Preparing Our Children for Their Financial Futures
By: Eryka Morehead, President & CEO, Collaborative Planning Group
For many parents, teaching our children financial responsibility can be a very tough task. We can all agree, it’s important. As a mother of four, and through my years of experience working with clients, understanding its importance has never been the issue. It’s how to take that first step of instilling a process to ensure children begin to practice this important life lesson. I grew up in a family of six that often felt financial pressure to make sure our basic ‘needs’ were met. This left very little focus for our ‘wants.’ As children, this taught us that money was a scarce resource, required hard work to earn, and should be used wisely. Now, factor in the complexities when you’re in a financial position that allows for the ability to avoid making ‘needs’ a primary focus and you can begin to indulge in the things you ‘want.’ At this point, you can easily find yourself struggling to help your children understand what it actually takes to get there. I won’t begin to pretend I’m the foremost expert in this; after all, we’re still talking about children where each has a different personality that affect what works and what doesn’t. I simply believe my personal story is one that has some interesting insights you may find valuable.
As a financial professional who owns my own firm and balances being a mother of four, I spend the bulk of my days assisting my clients with protecting and effectively transferring their wealth for their families, meanwhile, leading my own family down a similar path and helping my children prepare for their lives. My own childhood was grounded with a great family base, but I also experienced a childhood where the luxuries of the more affluent were scarce. Transition to today where I find myself continually focused on building financial security for my family, not to allow for an extravagant lifestyle but one that provides my family the means to live how we choose. A significant portion of this is working with my children so they begin to understand the need for sound, strategic financial planning in their everyday lives.
Case Study: My Children
I’ve been fortunate to see the rewards of this through my two oldest children, an 11-year-old girl and a 13-year-old boy. Two kids, growing up in a dual-income household where their basic needs are always met. When they each turned eight years old, I organized their first individual meeting with our family banker to set up a checking account. They each got the opportunity to sit across from the banker and learn how to make deposits, make out a check, record spending in their register, and look at their account online. This helped to reinforce the basic math they learned in school and realize there are real life uses for these math skills. From that point on, I deposit a monthly stipend into their accounts, which is what they have had to live on for any non-basic living expenses. This freed me from the never-ending debate in the checkout lane over the extra items they would want to add to my cart. They now have to decide if that item is really worth the cost. They are spending their money, not mine. Despite what you may be thinking, we do not make them pay rent or force them to Uber to the store to pay for their own food and clothing needs…although that day may come, but I’ll save that for a follow-up blog. Each has adjusted to this process in their own way:
- 11-year-old daughter:
Saying she was initially “shocked” at the price associated with things she once took for granted is an understatement. I watched as her interest in these items dwindled right in front of me. Within 12 months following this new process, her savings account had accrued, what she felt was, a significant balance. She began thinking about the future cost of things like college, and we began basic conversations around investing money. As her 10th birthday approached, her grandmother asked for her annual birthday list. She found herself struggling to come up with anything she really needed. Around that same time, she saw a video about the work a charity was doing to bring water to areas where young girls were growing up without access to clean water. At that moment, she gave up on the birthday list and decided to donate her birthday money to the charity. We set up a Facebook page and asked her guests to please make a donation in lieu of a gift. Throwing in some of her own money, she managed to raise $500 for Charity: Water. Yes, under the age of ten and donating her own saved money to charity. I’d like to say the charitable focus was due to my charitable tax strategy knowledge, but in reality, it was simply due to her big heart and having access to her owns funds. She’s not without her desired purchases from time to time, but always has her own funds to manage and spend on the things she finds valuable.
- 13-year-old son:
Unlike his sister, the price realities of non-basic living items did not register immediately. While he understood the theory behind the new responsibility, he convinced himself that the well wouldn’t actually dry up if he kept purchasing. We all know how this movie played out. For me, the rewarding part of his situation came following his reaction when the well was completely dry. Clearly, his wants were not going to be met on this budget!
At that point, there were a couple roads he could have taken. One would have been to throw a fit at how unfair it was; after all, his friends didn’t have to do this! Instead, he focused on the ways in which he could fill that well back up on his own,, and immediately found himself doing odd jobs here and there to earn what he needed. Today, I’ve been forced to create jobs for him to do in order to appease his drive to keep that well full. He mows lawns for family members and is looking forward to his 14th birthday, when he can get a job. With an eye on driving at 16, he is asking how much items like car insurance will cost as he calculates how much money he will need to earn next summer to afford the luxury of driving. His take-away from this exercise has been that he appreciates the finer things in life and will need to work hard to keep his earnings in line with the lifestyle he values.
Both outcomes appealed to me as a parent and a professional. Each responded very differently, but I feel the experiment has been a success. Learning the true value of money at an early age will enable them to make informed financial decisions throughout their lives.
You’re Like Most
While I’ve had the fortunate opportunity to work with clients whose wealth will provide for their family for decades to come, the vast majority face this same dilemma; instilling the work ethic and value of money that will prepare them to become productive members of society. At this stage, it’s not about where our children’s balance sheets end up in 5, 20, or 50 years. It’s simply about instilling work ethic and values. Each child will react differently just as mine did, but as a parent and a professional, I take comfort in knowing they will both be a little better prepared for what life throws at them.
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