It’s never too early to start teaching your children about money. Financial planning and a good understanding of money are essential life skills and cultivating them early should be seen as essential. Learning about money is something that will happen naturally as society is filled with opportunities to experience its utility, but parents can also guide children into gaining useful knowledge and habits.
The value of teaching kids about money may only become obvious later in life. Instilling in children the need to pay attention to how much things cost, to save money rather than spend it all at once and to understand that money comes from somewhere and is not limitless are all good lessons to learn. Talking and learning about money can be as simple or as complex as is necessary and conversations with your children should get steadily more sophisticated as they get older.
Teaching children to manage money in the early years will inevitably revolve a lot around play. Toy shops are filled with games and products that involve getting familiar with money such as plastic market stalls and cash registers or rudimentary calculators to help children improve their counting skills. As your children get older, they will inevitably hope to graduate from playing with pretend money to handling real money and paying for things themselves.
Fast learning
Once children get to primary school age it may be surprising how swiftly their understanding of money and finance develops. Given how quickly technology is developing in this area and the fact that so many young people have access to smartphones, tablets and laptops, your child’s mastery of money may start to outstrip your own in some ways. But parental guidance is still crucial at this time, particularly because in the digital world, spending money is easier than ever and this could lead to children overspending or making other poor financial decisions.
When approaching the financial education of your children, it is probably wise to never consider the job complete. People will face different financial challenges throughout their lives and the experience you can offer to your children on this front will be invaluable every step of the way. Every financial lesson your children will have to learn, you will likely have learnt it before them. And it’s likely they will appreciate your advice.
Young adults could benefit most from advice around savings and investments, along with how best to handle debt. Everyone will know the temptation to just enjoy your twenties and early thirties, but taking the time to understand products such as individual savings accounts (ISAs), credit cards and student loans could mean the difference between financial security or insecurity down the line. Talking to young adults about investing is also advisable. There are plenty of opportunities to invest these days due to advances in technology, but well-publicised pitfalls such as cryptocurrency scams or investing platforms that can seem more like computer games should be warned against. Investing responsibly tends to involve diversification and long-term thinking and anyone new to it should be advised to think carefully before they get started.
Lifelong advice
The next stage of your son or daughter’s life is likely to come with a fair amount of financial complexity and this is where they may appreciate advice on buying property or how to start dealing with the finances of their own family. Naturally, they will be earning money for themselves by now and may even be at their peak earning potential, but outgoings may also be rising meaning advice on managing cashflow or saving jointly with their partner may be well received. Pension planning should ideally start early, but this may also be a good time to encourage someone to assess what they will receive and when they can access it. In the modern world, some people have multiple pensions and looking into consolidating them may be beneficial.
The preservation of family wealth can be a challenging business so it is worth educating your children about estate planning as early as possible. You may want to set up trusts or outright gift some of your wealth to your children so it is worth explaining the nuances of this process of giving and why you are doing it. Wealth managers may also advise you to be as open as possible with your children about inheritance and wills as this can help avoid any unnecessary family conflict.
At London & Capital, we believe that family wealth is best preserved when financial education is taken seriously and knowledge is shared within the family. Educating your family in responsible wealth management can ensure they are able to manage their own wealth and also be capable of assisting you in managing yours in your twilight years.
