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One of the greatest lessons you can teach your children is how to manage their finances.  There is an incredibly delicate balance between enabling and equipping kids with financial resources.  The old adage of “give a person a fish, feed them for a day…teach a person to fish, feed them for a lifetime” has some correlation here.  Everyone is prone to financial mis-steps, especially those just embarking on first-time employment and receiving a paycheck.  To heighten their probabilities for success in avoiding those pitfalls and critical mistakes, consider these pillars to help build their financial acumen and foundation:

  • Don’t ignore debt:  *The majority of college students graduate with debt averaging somewhere in the range of $30,000.  *Shockingly, an estimated 30% have no idea they have any outstanding debt at all.  Ignorance is bliss?  More like pending trouble.  Encourage your kids to tackle debt as quickly as possible and, by all means, avoid high-interest credit card debt.  That can be an extremely slippery slope
  • Maintain a budget:  Create a simple plan to ensure money goes where it should.  Without a budget, money tends to trickle away frivolously.  Just have them jot down their income sources and fixed expenses.  Whatever margin is left is available for their discretionary expenditures.  Again, make this simple.  Don’t avoid aggressively addressing debt and savings within the budget, either.  Encourage them to live within this budget even as their income increases.  This will allow for accelerated savings and elimination of debt.
  • Manage spending:  Obviously, the aforementioned budget can help prevent the tendency to overspend.
  • Start retirement savings now:  **A recent study suggests nearly 70% of people ages 18-29 had no retirement savings at all.  The earlier one starts, the better.  Time is an ally when it comes to compounding interest.  If a child is employed with a company that offers a 401(k), be sure they are participating and contributing at least the amount necessary to receive the full company match.  Don’t let them miss out on any free money!
  • Avoid costly investments:  No two investments are truly alike, especially when it comes to fees.  Encourage your children to review investment options – whether in an after-tax brokerage account or their 401k – to avoid the use of high-cost funds.  Paying too much now can be a significant drag on long-term returns.
  • Establish an emergency fund:  This is, arguably, the most important lesson you can teach your kids.  Life is full of uncertainty.  Having immediately accessible cash in a bank account (don’t worry about the low interest rates) can help address unpredictable financial circumstances and avoid taking on additional debt or liquidating investments.
  • Obtain insurance:  Health, disability and life insurance should be addressed in that order.  Life insurance (stick to term) can potentially wait until your child has a family of their own, but health and disability coverages are must-haves right out of the employment gate.  Reminder that not purchasing health insurance in our country now potentially comes with a costly penalty!


While this list may not be all encompassing, these building blocks will give them a fantastic roadmap towards protecting their financial well-being.  Entering into those conversations now will be an even greater gift than writing them a check.  Enable vs. equip.  And of course, don’t forget to tell them to stay diversified.

*Bidwell, Allie. “Average Student Loan Debt Approaches $30,000.” US News. U.S.News & World Report, n.d. Web. 13 Nov. 2014. <>.

**Hellmich, Nanci. “A Third of People Have Nothing Saved for Retirement.” USA TODAY. N.p., 18 Aug. 2014. Web. <>.


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