Your Money: From Dollar One: Helping Kids Build Financial Confidence
Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO 830 AM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Advisory services offered through Wealth Enhancement Advisory Services LLC, a registered investment adviser and affiliate of Wealth Enhancement Group.
Remember the first dollar you earned or saved? Whether it came from an allowance, a household chore, or a first job, deciding what to do with it offered an early lesson in priorities.
Today’s children can move money and make purchases with a few taps on a phone. But that convenience leaves many families wondering whether they are learning the lessons they will need to become financially confident adults.
Wealth Enhancement recently commissioned its First Dollar Survey to explore concerns that U.S. parents and grandparents have about the readiness of younger generations to manage money wisely.
Its findings also offer a starting point for families who want to help children build confidence with money.
What Families Are Telling Us
More than half of respondents, 53%, said today’s children are less prepared to manage money as adults than they were at the same age. Grandparents expressed greater concern: 61% held that view, compared with 46% of parents. Only 29% of respondents believed children today are better equipped than previous generations.
These responses reflect adults’ perceptions, rather than a direct test of children’s financial knowledge. Still, they point to opportunities for families to teach kids money skills more thoughtfully and effectively.
The survey uncovered some notable trends among today’s families:
- More than half (53%) of respondents had never opened an investment account for their children.
- Fifty-six percent identified avoiding impulse purchases and overspending as the hardest money lesson to teach.
- Nearly two thirds of respondents (63%) had given their children an allowance, and respondents considered $18 a fair first weekly amount. (Of course, each family can and should choose an amount that fits its budget and expectations).
Why Money Lessons Can Be Challenging
To be sure, previous generations faced plenty of financial pressures, including inflation, recessions and high mortgage rates. But today’s young people also face an increasingly complicated set of decisions about saving, investing, borrowing and eventually preparing for retirement.
One reason for this is the ubiquity of digital tools that add a dimension that parents and grandparents may never have known — immediacy. A purchase that once required a trip to the store can happen almost instantly. That speed can make it harder to practice patience or recognize how purchases, however small or impulsive, fit into a larger budget.
Online safety deserves attention, too. Avoiding scams and fraud ranked as the least difficult money lesson to teach in the survey, at 27%. Yet feeling comfortable teaching that lesson does not eliminate the need to discuss suspicious messages, requests for money, and protecting personal information.
Family Conversations Begin With Values
Before opening a budgeting app for your son or daughter, talk about what money means in your household. Do you prioritize education, travel, security, generosity or time together? Explaining those priorities helps children understand the reasons behind spending and saving decisions.
Consider your own experiences as well. Was money a source of worry growing up? Were financial conversations avoided? Families can pass along deeply rooted anxieties without realizing it. An honest conversation gives you an opportunity to explain which habits you hope to continue and which you want to change.
Make those values visible. If you are saving for a family vacation, explain why you are setting money aside and what you are choosing to spend less on. Children can see that a decision today supports something meaningful later.
Turn Everyday Choices Into Practice
An allowance can give children experience dividing money among spending, saving and giving. A shopping trip can become a conversation about needs, wants and tradeoffs. Saving up for a “nice to have” item offers a chance to learn deferred gratification and to track progress.
Keep the lessons manageable and appropriate to the child’s age. Ask what they would choose and why. Small decisions give children room to develop judgment before the financial stakes grow.
As children mature, conversations can begin to add the nuances of investing and how an account works. Opening an investment account can teach the basic mechanics of managing finances and the concept of risk but ongoing discussion matters, too. Explain that investing requires patience and “time in the markets.”
Protect Your Own Foundation
Helping the next generation also means attending to your own financial stability. Keep retirement preparation front and center before you consider giving financial support to children.
You do not need to teach everything at once. Consistent conversations and the choices children see you make are the lessons that are likely to stick with them over time.
A financial adviser can help you consider age-appropriate ways to prepare children and grandchildren while keeping your family’s broader goals in view. By starting with what matters most to you as a family will help the next generation connect those values to the money decisions they make throughout their lives.
The original article was published in Pioneer Press.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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