Parents should start training their kids to be financially responsible from the time they start understanding the concept of money. But such training doesn’t always happen. Even though the best time to influence your children is before they start earning their own money, that doesn’t mean all hope is lost if you haven’t taken the time to instill them with some positive financial habits.
Click through to learn how you can make sure your kids can help financially support you in retirement.
Starting a financial conversation with your adult child can be awkward. One way to open the dialogue is to share entertaining, personal stories of your own milestone experiences. They can be anything from learning to make change running your own lemonade stand in fourth grade to what it was like earning money from a part-time job while in high school.
Stories about how you acquired your first car or home are also good examples to share.
Share Financial Mistakes
Take care to expose your financial flaws when relating your experiences by sharing your thoughts and feelings about different financial situations that have gone wrong in your life. Explain why they went wrong, how you were able to resolve them and, in hindsight, what you would have done differently to change the outcome to a positive one.
Knowing your past mistakes and how you dealt with them — as well as suggestions for doing things differently — will give your adult children insight into successfully navigating their own finances.
Share Financial Successes
Sharing what’s worked for you financially — especially why it did — is also important. For example, if you have always believed in buying used vehicles instead of new ones, don’t simply state that you can save thousands of dollars by buying used. After riding around in used cars all their lives, your kids might be determined to buy new. To make a convincing point, you should also explain why buying used can be a money-saving strategy and how to make it work.
Discuss Ways to Get Rid of Debt
Gently question your children about their current debt situation. Encourage them to make a plan to pay off their biggest debts by a certain date. For example, if they have high-interest credit card debts, the snowball (smallest debt first) or avalanche (highest interest rate first) methods can be effective. Also, discuss their future financial goals and ask them to imagine what it would be like to have the money that’s going toward paying off debts as funds that could go toward investments.
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Discuss Being Frugal
Although the word “cheap” has a negative connotation, people who are frugal can be financially savvy. Take the time to explain the difference and the positive value of frugality to your kids. Being frugal means that you’re motivated to save money, but you will spend money on things according to the value offered.
For example, paying $2.50 for a beverage at a restaurant is not a good value when you can drink water for free. But paying a little extra to get a good, supportive pair of shoes is a good value because of the positive impact the shoes will have on your feet and joints.
Cheap or Frugal? 10 Signs You’re a Cheapskate
Discuss Retirement Plans
Ask your kids if they have a retirement plan in place. And if they don’t, explain that the earlier they start saving for retirement, the larger their fund will be when they need it. Talk about the power of compound interest or 401k matching when it comes to saving money. Also discuss how much money it realistically takes to retire.
To drive your point home, you can even have your kids sit down with you and run some numbers through a retirement calculator.
Recommend Financial Counseling
Although you might want to be the financial guide for your children, it could be helpful if you recommend that they also seek professional help. Having the benefit of both your advice as well as someone who deals with finances for a living can help your children develop a valuable financial perspective. Your trusted financial advisor or another professional who comes highly recommended are good options.
Good to Know: How to Pay Off Debt While Paying a Financial Planner
Recommend Personal Finance Books
A supplement to professional financial advice is reading personal finance books that have sound, actionable advice. “The Richest Man in Babylon” by George S. Clason is a classic of the genre, but there are lots of great personal finance books to read.
Recommend Automating Savings and Investments
Sometimes, a set-it-and-forget-it mentality is best when it comes to savings and investments. Explain to your kids that when they become used to having a set amount of money transferred from each paycheck to a savings or retirement account, they won’t even miss it. Meanwhile, their contributions are earning them money.
Smart Strategies: How to Maximize 401k Contributions
Discuss Debt vs. Credit
Although building credit is a big part of everyone’s financial future, it’s not necessary to go into debt to do it. Encourage your kids to promptly pay off any credit cards they use, before interest accrues. They can still build credit, they’ll just be doing it without debt.
Discuss Wasteful Spending
As a parent, you can’t help but notice when your child is being wasteful, and it’s okay to address it. For example, when grocery shopping, you can fall into a bad habit of buying unnecessary things or overbuying perishable food that you’ll end up throwing away later. Encourage your children to make a list before they shop.
Advocate taking the time to use coupons or download savings apps from retailers like Target and Walmart to cut down on unnecessary expenses. Buying generic brands is another way to save. Planning ahead to avoid using out-of-network ATMs and squeezing a bunch of errands into one car trip are other ways to avoid wasting money.
Lead by Example
No matter what sound financial advice you give your kids, make sure you practice what you preach. Otherwise, your advice won’t hold much value for your children. T. Rowe Price’s 2017 Parents, Kids & Money Survey found that when parents model good financial habits, kids will often respond with responsible financial behaviors and expectations. On the other hand, when parents exhibit negative financial behaviors, poor financial habits and expectations often develop in children.
Click through to see what things your kids can learn from your retirement.
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