Americans are great at showing their kids how to spend money, but not so great at teaching them how to save money and even grow it.
We might get as far as a piggybank and an allowance, but that’s where it ends. In fact, 69 percent of parents say they have some reluctance to discuss money matters with their children, according to a recent T. Rowe Price survey.
Maybe we think the conversation will be over their heads or they will be bored.
But here’s the thing: That same 2017 Parents, Kids & Money Survey found that parents who discuss financial topics with their children at least once a week are significantly more likely to have kids who say they are smart about money (64 percent vs. 41 percent).
And that confidence could lead to fewer problems down the road with things like credit card and student loan debt.
But how do you talk to a fidgety 5-year-old about compound interest and market volatility?
“You don’t,” says Eric Mattinson, an Investment Advisor Representative with Semmax Financial Group Inc. (www.semmax.com). “You keep it fun – and pretty informal – and step up the level of learning as the child gets older.”
Keep the lessons simple and personal, with plenty of examples, Mattinson says. That applies to everything, from budgeting for a videogame purchase to buying stock in the company that makes it.
His tips for talking about money matters include:
- Tell your story. Sit down and talk with your children about your investments and how you make investment decisions. “If you put in the time to explain it in simple terms, you’d be surprised at what they can understand,” Mattinson says.
- Introduce them to online resources. Kids love anything with a tech angle. Show them how to use platforms such as Yahoo Finance or Fidelity.com. They can get a wealth of information from such sites.
- Encourage them to buy stock in a favorite company. “I did this with my 10-year-old son, who chose to invest in Disney right before the last ‘Star Wars’ movie came out,” Mattinson says. “He’s shown great interest in what’s happening with the stock and he already understands yield. When the stock matches something children already are excited about, it’s much easier to keep their interest.”
If you want your children to handle their money wisely in adulthood, Mattinson says, it’s important to instill the right money-management lessons early and often.
“If you wait until the day arrives for them to leave for college,” he says, “then you’ve waited too long.”