At some point your kids are going to need to handle their finances on their own, hopefully many years from now. However, here are some basics that you can teach them to establish the fundamentals.
- Spend and Save: Don’t blow that NFL signing bonus all in one place! If you’re spending money, save money too. It might not need to be in the same proportion as the money that you’re spending, but they’ll need money for the future and not just now.
- Envy is bad: No one should follow the crowd just to follow the crowd. Teach them that they don’t need to always buy the newest, shiniest thing. Bill Gates, Warren Buffett, or Vladimir Putin (or their future equivalents) are always going to win a battle of buying power in the end.
- Think first: Don’t spend without thought. Resist impulse buys, and prioritize spending before you do it. Teach them to understand the value of their money and that planning how to spend it is an important part of being an adult.
- Don’t be afraid: Perhaps this is just our bias as accountants, but finances aren’t something to be afraid of. Pick a topic and explain it to your kids every week or every day. Obviously we’re focusing on finances here, but you’re probably already doing this with a kid, right?
- Talk taxes: Before they start their first job, explain them the basics of taxes, including what those taxes do. Social Security and Medicare are going to be called out separately in their first paycheck, but their federal and state income taxes pay for roads, doctors, and so many other things. If you haven’t explained it yet, don’t forget sales tax too! They need to understand how to factor it in when they pick out something that they want to buy.
Finally, keep the conversation going. Encourage your kids to ask questions, and get them involved with your personal finances. And hey, if they ask questions that are too difficult, we can be here to help.