WASHINGTON — In honor of Father’s Day, we want to acknowledge the importance of a father’s role in talking to their children about money. By integrating money lessons into everyday actions with their families, fathers can support a positive relationship with money while providing basic financial management skills. If you’re a father, here are six ways to help your children build money skills that lead to financial independence.
1. Spark an interest in investing
The best way to learn about investing is by doing. Help your children invest a small amount of money in a particular stock or mutual fund. This real-time experience will teach them how to place a trade, read the daily quotes and track news related to their investment.
For young children, you may want to work with them to develop a list of three or four companies that interest them. Do the research for each stock together, then let them choose the one they think will be the best investment.
If you have teenagers with summer job income, you may consider opening a Roth IRA and contributing some funds (up to the gross amount they’ve earned or a maximum of $5,500 in 2018) for them to self-manage. Some ideas for purchases for them to research could include stock in a favorite fast food restaurant, a favorite clothing line, a car manufacturer, an entertainment company or mutual funds that focus on a particular sector of interest such as technology, cyber security or socially-conscious investments.
2. Share examples of your successes and failures
Another great way to teach your children about finances is to share real life stories of your own encounters with money dilemmas and successes. Tell them how you got started and what worked for you at various stages of your life. Be willing to expose your own mistakes so those around you can learn from them.
Explain that having fears about money, or not grasping all of the complexities of investing is natural. Talk about how you’ve managed to grow wealth in the face of your own money fears.
3. Show them how to develop core money skills
It’s surprising how many young adults arrive at college not having been taught basic money skills. Even if you’re footing their entire college bill, your children need to understand how to create and then follow through with a spending budget. Some easy ways to accomplish this include sharing how you manage the household budget to live within your means.
You may want to give your college student a credit card with a modest limit. Having their own credit card will teach them how to limit spending, pay their bill on time and build a strong credit rating for future use.
If your children are younger, give them a small weekly allowance to cover snacks or spending on toys. By making these decisions, they learn how to prioritize their wants and to say no to some things in order to save for more important goals. For more ideas on raising money-smart kids, listen to our interview.
Once your young adult has a job, teach them how to read their paycheck and to check it for accuracy. They will see how quickly taxes can eat into their salary. Encourage them to have a spending plan as a way to establish the discipline needed to have money available when unexpected things turn up like a birthday gift for their friend’s party or a coveted ticket to the summer music festival.
4. Encourage lifelong learning especially during career breaks
As parents, we know all too well the high cost of a college education. It seems we spend a lot of time supporting the college decision, but that support isn’t always continued throughout the college experience and into the student’s first job.
Stay engaged by encouraging them to consider electives that best align with their career goals. Connect them with people you know who currently work in their field of study for conversations about career choices and potential starting salaries. If you’re celebrating the graduation of a college student, here are some ideas specific to their key financial needs.
Even adult children benefit from another person’s opinion about how to face inevitable challenges in work or career decisions along the way. If you have an adult daughter, emphasize the importance of continuing her education throughout her lifetime, even when she’s not officially in the workforce. Maintaining relevant job skills is one way to maintain employability which can serve as a potential financial safety net.
Even if they are fully employed, adult women still have the wage gap to overcome, so a father’s support and guidance can help her find ways to achieve independence in the face of these challenges. Similarly, breadwinner women or those in nontraditional careers stand to benefit from a father as a cheerleader — giving her strength to break through barriers she may encounter along the way.
5. Support financial education
One of the reasons young adults are ill-prepared to manage finances in adulthood is that our educational system often doesn’t provide formal education in money management. In fact, unless they are studying business or finance, many college graduates will graduate into the workforce never having had a class in personal finance.
Since most college students have elective requirements, guide your children toward electives that teach basic financial education. Some examples include the basics of investing or an intro to economics course. You may want to suggest online resources you’ve found helpful along the way. If you have self-learners, there are also many books that serve as good presents. See Her Wealth’s Top 10 Books to Know and Grow Your Wealth for some ideas.
6. Seize opportunities to talk about money
We know that “money talk” can be uncomfortable. Our goal is to break the taboo around these conversations by finding ways to lighten up the topic. One of the easiest ways to open a money conversation is to encourage questions. You may find that your children ask questions you can’t answer, which is a perfect opportunity to investigate and learn something new together.
Without establishing a rigid schedule, consider making a mental note to bring up money-related topics on occasion, when teachable moments occur. Holiday time, before they head off to college, when they’re changing jobs or while they are preparing for their first child can be natural times to bring up the topic of money. Starting with reassurance that your guidance is always available may be enough to make the talk comfortable. Supporting healthy attitudes toward money and positive experiences talking about money may help your children to open up if a financial dilemma arises in the future.
We emphasized in our WTOP interview, Why Men Have a Financial Stake in the Financial Empowerment of Women, how important a man’s role is in supporting the financial success of their wives, daughters, mothers and all of the women in their lives. It starts by embracing your role in raising financially independent children. By taking control of your own finances and speaking positively about your financial security, you can lead by example each and every day.
We hope you’ll revisit our list of ideas on occasion because building sustainable wealth and positive money habits in your family is a lifelong endeavor.
Dawn Doebler, CPA, CFP®, CDFA® is a senior wealth adviser at The Colony Group. She is also a co-founder of Her Wealth®.
