NEW YORK (Reuters) — When it comes to imparting financial intelligence to children, many parents know where to start.
At first, they introduce children to the concept, giving them small amounts of money like allowances or tooth fairy gifts to manage. The end goal is a fully financially responsible adult — earning money, managing a budget, paying bills, saving for retirement.
The real challenge, however, is the middle years. How do you get them to cross the finish line?
This is the puzzle that drove Bobbi Rebell crazy. The author, certified financial planner and former business news anchor for Reuters found herself frustrated trying to get her two college-aged stepchildren to embrace ideas about financial literacy.
“Even though I spent decades writing business and personal finance short stories, I was failing miserably,” Rebell says. “There are a lot of amazing teaching aids out there for little kids, but I haven’t found anything for parents of people coming of age.”
Presto: his new book “Launching Financial Grownups”.
There are several reasons why launching our children into the real world is so difficult. Often adults don’t have their own financial house in order, so we lack the knowledge or tools to teach the next generation.
Also, the last thing a teenager wants to do is patiently listen to their parents and learn from them.
And the schools aren’t much help either. Financial skills are now part of some curricula, but the reality is that personal finance is often overlooked as a subject.
The result is that teenagers often absorb money lessons from elsewhere, if at all. According to a survey by banking giant Wells Fargo, 35% of teens say they get information about money management through social media.
Every family’s financial resources and backgrounds are different, but these fundamentals can serve as a compass for raising money-smart kids:
Find that balance
It’s generally unrealistic to launch kids at 18 and expect them to take care of all their financial affairs from day one. At some point, however, you have to release them.
Yet 74% of parents are helping their adult children financially – and half say they cut into their own retirement savings to do so, according to surveys from personal finance site Bankrate.
That’s why you have to strike that delicate balance, says Rebell: Helping out in times of crisis, contributing if you can to big expenses like their first car or school fees, but not doing everything for them so that they have no skin in the game.
“Just because you can subsidize them doesn’t mean you should,” Rebell says. “You have to be strategic about it.”
Using the Covid years as an opportunity
This unique pandemic era has rewired family dynamics in so many ways. In many cases, young adults are living with their parents for reasons such as saving money, job loss, or colleges closing for in-person instruction.
If your child is there more often than expected, take advantage of it. Have conversations about money, invite them to make budget decisions, and ask them to contribute to household expenses. They learn more than you might think just by watching what you do, so be transparent about how running a household means making tough choices.
Avoid “janitor” parenting
If you solve all the financial problems that come their way, they don’t learn much on their own. Resist the urge to intervene in everything, let them make some decisions and face the consequences. It means letting them fail sometimes.
Think back to your own financial history: Probably the best money lessons you’ve ever learned come from when you had very little and had to get creative.
“A lot of parents mean so well and they just don’t want their kids to suffer,” Rebell says. “But sometimes you have to let your kids fail.”
Don’t just teach – listen
Helping your kids understand money isn’t just a one-way, teacher-student dynamic of presenting a lesson plan and digesting it. After all, they are not you: they are (or will be) independent, with their own ideas about what they want out of life. As a result, they will have their opinion about money and how they want to earn it, spend it, save it and give it away – and that’s okay.
“It’s a conversation, so let them talk more than you do,” Rebell says. “Find out what matters to them and don’t assume their priorities are yours. Then you can help guide them.