Most adults understand the importance of teaching their children about personal finance topics and instilling them with fiscal discipline and a sense of responsibility. However, when it comes to actually instructing their kids on money management topics, some parents are unaware of how to begin and, as a result, balk at talking to their sons and daughters about these issues.
A recent study conducted by BMO Harris Bank shows that nine out of 10 parents believe they are a primary resource for their children when it comes to learning about money. Despite this high percentage, only 36 percent actually talk to their kids about money management on a weekly basis.
“Learning doesn’t stop when the school bell rings at the end of the day,” said BMO Harris Bank regional president, Kara Kaiser.”It’s never too early to introduce kids to the world of finance and that can start in the home. Even very young children can learn basic money skills, while older children can be taught about the stock market and the importance of setting financial goals.”
Start with basic concepts
Easing kids into financial conversations can help parents avoid overwhelming them, so starting with the importance of saving money can be a good place to begin, the study’s authors said. When children are between 5 and 9, parents can explain why saving money is important to their future. They can also teach the fundamentals of different bank accounts. In addition, adults can put these lessons into practice by giving their kids an allowance or paying them to do chores. They might encourage their children to save for a goal – such as a new toy, book or other item – which can make it easier for kids to set aside their money.
Consolidated Credit advises consumers that between the ages of 10 and 12, parents can begin discussing credit products with their children, the benefits and drawbacks of credit cards and loans and how spending behavior impacts their credit scores and reports.
This may also be a good age to start explaining the basics of investing and the stock market.
As children enter high school, setting them up with a simple investment fund to teach them how to track stocks and explore other wealth-building vehicles is a practical and hands-on approach to instructing them on the marketplace. Over time, all of these lessons may help young adults set a stronger financial groundwork for the future and make smart, life-long decisions about their income.