May 5, 2021

This paid piece is sponsored by First National Wealth Management.

By Adam Cox, chief wealth management officer

What’s your first memory about money? Was it a time when your parents said you couldn’t buy a certain toy? Or maybe you remember getting a weekly allowance and spending it on soda and candy.

No matter what kind of memories you have about money from your childhood, they’ve probably shaped how you share, save and spend your money as an adult – for better or for worse.

When you think about it that way, you realize how important it is to teach kids good money habits. But how do you do that?

On the latest episode of our podcast, “Common Cents on the Prairie,” we sat down with Nathan Dungan, founder and president of Share Save Spend®, an organization with a mission of helping individuals and families align their money decisions with their values. During our conversation, we talked through how you can teach your kids good money habits so they don’t end up coming to “The Bank of Mom and Dad” later in life.

You can read a recap of our conversation here, watch the full episode on YouTube, listen on our website by clicking the player below or stream it wherever you stream your podcasts.

Determine your money values

When it comes to deciding how you want your kids to think about money, you first need to know how you think about money. Essentially, you need to establish your own money values and then teach them to your kids.

You can determine your money values by asking questions like these: What is it about money that’s important to me? How do I connect that with the things that matter most to me in life? Then, where do I start to see some of the intersections?

For example: If your family likes to go on vacations, you could use that to frame how you spend your money and model that for your kids. Say you’re out grocery shopping, and your child wants to buy a certain toy. If you’re trying to teach them to save, you might say, “Well, we really like to go on vacations, so we want to save our money for that.”

While establishing money values and teaching them to your kids like this is not an easy task, the alternative – not doing anything – can have some pretty serious consequences for your kids later in life. Our culture values material things, even if it means overspending and going into debt. If you leave your kids to learn their money values by watching those around them, they could end up in financial trouble someday.

What is the right age to start teaching your kids about money?

As far as deciding when is the right time to talk to your kids about money, the answer isn’t a clear-cut certain age. Generally speaking, though, a good time to start talking about money and money values is when your child has a good sense of wants and needs.

While it might sound like third grade social studies to you, it really works for kids. When your child asks you about buying something, you can frame it using wants and needs. Ask them if what they’re asking for is something they want or if it’s something they need. Then, add in the layer of your money values, like the vacation example above. This teaches kids how to spend their money only on what they need and to save for things they value.

You also can talk about costs with your kids. While you shouldn’t guilt them into feeling bad about purchasing things, it’s important to teach them the time and work it takes to earn money. One way to do this is to give them an allowance for doing chores around the house, so they have their own money and can make decisions with it, knowing the work it took to earn it.

If you’ve thought about giving your child an allowance, there are a lot of things to consider: how much, how often and stipulations about what they can do with it. There’s more than one right answer to all of those questions. Nathan Dungan does advise, though, that you encompass all three elements of the money: share, save and spend.

Saving for college

Of course, we can’t forget about what is probably one of the most important financial decisions your child will make while they’re young: going to college.

We ask 17- and 18-year-olds to make a massive financial decision to borrow money to go to college without helping them fully understand the consequences, like having thousands of dollars in student loan debt.

For that reason, Dungan recommends starting to talk about college sooner rather than later. He suggests that you make your kids have work experience before going to college, so they know that earning money takes work. After all, that’s exactly what they’ll have to do to pay back their student loans.

He also encourages parents to talk to their kids about building credit, credit scores and how those work into achieving larger financial goals such as buying a house, a car, etc. This is also where a financial advisor can be really helpful.

Inherited wealth

When our team at First National Wealth Management helps clients plan for passing down their wealth, some people are concerned about how an inheritance will impact their children.

Some clients fear that if their children know they have an inheritance coming, it might distract them from building a solid career and practicing good financial habits. However, Dungan said not talking about it actually could be more financially harmful than making children fully aware of their inheritance.

He suggests that parents prepare their kids for an inheritance, so they know how to manage it well. Dungan uses this analogy: swamping someone with a lot of money they weren’t aware of can be like drinking from a fire hose.

The bottom line is, talk to your kids about money. It could make a huge difference in their financial well-being now and later in life. If you’d like a little more guidance or help planning for the future, please reach out to us. We’d be happy to help!

Any comments, insights, or strategies discussed in this article are intended to be general in nature and, therefore, may not be suitable for you and your situation, whatever that may be. Before acting on anything written here, please consult with your attorney, CPA, and/or your financial advisor.