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Are you educating your kids about money?

— 8 min read

Preparing your children to be well-informed about financial decisions is a tough undertaking!

Financial advisers often hear from clients that they did not receive much financial education. Money in general is a personal topic with aspects that are often not discussed with close friends and even with family. Your personal relationship with money is often influenced by how your parents managed (or didn’t manage) their relationship with money. It’s a subjective topic which can take different forms from one person to another, that’s why it is often suggested that parents consider sharing experiences with their children to help them be better prepared to take their own financial decisions in the future.

Your own financial habits are on display to our children regularly and these practices reveal our values toward money and finances. Children learn spending and saving habits from watching you but some decisions you make are out of their view unless you choose to discuss them.

Just as teaching a child to handle scissors safely is best done in a calm way and not in the heat of the moment, teaching your children about finances follows the same principle. Before your child is given access to a debit or credit card, explain why you are giving them the card as well as the risks, responsibilities and issues with managing the card.

1.  Games and stories

Young kids can be taught the basics of money through board games that are fun and educational. Once your children are older, real-life experiences, especially your stories, will likely have a significant impact because they are personal and relatable. This article focuses on adolescent children as there are numerous sites that address games for young children.

Beginning to reveal personal stories to your children will naturally begin the conversation as most other people will likely not have spoken to your kids frankly about their own financial experiences in great depth.

2.  Development of your investment philosophy

What is your investment philosophy? How was your portfolio designed? Whether or not you developed this philosophy from scratch or have borrowed tested ideas from others is secondary to you discussing the benefits and risks you’ve found with your current course. There is no one winning investment game plan, but understanding the aspects of how to analyse an investment plan helps our children begin to understand the metrics at play.
What investment mistakes have you made? How have you adjusted for it? How were you (or not) impacted during the GFC and what did you learn from that experience? What investment structures do you have established, and how did you use each one?

3.  Your trusted team of experts

Managing finances generally requires bringing in other experts: a bank manager, a financial planner, a tax accountant, brokers, lawyers or others. Letting your children know about these experiences helps them be savvier when they inevitably seek the help of industry experts.

Share: What has your experience been with financial advisers? What clues did you have that a particular adviser was not going to be a good match for you? Why is it that you like your current adviser and why?

4.  Supplement the learning with useful online tools

Show them modeling of one of your investment strategies. If you are making regular investments to build wealth consider showing them ASIC’s Money Smart website which will demonstrate the benefit of tipping extra funds on a regular basis to the final balance of your investment. The easy-to-use program has numerous levers that can be adjusted to show the long-term impact of a few simple changes. Introducing them to this site may then open their eyes to user-friendly informative pages and tools that they can explore on their own.

Discussing your finances does not need to include the dollar amounts involved; you may decide that information is too personal; but the varied and complex nature of your financial situation is an insightful topic for your child to develop a framework for his or her adult responsibilities.

If you wish to speak to a DPM wealth adviser about your child’s financial education journey, call 1300 376 376 or book in for a complimentary no-obligation initial consultation.

Disclaimer: * The information contained in this article is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.

Authors

Tao Hsu

BA (Mathematics), CFP®

Consultant
Melbourne

Tao joined DPM in 2018 and is a Certified Financial Planner.  Tao is passionate about empowering her clients to make informed financial decisions and working with them to develop strategic long-term wealth management plans.