As retirees hit the road to visit grown children and empty-nesters welcome back larger families this holiday season, it’s an opportune time to reflect on family values. If you’ve successfully nurtured financially savvy adults, great!
For those still with little ones or young grandchildren, you’ll want to know the secrets for raising financially responsible children.
At First Financial, we stress the importance of starting your wealth journey now. The sooner you start, the more success you will enjoy long term. This principle also applies to financial parenting – introducing good money habits to your kids early is key to ensuring those lessons take root and endure over time.
Good money habits in the early years
For a lifetime of financial responsibility, it’s best to start in early childhood. Even the youngest children can grasp basic concepts such as saving, spending wisely and understanding the value of money. Introduce your children or grandchildren to simple activities such as coin counting or saving for small items to instil these essential principles.
Another powerful concept to master early on is delayed gratification. Encourage them to save for things they want rather than giving in to impulse purchases. This will help them build patience and resilience, laying the groundwork for more complex financial skills as they grow.
You can also use everyday experiences to impart your own financial wisdom. Whether you’re at the supermarket for grocery shopping or during playtime, involve children in decision-making processes. Discuss choices based on budgets and priorities. These small, practical lessons create a natural and effective environment for financial learning in the formative years.
Financial lessons for the teen years
Handing over the keys to your teen for their first drive is like the initial stages of financial planning—a bit bumpy, but with the aim of a smoother journey ahead. With teenagers and money, start with the fundamentals. Explain the significance of budgeting and the importance of allocating funds for needs before wants. Just as mastering driving takes time, so does financial responsibility, so provide as many learning opportunities as possible.
Teach your teenagers the art of goal-setting. Whether it’s saving for a new gadget, their first car or future independence, having clear objectives cultivates discipline and foresight. Equip them with tools to track spending, enabling informed decision-making from the beginning of their financial journey.
This time is also ideal for teens to grasp the perils of credit and overspending. Before your children and grandchildren enter adulthood, arm them with a solid foundation that includes a genuine understanding of the risks associated with credit cards and buy-now-pay-later scenarios.
Savings, emergency funds and investing in the future Image:
A secure financial future is dependent on the ability to save. By highlighting the importance of consistently setting aside a portion of their earnings, children and teens can develop the discipline needed and witness the power of accumulating funds over time.
Teenagers, being mature enough, comprehend that life doesn’t always follow a predictable path. This is a great time for education on proactive financial planning. As they approach adulthood, encourage them to establish an emergency fund that can cover unexpected costs, emphasising how this can preserve their savings for personal goals and aspirations.
Investing is a future-focused, long-term wealth-building strategy that plays a crucial role in financial and retirement planning. Children can grasp these concepts at age-appropriate stages. Empower your children and grandchildren by sharing the importance of forward thinking and teaching them about the power of compound growth. Early exposure to these financial principles establishes a solid foundation for later years.
Have the tough conversations
Parenthood often involves navigating tough conversations, some pertaining to financial matters, such as estate planning. Broaching this weighty topic should occur at an age-appropriate time. The timing varies for each family, influenced by factors like parents’ age and the maturity level of their children. Beyond conveying your wishes, discussions on estate planning foster understanding and prepare the next generation for responsibilities that may involve managing assets and making decisions on your behalf.
As your children mature, the significance of addressing wills and communicating your wishes, including the potential need for aged care, becomes increasingly valuable.
Beyond preparing them for a time when you may not be present, these conversations also instil a sense of responsibility, motivating them to make their own preparations for their future families or responsibilities.
Leading by example
As with any value you wish to impart to children or grandchildren, the most effective approach is leading by example. If you want them to be responsible with credit, demonstrate responsible credit behaviour. Similarly, if you wish for them to set goals and work diligently to attain them, it starts with you setting and pursuing your own goals.
Your actions throughout the formative years and even further create a tangible blueprint for navigating personal finance. Beyond mere conversations and lessons, your own financial responsibility becomes a way of life – a lifestyle your children can embrace from day one and carry with them throughout their lives.
And even the most financially responsible parents and grandparents often need professional help to achieve their goals, dreams and ideal retirement. At First Financial, our experienced advisers want what’s best for you and your family. We have watched countless clients progress from parents to grandparents to successful retirees.
Talk to a member of our expert team today for financial planning advice.
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