How I Talk to My Kids About Money....

Kids can understand more than we think they can about money. A lot more. I know it, because I have one sons, ages 14, who aren’t content to just have savings accounts at the bank. He also have his own Postal Recurring Account. And, yes – he is contributing to those accounts. Aggressively.

Here’s how it happened. I grew up in a home where we discuss finances very often. We have money to invest, and it's a topic my parents understood particularly well as we all are in to financial business. When my wife and I had children, we agreed we would take a different route. We would treat our son like adults when it came to finances, to whatever degree he could understand the concepts involved.

Involving children in financial discussions from an early age helps teach them to true value of money.

A Weekly Allowance

We started, naturally, with an allowance, which we based upon his age. So when he were six years old, he could get Rs.60.00 a week, when he were eight years old, he could get Rs.80.00 a week, etc. Notice that I said “could get.” It wasn’t guaranteed. he had responsibilities to perform for that allowance, and failure would result in deductions. Plus, he had to ask for his allowance on Sundays – getting it wasn’t automatic. From this, we wanted to teach him that money had to be earned, and that nothing is a “given” in life: you have to ask for what you want and need.

A Family Discussion

About the time he were six , we began to involve him in Basic accounting with my father. on Every Sunday, and at that time my father discuss our finances in depth. We included him in that dialogue so that he understood in very general terms what my family had invested, where we invested it, and what our decisions were based on.

At first, of course, we kept things very high level for him. But as the years progressed, he started to stay longer during those meetings, asked more questions, and understood more.

A Circle of Trust

When we tell people that our son – as young as they are – have a full and complete understanding of the financial status of the family, they are often shocked. But here’s the key: we have established what we call a “circle of trust” in our family. We made an agreement with him that anything relating to our financial status can never be discussed with anybody outside the family. Otherwise, the trust will be broken and he will never be involved in these conversations again. he understand that, and he respect it.

A Personal Decision

It did not come as a surprise when our sons started to get more involved with own money. He already had savings accounts which we had set up, but upon his request, we set up Postal Recurring account for him as well. Being boy, they are highly competitive … so they are in a never-ending sibling race to see who can save and invest the most money!

An Understanding of Value

Building on the foundation of understanding they had formed by being exposed to financial matters both as a family and as individuals, my sons started asking questions about the real value of money. Not “What does the latest tech toy cost?” but the much larger question: “Why is money valuable?”

Here is our answer: money is valuable because it gives you freedom and flexibility.

That’s it. It doesn’t buy happiness, and it’s not about baubles and gadgets. The real issue isn’t whether you make a salary of four digits, six digits, or eight digits: that doesn’t bring happiness, either. The real value of money is that it gives you the freedom to make your own choices and not to have to do things you don’t want to do, and it gives you the flexibility to do the fun things that you do want to do. So the value of earning and saving is to gain freedom and flexibility.

At 12 and 14, we are now having family dialogues about how to understand risk-return trade-offs, how to balance a portfolio, how to set objectives, how to approach financing their college education, and more. Our end goal is to make sure that once our sons is on his own, he will know the right way to invest so that he is not haphazard, lazy, or foolish in their decisions. With a firm financial foundation, we know our sons will be able to experience freedom and flexibility in life – that is, he can enjoy the real value of money.





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Regards,

Ritesh.Sheth CWM^®

CHARTERED WEALTH MANAGER

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