We have been fortunate over the past couple of weeks to have Liam Cronan join us at Single Point to work on a few projects. Liam is a senior at Thayer who will be attending Bentley in the fall.
In a previous blog we touched on the topic of how to help teach your children about money:
http://singlepointpartners.blogspot.com/2015/08/should-kids-have-to-do-chores-for-their.html
We thought it would be interesting to hear a firsthand perspective on the topic. In this guest blog post, Liam discusses his personal experience with how his family handled conversations about finances.
Some would argue that money and
finances, especially those relating directly to the family, are not the
business of children. Others may say the processes, not to mention stresses,
involved in earning, maintaining, and expanding personal wealth is a topic that
should not be a child's concern on the grounds they are too immature to
understand it or that their innocence regarding money should be spared.
However, keeping children ignorant as to a families assets, how and why their
financial decisions are made, or even something as simple as the point of a
having a bank account is not only a lost opportunity for valuable life lessons
but also places children at a significant disadvantage. Children are naturally
curious and are only further intrigued by something they find mysterious or off
limits. Money would fall perfectly into this category. Most children, when
trying to ask their parents questions such as “how much money do you make?”,
“are we rich?”, or “why is their house larger than ours?” will most often be
met by a response saying it is impolite to talk about money or income. This
reaction, of course, will only make the child want to know even more, begging
the question: would it be so terrible to answer questions like these; would it
be some complicated and strenuous task to explain? In large part, the answer to
both of these is no.
This concept does not necessarily
mean handing a form 1040 and a balanced check register to a five-year-old will
set them on a path to financial knowledge and success, however keeping them in
the dark entirely leaves them unprepared on one of the world’s most universal
and important topics. Discussing finances can start with things as trivial as a
grocery bill or the reasons why something can or cannot be purchased. When a
child receives money for a gift, they can be taught how and why some should be
spent while some could be used to start a bank account that will earn them
interest. Any one of these can be utilized as an opportunity both to teach them
and to spark their curiosity. As they grow older, children can be introduced to
more complex topics, which will make intuitive sense based on their furthered
maturity and the previously taught knowledge.
Talking about money with children
is crucial as it is one of the most important means for teaching them to handle
their finances in the future. As these children grow into teenagers, those who
are equipped with an understanding of money and family finances will likely be
the ones who make sound financial decisions with their own money, who will
understand the costs and benefits of the increasing cost of higher education,
and will likely not be the ones with a quarter of a million dollars in debt and
a degree in ancient Mesopotamian cultural studies to show for it. Sadly,
according to a 2014 survey conducted by Citi Group, only fifty-nine percent of
parents even feel comfortable talking to their children about their personal
finances, twenty-eight percent of them stating it was a topic they considered
off limits for a child. By consequence, the forty-one percent are left to
surmise what they can and be left in the dark about the rest. This fact means
that nearly half of all children will subsequently grow into to relatively
monetarily and financially illiterate young adults.
Talking about a family’s finances
does not need to be a daunting task for parents, yet so many make it out to be
so. Part of changing this fear comes in a willingness to be open on the part of
parents as well as overcoming the fear that discussing these topics will be
some life-altering and traumatic event for children. For some, the child may
not have any interest whatsoever in learning about money (which could be
considered a problem in and of itself) but if and when they do, it is
imperative that they be given the information to have tools they need, so far
as they can handle it in a mature and confidential way. According to an article
published in The New York Times on
the issue of talking to children about financial matters, discussions about
money can being as early as six or seven with something such as a grocery bill
or in a larger sense why the parents choose to spend money in the way they do
and slowly advance to more complex topics as they age. Moreover, a similar
article in Time Magazine furthers
this by stating that it is not something to occur once but instead something
that is more of a process. They end with a simple piece of advice: if a child
asks about money, personal finances, income, or what have you, find out why
they want to know, find out what piqued their curiosity.
Personally, my parents were always
open and willing to discuss topics regarding money and their finances from when
I was very young. My aunt, a forty some year veteran of the banking industry,
was also more than willing to answer my questions, foster my curiosity, teach
me about the banking and finance industry, and instill the importance of saving
money in a bank. As time went on, my parents involved me in their rational
behind more complex decisions about their finances. My mother allowed me to
come with her to her accountant and watch him file her taxes. However, I was
not forced to do this; I was genuinely interested because of the curiosity she
fostered in me. She then used this as a chance to teach me what tax returns
were and why we were there in the first place.
I began to learn about just why my father was so diligent about saving
for retirement even though it was decades away, why he (as well as most people
of his generation) won’t have a pension set aside for him. Eventually, I was shown and taught about
financial advisor reports and all that that entailed, from what the different
types of assets meant what level of risk involved, and so on.
That being said, was it beneficial
to me? I would answer that with a resounding yes. According to studies taken by
Fidelity Investments, over three-fourths of people in “Generation Y” have a
genuine interest in talking to their parents about money related issues, and I
would consider myself within that group. Learning about money and finances from
a young age not only helped me understand first and foremost that money had an
important purpose in society but also forced me to slow down and think about
its use and how that affected me. Furthermore, it taught me that financial
success does not come arbitrarily but rather from a careful setting of goals
and a willingness to follow through with them.
Before the next generation of
children, the next future of the U.S., can grow into financially literate young
adults, the taboo around discussing money needs to dissipate. Parents need to
understand the importance of teaching their children about money and finances
and to consider a talk about money with their child from an early age as being
no less important than any other similar lesson. For me, I do not regret for
one moment that my parents taught me this from a young age or feel in any way
that it was some destroyer of my innocence. On the contrary, I could not be
more grateful for being provided with the tools I need to understand some of
life’s most important issues.
