By Kyle Louvar, CFP®, AIF®
Teaching your kids financial literacy is an invaluable investment. Financial literacy is a skill that can set them up for a bright and successful future, and it’s essential that they learn it from someone they trust. As a parent, you are the ideal person to impart this wisdom.
If you don’t know where to start, or if the topic seems overwhelming, don’t worry! You can start small by teaching your children the basics. Explain the importance of budgeting and saving, and how to use money responsibly. Talk to them about the difference between needs and wants, and why it’s important to only buy what you can afford.
You can never start financial planning too soon, and the earlier, the better! Use this introductory guide to ensure your children understand the basics and have the tools they need to make smart money decisions and put healthy financial habits in place for a lifetime.
1. Be an Example
If you want your kids to grasp the importance of handling money wisely, let them watch you make financial decisions and model what you want them to learn.
The number-one money habit children learn from their parents is spending habits—good or bad. If you spend money recklessly, your kids will see that. If you rely on credit cards to cover expenses or argue with your spouse about finances, they’ll accept that behavior as the norm. Your actions set a precedent, so be intentional about how you model money management to your kids and let their watchful eyes be a motivator to change any negative financial habits.
2. Start the Conversation
Since many areas of personal finance aren’t visible, sometimes a silent model isn’t enough. That’s why it’s vital to start the conversation now. Talking to your kids about money regularly leads to kids who are more financially literate. It doesn’t have to be a long drawn-out discussion. Just let them in on your thinking and decision making as you go about your day-to-day life. At the grocery store, explain why you buy the off-brand cereal; at the bank, explain why the bank keeps your money and why you only take what you need from the ATM. You may even want to talk to them about a plan to save for college. These real-world scenarios help cement the whys and hows of money in your child’s mind.
3. Give Them Opportunities
For financial understanding to truly sink in, kids need to experience their own successes and failures. On a practical level, give your 5-year-old money to buy something at the store so they learn the value of different items and realize that, to obtain something like a toy, an exchange of money needs to take place. Try letting your 10-year-old figure out the cost of a new video game, plus tax, and help them save up allowance money to pay for it. Let your teenager buy their back-to-school clothes with a set amount of money.
Seeking out financial literacy classes in your area or online is another great way to introduce the topic of money management to your children. As they get older, you may even choose to guide them in investing some of their hard-earned money, letting them make some of the decisions. It may seem a little scary at first, but we all learn best by doing, so allowing your kids to make mistakes can teach them valuable life-long lessons.
We Are on Your Side
When it comes to teaching kids about money, there are many resources out there that can help you get started; and it may feel overwhelming to find the right ones. At Guided Capital Wealth Management, we utilize our proprietary process, The Paradigm FORMula, to help you create a dynamic plan that can help you reach your financial potential and stay on track as you pursue your goals. We are committed to providing guidance in order to support you and your children to find confidence in their financial future.
We understand that each family’s financial goals and needs are different, which is why we offer complimentary introductory meetings. During our meeting, we can discuss the best strategies for managing your financial goals and determine how we can walk alongside you in achieving them. Reach out to schedule a FIT meeting by contacting us at (832) 975-0711 or by email at email@example.com to learn if we are the right people to guide you on your financial journey.
Kyle is a CERTIFIED FINANCIAL PLANNER™ professional and holds the Accredited Investment Fiduciary® certification. Kyle Louvar is the CEO and Wealth Management Advisor for Guided Capital Wealth Management, a fiduciary financial advisory firm offering fee-based advice, guidance, and education. After seeing the impact that the 2008 financial crisis had on families, Kyle became fully committed to helping his clients develop a financial plan that changes as their lives unfold and their needs evolve. Spending nine years working for one of the largest brokerage firms on Wall Street, Kyle holds a high value for process, expertise, objective advice, and customized solutions. His goal is to help his clients experience confidence in their financial future through a disciplined process of financial planning, investment management, and sound financial decision-making.
Kyle graduated from New Mexico State University, where he was a proud 4-year letterman in football for the Aggies and where he’s sat as an NMSU Foundation board member since 2015. When not helping his clients, Kyle enjoys spending time with his wife, Nicole, and their two daughters. You can often find him coaching his daughters’ softball teams, playing golf, cooking, and traveling. To learn more about Kyle, connect with him on LinkedIn.