Raising Money Savvy Kids

By Hightower Westchester on March 1, 2021

I have been a financial advisor for almost 30 years and was raised in a house with a father who still is a financial advisor, so for me money talk was always dinner talk.  Because of that it seemed I just grew up understanding finances, which might explain why I do what I do.

I probably tried not to talk about money too much at the table with my kids as I always felt that modeling good behavior was the way I would do it, but I have had many and still have conversations with my two now teenage daughters about wants versus needs.  At a young age we gave both our daughters an allowance for doing chores around the house, although whether they knew it or not, they were going to be doing them anyway even if they did not get an allowance. We thought, and still do, that by giving them money for work it would start to instill a work ethic, which by itself is another blog topic. And it would also give them money to spend on things they wanted but that we chose not to buy for them. I would say my kids were always careful with “their” money but did spend it on things they wanted and on birthday and Chanukah gifts for us or each other. My wife and I taught them how to spend an appropriate amount on gifts and would make them bring their money to the store and hand it to the cashier. We both believe the experience of physically exchanging money helps children understand HOW to spend money.

When they were old enough, we opened a savings account at our bank for them. Yes, I could have opened a brokerage account, but again I thought the physical part of going to the bank to hand the teller the money was a learning experience. And as their allowance money accumulated in their drawer, I would help them count it, fill out the deposit slip, and then make them go with me to the bank and hand the money and the slip to the teller. I know we live more and more in a virtual money world, but I thought then, and still do, that having a physical connection with money is important to understanding the value of money.

When my older daughter was in high school her friends started getting debit cards so naturally, she wanted a debit card too. The bank we use had a debit card for teens that I co-signed on. I made it a point to explain to her that this was a separate account and when the statements came, I handed them to her.  Again, I chose paper statements to build on the physical connection with money. I set her up on the bank’s app so she could see what’s in her account and made her responsible for checking it often and paying attention to what she was spending.  I made it very clear that this was not a bottomless well of money. Over the years there was never a time when she took advantage of the situation and she demonstrated that the lessons she was being taught about money resonated.

A  few summers ago when my older daughter was going to travel on her own I got her a credit card connected with mine as I wanted to be sure she had access to a larger pool of money if she needed it. When we did this, we again had a very clear conversation as to what the card could and could not be used for. And to her credit when she messed up a couple of times, on her own volition, she gave me money for charges that should have gone on her debit card and not my credit card.

When it comes to teaching your children about money my suggestion is to have a very clear discussion on expectations ahead of time to avoid misunderstandings. This advice can cover almost anything.

The other thing we do with both daughters is have them help us plan vacations.  Not only are they better at the online aspects of planning than my wife and I but we also give them budgets to stay within, again teaching them about the value of money and what things cost. A few years ago, when we went to Iceland, other than booking the plane tickets, I had them do everything.  The hotel, the tours, and pretty much everything we did from the time we touched down in Reykjavik to the time we left was all their doing, and they did a great job.

If you’re interested in learning more age-based ways to teach children about money, check out our white paper “Educating the Next Generation: A Guide to Preparing for an Inheritance & Responsible Financial Management”.

Peter Lang – Managing Director, Partner – Hightower Westchester

914-825-8631 – plang@hightoweradvisors.com