For high-net-worth families, teaching kids about money at an early age can go a long way towards preserving generational wealth. Indeed, financially educated children tend to make smarter choices with their money throughout life. However, there’s also an emotional component to inheriting wealth. Giving your children the tools to make good financial decisions includes instilling the right values and helping them develop a positive money mindset.
Tip #1: Be Transparent…to a Point
Money is considered a taboo subject in many wealthy households. But there’s a fine line between transparency and oversharing. While your children may not need to know every detail of your financial life, bringing them into family conversations about money can be beneficial.
Teaching kids about money—specifically, how you accumulated your wealth and what wealth means to you—can impart responsibility and perspective. In addition, sharing positive stories about your family’s wealth can help your children develop a healthy attitude towards money.
Tip #2: Prioritize Financial Literacy
Many parents assume their children are learning about money in school. Unfortunately, this isn’t necessarily the case. In a 2019 survey of over 27,000 people, FINRA Investor Education Foundation found that four in five youths couldn’t pass a financial literacy quiz. One reason for this gap in financial literacy may be that only 18.4% of U.S. high school students must take a personal finance course to graduate, according to research from Montana State University.
When it comes to teaching kids about money, the responsibility still falls squarely on parents’ shoulders. If you don’t feel confident in your own financial knowledge, consider enlisting the services of a fiduciary financial advisor, who can facilitate family conversations about wealth.
Tip #3: Give Them Hands-On Experience
Often, children need to have some skin in the game to truly understand how money works. Paying them a weekly or monthly allowance is an easy way to give them hands-on experience.
In addition, consider creating an incentive system so they learn to save and invest—not just spend. Encourage them to set goals and schedule monthly check-ins to assess (and reward) their progress.
Tip #4: Lead by Example
Lastly, make sure you practice what you preach. Regardless of what you teach your kids, they’ll notice how you behave when it comes to money. While none of us is perfect, we can all do our best to make smart financial choices for the good of our families.
Teaching Kids About Money is an Ongoing Process
Teaching kids about money requires a healthy amount of patience, but the payoff is often worth it. Ultimately, you’re preparing your children to inherit, protect, and grow your family’s wealth, so it can be passed on to future generations. In turn, they’ll be better equipped to preserve the legacy you envision for your family.
Sherwood Wealth Management specializes in the financial planning needs of sudden wealth beneficiaries. If we can help you have these conversations with your children and plan your legacy, we encourage you to schedule an introductory call.