Experienced financial advisor says you can start as early as three and keep layering it up until they're adults
Children are never too young to learn about money. Advisors can help parents learn how to tailor the lessons to their age and their delivery to what will make the most impact, said one experienced financial advisor.
“We have a great dialogue about the birds and bees. Why aren’t we having these conversations with our children and laying that foundation for financial success later?” Nancie Taylor, a senior financial advisor at Meridian Credit Union in the Niagara peninsula told Wealth Professional. “Talking about the birds and the bees is about making sure they’re making good decisions for later in life, but those financial conversations are just as important.”
When Taylor meets new clients, she said she asks about the financial conversations they had in their families when they grew up since those may shape how they handle money now. Then, she encourages them to share their experiences – successes and failures – with their children, so they can learn from those, too. She also provides regular tips that she’s noticed many female clients use to educate their children. She’s willing to share those with others, too, though she noted that the Bank of Canada also has many resources for different ages and learning styles.
Taylor is concerned that a lot of young parents are not having these conversations with their children, so they are missing out on some fundamental lessons they’ll need for their long-term financial health. She urged advisors to initiate the conversations with the parents, just as she does, and encourage them to do this education.
She said parents can start having these conversations with children as young as three, when they set up a piggy bank for them. They can ask children to help with yard sales so they learn the different coin values. They can teach their children to comparison shop and determine value while getting groceries. The family can buy a couple of stocks – such as for Disney or skateboards – and monitor them, discussing why they rise or fall. The parents can also talk about budgeting, and differentiating between needs and stocks, as teens get their first job and leave for more post-secondary schooling.
It makes a difference. Taylor recalled one millennial who just became her client. The young woman was only 14 when she listened to her parents’ meet their advisor at their dining room table. “She said, ‘I didn’t think I understood a thing. But now, I’m hearing things that are resonating more because of that early exposure,’” said Taylor.
Taylor offered several tips that advisors can pass on to clients to help them have these conversations.
First, parents should set a good example by getting a financial advisor and developing a financial plan, which they can then share with their children. She urges parents to have an annual financial conversation with their children, and ask their opinions, as it’s age-appropriate, about how the family is financially planning for things such as family vacations. As their children get older, the parents can also discuss how they accumulated their money and what they want to accomplish with it, and then ask the children how they feel about it. Such discussions can also open the conversation for when families must make elder care and estate decisions later in life.
“If you don’t have those financial conversations while you’re growing up, and then all of a sudden, your parents are in their 80s and want to start, it’s a little more challenging and awkward on both sides,” said Taylor. “So, the more you normalize it, the better. I believe it should be an ongoing education journey as they’re growing up.”
Parents should also keep their advice brief and to the point. “Tell them to try not to sound too lecture-y, like they know everything,” said Taylor. The advice should directly pertain to the situation and can include other resources.
Parents can also share positive and negative lessons from their financial choices. She noted that when her son got his first credit card, his dad shared that he’d used his first card like an ATM machine, and then had to ask his parents to co-sign a loan to pay off his card.
“It’s really good when parents do share their experience because it shows they don’t know everything, so that’s why they are where they are, and that’s a learning journey,” she said. “They should share the good and bad, and not make it a two-hour conversation. They can talk about what they’re proud of and when they failed. I think that’s key.”
Taylor said parents should also keep their expectations in check – especially if they’re disappointed in some of their children’s decisions since they’re not going to follow all the parents’ advice. “Advisors can help parents accept that their child’s going to make those mistakes, and let them. Parents shouldn’t be judgmental because then their kids will come to them for more advice,” she suggested.
As children age, advisors can also encourage parents to share their investment – or even children’s registered retirement savings plan – statements with their children to show them what they look, so they become familiar with them. Parents can also talk about how diversified the funds are and start explaining some terms in them. If parents are concerned about a child sharing information, such as with teachers, they can only share part of the picture.
While Taylor is concerned about the next generation, which may face some different financial challenges with buying housing and saving for retirement since pension funds have changed in the last two decades, she said they may need to assume more risk to get the same return because interest rates are low and inflation is increasing.
“Advisors can pass on the idea that parents always want what’s best for your kids,” she said. “But that doesn’t necessarily mean the best clothes or the best brands. They want them to feel safe. They want them to feel secure. So, the parents need to lay that foundation for their children to build on later in life, so they have the confidence to manage what they’ll need to do.”
