McCann-WEBTeaching children about money management will help set them on the right path to financial independence and success. Of course, it’s not as easy as it sounds to begin a money conversation. As a parent, I understand how challenging it can be to impart ideas and wisdom on your own kids. Let’s face it, most young people are inclined to take advice from anyone but their parents. Factor in that many people don’t feel qualified to teach financial topics, and the task becomes even more daunting.

The good news is there are many resources and people to assist in you.

As a long-time and active volunteer for Scouts BSA, one of my regular roles has been as a Personal Management Merit Badge counselor. This badge addresses elements like creating a budget, knowing the difference between saving and investing, and exploring and evaluating careers. The curriculum was developed by Brent Neiser, CFP® and Eagle Scout. It’s a challenging merit badge that takes several months to complete.

I’ve learned a couple of interesting things by teaching the course. First, young people are often eager to talk about money if you approach it in a way that is relatable. Second, they tend to pick up on key concepts more quickly than you might expect.

Here are a few tips to begin a money conversation with a child or young adult in your life.

  • Start with the basics. That means introducing the importance of living within your means. Earning a weekly or monthly allowance for completing chores is a great start. When a child manages an allowance, he or she begins to understand how to balance wants with cash flow.
  • Make budgeting real and personal, not theoretical. Help your child create a budget. Older children can use a simple spread sheet to track spending, saving, investing and charitable giving. Young ones can use labeled envelopes or jars for each category.
  • Show that money can grow over time. Use this simple chart to show how a person who invests $5,000 a year starting at age 25 can end up with nearly $825,000 by age 65, while one who waits until age 50 to invest $5,000 a year would have just $128,000. Then show them a picture of what they could buy with the $697,000 difference. (e.g, a new Tesla Roadster costs about $200,000; they could buy several.)

Our advisors often facilitate family discussions about money. It’s one of our Core Client Services. That’s the value of Perspective.