Dad, Be a Financial Superman to Your Kids
Every dad wants to be a superhero to his children. On Father’s Day, kids remind their dads of all the reasons that they are appreciated – because he is wise, strong, patient, hard-working, and good at solving problems. But what many fathers don’t realize is that they may be falling short of superhero status when it comes to teaching their kids about money.
“Sending them to school to learn the financial facts-of-life is not the answer,” says CFP Board Consumer Advocate Eleanor Blayney, CFP. “Only 17 states across the country require financial literacy programs in high school, according to the Jump Start Coalition’s 2016 biennial survey of state standards, and only seven states test students’ financial proficiency. Teaching kids how to stand tall financially is largely up to parents.”
In her latest contribution to LetsMakeaPlan.org, Blayney provides a few ideas for parents to help teach their kids how to be more financially savvy:
- Money is not just for spending.
Kids view money as having one function: the way to get stuff, now. Instead of letting them spend their money as soon as they get it, teach kids to consider other uses for their funds – such as saving and giving – and engage them early about why saving is important.
- Your credit limit is not money in the bank.
Based on how many adults use their credit cards, it can be easy for children to assume credit is the same as cash. Don’t wait until your child gets his or her first credit card to teach them about responsible credit use. Explain that only charging as much as you can reasonably pay off will help avoid problems down the road.
- Money may not grow on trees, but it can grow when it is invested.
Once a child has grasped the basics of saving versus spending, introduce the idea of investing. Explain the risks of the stock market and the possibility of owning a “piece” of a company they know, like Apple or Disney, by buying company shares or finding a mutual fund that holds company stocks.
- There are at least two sides to every financial decision.
Help your child think through financial decisions by teaching them not to make choices unilaterally, without regard to quality, or thinking that an investment with a high rate of return is better than one returning less. Share personal experiences of how you’ve made important financial decisions to help them better understand the costs and benefits of their choices.
- Money management can be fun.
Turning money management into a family event can help teach children how to budget in a fun way. For example, allowing older children to plan one aspect of a vacation, such as family lunches or an evening’s entertainment, can be an easy way to have a discussion about finances.
“If you work with a CFP professional, ask him or her to speak to your child about smart money choices,” says Blayney. “This can be particularly valuable for kids heading off to college where they may be handling money and credit cards for the first time on their own.”