Many parents understand the value of a good education and encourage their children to do well in school, but often do not put the same emphasis on money management. This can be a big mistake.
Why it’s so important
According to a study conducted by the Federal Reserve Board, (not surprisingly) indebtedness increases the likeliness that a young adult will find it necessary to move back home with their parents. Between 2005 and 2014, this “boomerang” generation increased by 15%*.
Communication is key
Your children look to you for guidance on many things, and finances are no different. Take advantage of opportunities to talk to them about money. Studies have shown that children are looking for information, and prefer learning from parents over friends or books.
Foster a positive attitude and good habits
A conversation about money can start when your children are young, and continue through college with age appropriate messages. For example, you can teach pre-school children through play, while older children can be taught about budgeting, saving, and philanthropy through an allowance.Teens and college-aged children can start to learn about credit card responsibility and debt, as well as the importance of investing for the future.
Try to be a role model for your children, demonstrating the difference between wants versus needs. A good way to do this is to show them how you are saving up for a big purchase.
Luma Wealth Advisors is here to help
Want more information on raising financially responsible children? We hold periodic events to help guide parents on talking to their children about money, and meet with adult children to provide coaching on financial literacy. We also provide access to resources, games and tools to help your children stay on a financially responsible path.
*Source: Dettling, Lisa J., and Hsu, Joanne W., “Returning to the Nest: Debt and Parental Co-residence Among Young Adults,” Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board, Washington, D.C., 2014