Family and finances: the importance of talking to your children about money

Something that your children are likely to inherit from you, whether you like it or not, is your relationship with money. The messages you share with your children, verbally and otherwise, will be their formative ideas about what money is and how it functions in the world. As a parent/guardian, one of your superpowers is the ability to guide and control your children’s exposure to positive money habits.

Below we will discuss some of the benefits of family money discussions and how to go about them to aid in the construction of a holistic understanding and wholesome relationship with money.

Start with yourself

Taking the time to take inventory of your own money beliefs (inherited or self-learned) gives you the space to recognise where your views on money stand, and where you may hold some toxic ideas around the acquiring, building, or spending of money. You may also find that you possess some valuable insights that you wish to impart on to future generations – like most things, balance is likely the key here.

Some questions to ask yourself are:

• What are my earliest memories about money?

• What messages about money/finances did I hear growing up? Do I believe that these are useful?

• How do I think about people who are wealthy?

• How secure do I feel in my knowledge of finances?

Pre-teens

It is healthy to include your children in conversations about money early on. Seek to strike a balance between lack and absolute abundance. There needs to be a healthy respect for money without a fear or obsession with its shortage being developed.

A good starting place is an understanding of being paid for adding value to society. From there, discussions can be around how the family budgets, making provision for savings & investments, and planning for large future expenses. This is the opportune time to acquire an understanding of the link between time and money i.e. the further into the future you plan, the easier the plan becomes.

When times of financial uncertainty arise, you can include your children (depending on their age) in the process of navigating it. Hopefully this looks like accessing emergency savings, and then following up to replenish what has been used over the following months. This is a moment to teach about the importance of avoiding debt where possible.

Teens

Eventually the dialogue can progress to being a long-term investor; focusing on consistency, patience, and navigating market volatility. It may be worth including your teens in one or two reviews with your financial planner, for them to develop an appreciation for planning and partnership.

You may be blessed with the opportunity of sharing the financial considerations of a major purchase with your teens. For example, you may buy a property or a vehicle. Since this is something that they will likely do on their own at some point, you can give them some wisdom around how to be diligent in this purchase.

All the points above become much easier if you as the parent have a firm grasp on your finances. It is worth mentioning that no one is born with a natural understanding of finances – so take your time to arm yourself with the basics.

Adult children

Once children leave the nest and find their feet financially, there exists a superb opportunity to include them in your retirement and the family succession plan.

Being open with your children about how your own retirement plan is unfolding will bear some amazing fruit.

• You and your children get an early gauge around your financial independence and ultimately, whether you will be leaving assets to them or potentially need their assistance. News flash, very few people have sufficient retirement savings to carry them through their retirement years at their desired lifestyle.

• Your children get a multi-decade early view of what the realities of retirement planning look like. This hopefully kickstarts their own retirement plan. As we all know, starting early makes the required contributions to build up sufficient retirement assets much more attainable.

• You can open up talks about family succession planning, and in the best of cases, how to build up and preserve inter-generational wealth.

While you do your own estate planning, your children (who are likely major beneficiaries) would benefit to be a part of the conversation. You have the power of your last will and testament to firmly conclude this conversation, but your vision for certain inheritances may become clearer through discourse. You may have a home, business, or other heirloom that has sentimental value, and you wish to make this clear to the future owners of that.

Finances and family have oftentimes struggled to mix. By allowing these conversations to happen (sometimes awkward as they may feel), you at least gain some control over what your children are learning from you, because they are learning anyway. Including your children in these conversations can empower them decades before it is needed and instil the wisdom that will build a financially secure generation.