It’s never too early to share some of the fundamentals of money with your kids.
Think your kids will know what to do with the legacy you leave them? Here are a few ways to ease into the conversations and educate your kids in a practical everyday manner.
- Start the Conversation– Use common life situations and begin to talk. For example, a car wash. We opened the dialogue with our kids about how much money the owner of the car wash might make. We looked at the number of cars possibly washed per day, the number of days and the average cost of a wash. We subtracted an estimate of some common expenses (a list we asked our kids to help us create based on what they saw) and came up with our answer. Our kids walked away from that experiment eager to learn more.
- Make it Fun – Vacations are great times to start fun conversations about money. While on our annual Michigan vacation, we’ve discussed the cost of getting ice cream at “Oinks” Ice Cream Parlor and how much the owner must make. (We all agreed, a lot! It’s delicious!) We’ve talked about how much the canoe rental owner likely made for 3 months out of the year. For the canoe business owner, we estimated 5 days per week, 6 hours a day at $25 per hour and 10 canoes running per hour. We estimated this for 3 months giving us income of $90,000 in just 3 months. This exercise gets easier as the kids learn the quick ways to estimate by rounding and gets more fun as you go along.
- Introduce them early–While you probably don’t want to tell your 6-year-old all of the details of purchasing your home: about your mortgage and down-payment… You do want to start the dialogue with something they seem very interested in learning about. For example at age 7, our son was interested in the riding lawn mowers at the local hardware store. By the time he was 9 we couldn’t get in the door at the store without him selecting and sitting on his favorite. So, we began to point to the price tags and the different features and benefits of the mowers. He began to see that the more features and benefits, the higher the price. He soon began thinking about and figuring out when he might receive money that could be saved for the mower and began to “earn” some of it by mowing lawns for neighbors at age 10.
- Save & Invest – While it’s fun to buy shares of stock, we suggest starting simple with a savings account so kids learn the basic principle of the compounding of interest. Show them their account statement each month so they can see the value grow. No matter how small the earning, the learning occurs.
Without conversations now, your kids may be forced to learn about money when they’re thrown into situations later in life. What we have learned by starting the dialogue with our kids is that they have become more curious about money and how it works.
Important Note: The views expressed in this post are as of the date of the posting and are subject to change based on market and other conditions. This post contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Please note that nothing in this post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and should not be taken to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Lenity Financial, Inc. unless a client service agreement is in place.