The next generation: Why you should have critical money conversations with your kids

by Badgley Phelps | Jan 21, 2020

Part 1 of 4

More and more millennials are living at home. According to a 2019 study by Zillow, 22 percent of people ages 23 to 27 are living with their parents, nearly doubling from 11.7 percent in 2001. And a recent report from Merrill Lynch says that more than half of younger millennials say they can't keep up their lifestyles without help from their parents, with 75 percent of these young adults defining success as “financial independence from their parents.”

All of this can present a financial toll and emotional drag for parents. That’s why it’s critical to have money conversations throughout childhood so your children are better prepared for the financial milestones ahead and to leave the nest as independent, fiscally minded young adults.

Your kids are watching you

According to research by TIAA, people’s financial habits and retirement planning are shaped by their parents’ experiences. For many millennials, watching how their parents handle—and struggle in—retirement has influenced their drive to do better. As quoted in Barron’s, “61 percent of respondents said they are taking a different approach to finances to avoid making the same mistakes as their parents.” The adage rings true: “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.”

Overcoming fear of critical money conversations with kids

It’s never too early or too late to discuss the concept of money and personal finances with your children. However, some parents avoid these conversations because they feel they’re not good role models with money management, don’t feel they know enough about money to teach about it or they perceive philosophical differences regarding money between the generations. They also might lack the confidence to talk to their kids about it in a positive way.

A big step in overcoming these fears is embracing honesty. Be transparent and explain to your child what you’re doing, why you’re doing it and how to do it. If you don’t understand something yourself—or can’t answer one of their questions—instead of saying “I don’t know,” say “I need to learn more about this too.” Explain the difference between wants, needs and tradeoffs using real life examples they can understand.

Studies suggest that habits take root in children as young as age nine. Creating and fostering an environment where children feel they can have open conversations about money will help them become productive members of society who can confidently and knowledgably set out into the world on their own.

Over the next weeks, we’ll share more about critical money conversations you can have with your kids.

 


 

 

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