Cleveland. The team provides comprehensive wealth planning services to individuals, families, and business owners. By examining clients’ lives before their money, Return on Life® aligns its advice with clients’ values to help achieve the milestones that matter most to them. This personalized approach also extends to the institutional and corporate retirement plan services available through 401(k) Prosperity®.