When your mother is a financial advisor, you tend to learn about money at a very young age.
Gail Winslow, a financial
advisor with RBC Wealth Management in Washington, D.C. and mother of six (and
grandmother of six more), says she gave her kids an allowance when they were
eight years old, and immediately began teaching them the basics of managing
money.
“If they wanted to buy gum
with their allowance, they could, but if they wanted something bigger they had
to learn to save for it,” says Winslow. “If they didn’t have the money saved,
they didn’t get it.”
Think that’s young?
Darla Kashian, a financial
advisor and first vice president with RBC Wealth Management in Minneapolis,
says that kids as young as three-years-old understand that you exchange money
to buy things.
She gives her two
children—ages five and eight—one quarter every Friday for each year of their
age.
In other words, one gets
$1.25 per week and the other receives $2.
“It’s so important to
teach kids about saving for the future and to express your family values,” says
Kashian.
“We actively save money
for our philanthropic activities and talk to our kids about it.”
Winslow and Kashian have a
wealth of information to impart to their kids, but here are three
lessons they agree are essential.
1. Pay Yourself First
“Put away money from every single paycheck starting with the very first one you
earn,” advises Winslow.
“Don’t wait until the end
of the month because there won’t be anything left.”
Kashian says that
understanding how compounding interest works is crucial to growing wealth.
“The ability to postpone
gratification now for greater things in the future is a lesson that should be
taught as early as possible.
Understanding the power of
compounding interest is a part of that lesson.”
“Every child should be
taught to be mindful of what each decision they make means for their financial
future,” says Kashian.
2. Understand How Debt Works
Kashian requires her kids
to have cash with them if they want to make a purchase. As she puts it, “I’m a
human being, not a bank.”
And she’s already talking
with her children about how to pay for college.
“My goal over the course
of their growing up is to have transparency,” she says. “I want to make sure
that none of our expectations come as a surprise and that none of the financial
realities of life come as a surprise.”
“Do not ever charge
anything you can’t pay for,” warns Winslow.
But Winslow also says that
part of understanding debt is knowing that the occasional debt can be
financially beneficial.
She says one of the best investments
in the world is a 30-year mortgage, especially when interest rates are under
four percent.
3. Integrate Your Values with Your Money
“Integrating your values
and your money means that teaching your kids about money becomes part of a
bigger mission,” says Kashian.
“If they learn to think
about their values while they’re making decisions then it’s easier to
understand when to save for the future and when it makes sense to spend money.”
When her children buy
something with their own money, Kashian pays the sales tax. “I want them to
understand that I believe in taxes as a way to support our community,” she
says.
Kashian comes from a
working class family that didn’t have extra money to spare for the violin
lessons she wanted to take.
After some family
discussions, her father agreed to pay for every other lesson if she could pay
for the rest.
“I never missed a single
violin lesson because I understood what it cost,” she says.
Kashian says she wants her
children to understand their privilege to be raised in a household with money,
and to know that the money comes from the family’s hard, honest work.
She says parents and
grandparents need to learn to articulate the planning, the sacrifices, and the
savings required to provide special experiences for their children and
grandchildren.
Final Thoughts on Money Lessons
for Kids
“Teach your children to be
reasonable with their money—and not extravagant—and to save, save, and save
some more and they’ll live a secure life,” says Winslow.
Kashian says that parents shouldn’t be nervous about teaching their kids about
money.
“It’s kind of like the
‘New Math’ — just stay one step ahead of your kids and learn alongside them if
your experience growing up wasn’t optimal,” she says. “It doesn’t have to be
super-complicated. You can always ask for help from a financial advisor—that’s
the key to long-term generational wealth.”
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