By Lazzetta Renee Braxton, next avenue
Sixteen years ago, when I became a new mom, my boomer dad shared with this gen zer the wisdom that parenting doesn’t come with a handbook. If that were the case, financial education would surely have a chapter of its own.
Although we often focus on teaching our children values, life skills and how to develop lasting relationships, we often miss out on the important concept of financial planning. Maybe with subjects like algebra and chemistry, we think it’s better for teachers.
Still, school is also not a fail-safe way for kids to learn about personal finance. According to the Next Gen personal finance site, slightly more than half of the 50 states have introduced legislation, await the governor’s signature or ratified personal finance legislation as a requirement in their state’s high school curriculum. .
We can’t wait for the academic rollout or trust that our upbringing alone is enough in the form of financial education training. So, how can Gen Xers raise financially smart kids?
As a financial planner and Gen X parent, I have a few tips.
Know your child’s money leanings
Whatever the age of your child, you probably have some sense of whether your child is a saver or a spender. Think about it: Does your child carefully snatch away the money they get from doing chores or collected from birthdays? Or is your child constantly looking forward to buying toys, video games or treats?
My 10-year-old niece has taught me a thing or two about knowledgeable savers. She prides herself on how big her savings account can be. She works long and hard on just about every purchase and is diligent about investing the money for the future.
But how can Gen X parents teach smart financial habits to young spenders? Get them excited about setting goals and making their money work for them. (Young savers may also appreciate these lessons.)
For Teens and Tweens, Set the Stage for Money Management
Adding dollars from birthday and holiday gifts can be an exciting activity for pre-teens and teens. For young children, to learn fundamental math skills, they can equate adding numbers with dollar counting and subtraction with spending dollars. And giving these kids responsibility as they grow up by delegating household chores, as well as rewarding them with perks, takes additional training as money managers.
Gen. Jer Curtis Ransom, Sr., a software developer in Lorton, VA, enjoys using BusyKid’s core app with his three teenage sons. He finds it an easy way to assign, track, and reward household chores completed for each child.
All of Ransom’s sons have the app on their phones and can follow up with dad’s assignments and payments. Ransom also encourages her sons to make purchases using their BusyKid debit cards so that they can track their income and spending.
“As an adult, I’ve realized how important money management is. It affects many parts of your adult life,” Ransom said. “I wanted to introduce good manners to my sons at an early age so that they would be better equipped to handle their own finances in the future.”
Alison Kitchell, a personal injury attorney in Washington, D.C. and a Gen X mom of three sons — 9-year-old twins and 11-year-olds — admits that teaching kids about the cost of everyday living expenses can be challenging in e-commerce. .
“My mom used to take me shopping and show me how much groceries and gas cost. As an urban family, we are more inclined to deliver groceries, especially since the pandemic, ” He said.
So, Kitchel and her husband decided to “build up” scenarios to help their 11-year-old girl understand and balance the cost of living with the spending on fun items. They’re taking a wise exercise from her husband’s parents: Give your son money to budget his clothing for the school year and let him decide how to spend it.
“As a teen, my husband bought a week’s worth of jeans, while his sister bought two pairs of designer jeans. Both were completely satisfied with their choice,” Kitchel said.
When teens manage their share of the household budget, it reinforces lifestyle choices and financial preferences at an early age.
Train the next wave of investors
Talking openly with your kids about goals, priorities, and budgeting can be a good introduction to the larger concepts of long-term investing and building a nest early in life.
Several financial apps for kids, such as BusyKids and Goalsetter, have expanded to offer investment methods.
A few years ago, I opened stores App’s custodial account for my daughter, nephew and niece. Each was given $25 to open their account and then chose a stock they wanted to buy with the money (Stockpile lets kids buy fractional shares for shares worth more than the amount they invested). They chose companies they knew well based on their experiences: Netflix
After looking at the recent value of the accounts of the oldest two children, I think my daughter and nephew may have an investment opportunity. However, my younger niece’s investments were not as resilient during the pandemic.
The good news: Each of them have diversified their investment portfolios by buying new stocks every year with financial goodies in their accounts.
Another idea: Opening a Roth IRA for a working teenager. It can be the gift of a lifetime.
For example, if your child sets aside $50 a month for 30 years and earns an average annual return of 5%, the account will grow to about $42,000, more than double the $18,000 investment. One day, the child will be able to take Roth IRA tax-free retirement distributions.
Imagine if your child masters the habit of retirement investing as an adult and increases the monthly retirement contribution as he grows up. This can be a huge boost to those on the road to financial security in retirement – perhaps even early retirement.
Balancing the demands of life and work with child-rearing is no easy feat. And, I know – translating what we took from our upbringing as Gen Xers to financially advance the next generation can feel overwhelming at times. Even as a financial planner, it’s challenging for me to stay in the present and implement good financial management habits, let alone training my daughter along the way.
Fortunately, we are seeing an increasing number of financial education tools and resources to support the efforts of Gen X parents.
As we gather with family and friends this holiday season, I encourage you to incorporate discussions on wealth building into your conversations with your children. Make a plan for introducing or fostering good personal finance habits with your kids. The benefit can be lifelong.
Editor’s Note: This article is the second in a series about money by Gen X and Certified Financial Planner Lazetta Rainey Braxton. The first article wasFinancial fire alarm Gen X needs to be retired in good shape,