7 ways to pass on your money smarts

Put your children on sound financial footing by giving them the knowledge they need to manage their own money well. It may be a richest legacy you can provide.

 of 9
 of 9

VIDEO ON MSN MONEY

8Comments
Apr 16, 2013 1:25AM
avatar
I must say this is some of the best money advice I've seen from MSN Money.  Excellent advice, they sure don't learn this stuff in school anymore.
Apr 16, 2013 9:17AM
avatar

It is hard to get your kids to open up to you about their finances when they are young adults.  I think they fear you still want to control them like in high school. 

I found what works best is each year I sit down with my sons, either by phone, skype or in person and update them on were we are in planning our retirement.  I present it to them as if I die they will need to help mom.  Boys always want to take care of mom. 

We go over the investments and how they preformed last year.  Changes to the investments and why.  Our future investment allocations and the withdrawal plan.  I make sure they know where the Wills are and the insurance policies.  Our debt and the timeline for payoff. 

It has worked nicely for opening the doors to talk about their financial situation and asking questions. 

Apr 16, 2013 8:58AM
avatar
A lot of people say no to making kids work for things they want, but I think that they should work for things they want that are above and beyond what they'd normally get. (ie, they just got a new video game for Christmas, and in Feb, a new game comes out they also want. They should "pay" for that one.) You could also let them help you pay a bill so they understand the routine that things happen on a schedule.  
Apr 16, 2013 11:18AM
avatar
All of this is good advice, but we also showed our teenagers what a loan amoritization schedule looked like, how the interest is accumulated, and how extra principle payments reduce the length of the loan and save interest.  All three have house loans now and know what they are really paying.We also pointed out that having extra money held out during the year for income tax was a terrible way to save, that it was better to put it toward debt during the year or into savings.
Apr 16, 2013 3:27PM
avatar
Most of these are tactics for more fundamental underlying principles.  It would be better to teach kids the principles behind each.

1) Take Bills Seriously - The principle is, do everything you say you will do.  Demonstrate that you are honoring your end of the contracts you've made.  The power company provided x amount of kilowatts last month per the agreement and you provide y amount of dollars.  Both parties trade value for value.  Teach kids to always uphold their end of the bargain unless the other party fails to meet the terms.

2) Don't Broadcast fights over money.  This is a specific example of "Don't be a bummer to your kids".  It is not exclusive to money matters.  In general you should always be optimistic for your kids sake.  Never let them think life is a bummer or a drag.  

3) Make kids earn - The lesson is that money is a representation of production.  First one must produce something of value and then one can consume.  Not the other way around.

4) Demonstrate buying behavior - The underlying principle is that in life there are trade-offs and opportunity costs exists.  The decisions you make for your current self has direct effect to your future self. 

5) Discuss Finances with teens - The principle is that money is an asset.  Finance is the area of study of how to allocate that asset.  Everyone should take a basic finance class. 

6) Don't stop - The principle is to be available to your adult children.  In this case, to provide financial advice to your kids and inquire about large financial decisions.  Be open and honest about financial mistakes in your past.  Maybe they'll avoid them.

7) Discuss your golden years - Already a fundamental principle of communication on its own.
Apr 16, 2013 12:56PM
avatar
Don't charge anything on a credit card that you can't pay-off on the next statement. Too many folks these days get into credit card interest hell because they are living over their financial means. 

Want to buy that expensive TV? Fine. SAVE for it first, then buy it, then pay it off right away. Great way to build your credit rating.
Jun 4, 2013 8:18PM
avatar
For the last 4 years our two sons, 12 and 14, earn an allowance each week.  It is $10, but they have to pay $1 in taxes, $1 to charity, $1 goes in long term savings (my husband puts in a savings account.) and $1 in savings they control.  When we go somewhere they have to pay for sodas, treats, etc. while we pay for the tickets.  When they have wanted big ticket items, like an ipod or cell phone, the boys must pay half.    they end up valuing what they have and treat it much better then when it is given as a present for Birthdays or holidays!
Apr 16, 2013 11:36AM
avatar
Very good advice.  I would add that no one knows what will happen at the end of your life.  My dad was gone in a month and my brother in a car accident very quickly.  I have our poa and will ready to go.  With so many step families and single families make sure you specify what you want.  My dads money all went to his second wife, kids inherited zero.  Lots of hurt. 
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.