Be the guiding influence your children can trust.
Mike Sheffar, CLU, ChFC, CFP
It’s no secret that most families don’t like to talk about money.
People will talk about almost anything else, but money is still mostly off-limits. Your children are going to learn about money from someone – maybe an out-ofcontrol pro athlete on social media or an entitled friend at school. It should be you, so take the opportunity to be the positive, guiding influence they can trust.
Money shouldn’t be a taboo subject, and your kids don’t need to be sheltered from your financial matters – good or bad. Managing money, whether we’re earning it or spending it, is a part of everyone’s life. Knowing how to use money is important practical knowledge our children actually need, and will use, in their adult lives. Start now to talk about money, or go deeper if you’re kids are older and you’ve only skimmed the surface.
If you have a business or wealth to transfer, it’s particularly important to be honest and open as you prepare for any eventual transfer of wealth down the road.
Reflect and articulate Many studies show that a large number of wealth transfers aren’t successful. In many cases, as much as 70 per cent of the original wealth created by you, the first generation, is gone by the time it reaches the third generation.
The first step in educating your children about money is being solid on your own beliefs and values around money.
Answering the following questions about money may be difficult, and even painful. But, the exercise will help you be more conscious of your own attitudes and values around money that you may be bringing to your role as a parent. The answers should help you affirm what you want to continue to model for your children, and also what you wish to avoid.
- What was the attitude of each of your parents toward money, and how did it affect you?
- What was said directly to you about your personal relationship toward money when you were growing up?
- What did you learn about money from watching other family members, friends and peers?
- What does money mean to you now? What do you see as its greatest value? It’s greatest danger?
- What are the attitudes about money you’d like to teach your children? How are you doing that? What changes would you like to make? From Children of Paradise, Lee Hausner.
Next, how would your spouse answer these questions? Are you on the same page or are you giving your children mixed messages?
Money and emotions
Think about your own beliefs, attitudes and behaviors around money. Do you…
- Believe money is power?
- Use money to reduce guilt?
- See money as the ultimate fixer?
- Believe money is a measure of personal worth and having possessions means happiness?
- Consider money a men’s issue?
Of course, there’s no absolute right or wrong when it comes to behavior around money. It depends on circumstances, individuals and consistency of actions.
Actions speak louder than words
With money and finances too, follow the golden rule of parenting and lead by example. Kids are the ultimate lie detectors, and they know more (and can find out more) than you think they do. If you consistently practise financial responsibility, delayed gratification, financial prioritization, and a work and reward ethic, your children are more likely to do the same.
Talk about values, not numbers
You don’t need to share your income with your children, or the exact amount of major expenses. They don’t really want, or need, to know. Instead of numbers, help your children understand concepts like saving, budgeting, living within their means, paying off debt and giving.
Watch for opportunities and think about having conversations and asking questions. By asking your kids questions about what they know and think about money, you can focus on how your family lives your values and help them formulate their own answers.
Teach and practice
Give your children the opportunity to become financially capable. When they have their own money to manage from an allowance or job, even small amounts, help them budget and think beyond their immediate wants. Think about how you felt the first time you paid for your own special something – your cool new bike or designer jacket. You were likely very proud and the value was far beyond the thing itself. Help your children earn and enjoy this same pride, self accomplishment and achievement.
If your children have expenses (maybe a cell phone bill?), help them figure out how to pay for them. Download an app that helps them track their spending habits so they can see how far their money goes. This will pay off as they grow into bigger expenses, like heading off to college or university.
Keep the conversation about money going as your children grow. If you have teenagers, you’ll want to start talking about post-secondary education – the costs and expectations for their participation. How will they be invested? This is when conversations about budgeting, working and debt will really hit home.
When they’re ready, let your children try their hand at being good stewards of money. If they’ve never met with your advisors, have them sit in on your next meeting so everyone can get to know each other and they can see the process. Consider giving them the opportunity now to choose investments for any trust fund you’ve set up so they can better learn and understand how this money can work for them over the long term.
If you own a business, share whatever information you have now about running a successful business. Consider giving them a role that matches their abilities and interests, and is age appropriate.
Help your children be financially literate. Use your own knowledge, and also take advantage of the several good books available about personal finance. Just like with any other subject, teenagers can read so they understand the value of saving and the power of compound interest, and in the longer term, RRSPs and TFSAs.
It’s never over
We don’t stop being parents until we’re done being. Just like all other aspects of parenting, talking about money is never done. It’s a lifelong job. If you do it well, your voice and values will live on to guide your children as adults, every after you’re gone.
Start talking now and keep those conversations going.
Some books for thought
Children of Paradise, Successful Parenting for Prosperous Families, Lee Hausner
The Financially Intelligent Parent, 8 steps to raising successful, generous, responsible children Eileen Gallo and John Gallo
Smart Money, Smart Kids, Dave Ramsey and Rachel Cruze
The Ultimate Gift, Jim Stovall
The Wealthy Barber (series), David Chilton
Rich Dad, Poor Dad, Robert T. Kiyosaki
About the author Mike Sheffar is a partner at Sheffar Potter Muchan Inc., a wealth management firm in London, Ontario. Mike holds CLU, ChFC and CFP designations