When you were young, you may have made poor financial decisions which you learned from, and gained wisdom that can now be passed on to your children and grandchildren. Although money can be a difficult topic to discuss, sharing this wisdom can help future generations make better-informed financial choices. Below are some topics to raise with descendants of different ages.
Advice for Ages 5-13
At this age, most children have not had much interaction with money, and the concept of money management may be foreign. If your kids or grandkids around this age are getting an allowance or money on their birthdays, then it might be a good time to teach them about saving. It is important for children in this age group to have the authority to spend their money how they wish, but teaching them how to save (and perhaps helping them open a savings account) could be a great first step in prudent financial practices.
Financial Knowledge for Ages 14-17
This is a time when teenagers get ready for college. They’re figuring out who they are and often start to pick up specific interests that they want to invest in, such as makeup, video games, or a stylish sneaker collection. It is essential for them to realize the real cost of their interests and the life their parents have provided for them. This could include tuition, books, their side interests, and how specific decisions – like taking out student loans – impact their future. Although their parents have been a safety net their whole lives, this stage brings up important lessons on spending, saving, and credit. Guide them on topics like credit scores, filling out a FAFSA form, and opening a savings account.
Age 18-22 is the Time of Financial Independence
College life can become very expensive. For this age group, it can be easy to get carried away by different activities as they are away from home for the first time. The most important topics at this stage may be budgeting and investing. Just as you are investing in their future by helping with their education, they may start to understand the value of investing in their financial security. Talk to your kids or grandkids about the value of retirement savings and the best ways to be disciplined. This is also a good opportunity to start bringing up investing in a Roth IRA and interest earned on savings accounts. As they approach graduation, they may also start to think about moving, beginning to pay off student debt, and taking out car loans. Guide them through important factors to consider, such as buying a used car versus a new one, budgeting while paying off debt, moving costs, and generally how to live alone for the first time.
As children grow, the concept of money can become daunting if they don’t receive enough guidance. Talking to your kids or grandkids about money from an early age can empower them to take charge of their finances in their adult life. To learn how you can take better care of your own finances and thus set an example for the next generation, speak with us today.