Educational Pursuits - Kids and Finance

What is the most common question financial advisors get asked about kids?

How to save for my kids college education? That was my thought, but no. It’s actually: How do you discuss finances with your kids?

This is a question I get asked a lot- it probably has something to do with the facts that I am in finance and the mother of 3 kids (currently aged 8, 5 and 2).

The reality is that my conversations around finances are age based. What I find fascinating is that as a member of a suburban neighborhood filled with kids and teens, and witnessing my clients kids it seems that I am not alone in contemplating what will stick and learning the hard way what will make eyes glaze over.

This blog post we will chat about different conversations that are age appropriate, considerations for life lessons and other resources available.

Age Matters when talking about Money Matters

When considering the basics of money - I have to take a step back and remind myself that I get WAY too enthusiastic about the topic and keep it higher level.

• For my 2 year old it is literally all about introducing the concept that money exists. We identify coins and dollars. The concept of having a piggy bank that we put it in. There is sometimes conversation around keeping things out of their mouth.
• My 5 year old it’s about understanding that the coins and dollars have value and so does most everything else.
• My 8 year old is learning more about values around money (spending, saving, donating, etc)

All three require different conversations.

For example my 2 year old will help with chores around the house and gets coins as a result. We practice counting the coins and differentiating the sizes. The goal is often conceptualizing the coins relative value. At this point in time repetition and consistency are key considerations for me.

The 5 year old understands that the coins have value- keep in mind that we still practice differentiating the size and values. A goal is for them to recognize that money can be traded for goods and services (in spite of my efforts there is still a focus on toys) and that one can do jobs in exchange for money. Activities to consider:

Highlighting the prices of items at stores. We highlight where to look for it and chat about the relative prices of different items.

Inviting your child to conversations about vacation planning (Great Wolf Lodge vs Disney World is a topic we have considered) in terms about what kinds of places you would stay, what activities you would do, and the costs associated with everything.

Remember the age and maturity of the child you are dealing with and go from there- for reference we keep it super high level but still include our five year old.

Our 8 year old understands that items have value, as well as chores and jobs can be done in exchange for money. Right now we are trying to convey the concepts of needs vs wants and values surrounding money (I know you want that toy now but. . .). Having my 8 year old visualize bigger goals and save towards them has helped a lot. Also volunteering in the community (his sports team put together activities) helped give him a different perspective on the topics on needs vs wants and understanding that not everyone can get everything they want and there has to be prioritizing or consideration. It’s a useful exercise for me to gently remind myself that he is 8 not Ghandi, and have a real conversation with him.

Older kids in my community are at different levels and it may be helpful to share their experiences:

Tweens: there is a clear understanding that items have value and money can be earned. It is fascinating to watch how different kids approach this. For example, witnessing a kid who is impressive in terms of sharing relative valuations for different items and then getting other kids on board- is a joy! This kid and another kid had two broken video game controllers (I think it was guitar hero); after sharing what a used one in good working order was worth the pair worked together to put together something to be sold as refurbished.

Teens: The entrepreneur comes out and conversations around market rates in terms of what is fair to ask and what the community is willing to pay comes up quite often. For example one teen will do lawns in the neighborhood and has a good idea of what he should charge based on the materials he uses, his time used and what is competitive. Older teens will often hit the job market and discuss longer term planning in terms of “I will get experience in this space” or “these are skills I want” for a job down the road. What I find gratifying as a professional is that teenagers approached me with genuine curiosity and interest in topics that affect them.

Conversations that get attention:

• After your teen’s first paycheck, a discussion on what are taxes, what is being done with that money, how to file for a potential refund
• Tax efficient savings ideas (yes I have had this conversation with full attention) as well as pros vs cons of different strategies
• Basic definitions of financial terms that affect them

Involve Kids in Your Financial Life

The next way I have seen effective lessons to the next generation is through real life lessons.

For example, I have more than a few clients that have gone through the unfortunate experience of divorce. It’s common kids have also walked away from those experiences with lessons in the value of saving, strategies to ensure their assets are protected in various scenarios, and a real world understanding of consumer math as well as different terms and solutions.

The point that should be focused on: Involve your kids and teens in the financial realities of your life so they can start to learn and understand concepts that will very likely impact their lives.

Resources Exist!

There are a ton of resources available if you are looking for specific activities or curriculums. Did you know that there are podcasts specific to kids? Million Bazillion and Money with Mak & G are just two examples. There are also some great reads like “The Everything Kids’ Money Book: Earn It, Save It, Watch it Grow” or even comic books from the Federal Reserve.

Be aware that many states in America do require financial literacy to be part of the high school curriculum. If you are in a state like Colorado, where financial literacy is not state mandated, consider reaching out to someone that is in a position to do something about it. Knowledge is power and financial literacy is so important.

Remember that kids ability to grasp and work with different financial literacy topics are really age dependent and consistency is key. Engage your kids in your financial life so they can learn real life lessons or just get exposure to different concepts. There are great resources out there if you are looking for other ideas on how to approach financial literacy with your kids (or grandkids).

Cheers to your success and the success of future generations!

Brianna Beski is a financial advisor and CDFA at Raymond James, based in Colorado. She and her team focuses on helping people have confidence in their financial futures. For the rest of the story, please visit her website or email her at brianna.beski@raymondjames.com.

While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJA, we do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Brianna Beski of Raymond James Branch 3BA and not necessarily those of Raymond James or Raymond James Financial Services.

Raymond James & Associates, Inc., member New York Stock Exchange/SIPC