Are Your Heirs Prepared? Your A-Z Moneywise Family Resource by Mitchell Kauffman

Author:Mitchell Kauffman
Language: eng
Format: epub
Tags: estate planning, financial planning, retirement planning, charitable giving, wealth succession, wealth transfer
Publisher: Mitchell Kauffman

VI

If You Don’t Teach Your Children to be Money Smart, Who Will?

“Shirtsleeves to sleeveless in three generations,” an old world proverb that famed industrialist Andrew Carnegie allegedly brought to America, speaks to the (all-too-often validated) fear that family wealth may be squandered with nothing left by the time the grandchildren pass. This dire forecast is particularly disturbing to those who have worked hard over their lifetimes in hopes of securing their family’s financial wellbeing for generations to come. Studies show that starting our children (and grandchildren) off with a solid base not just in financial literacy but also with good sense and values, can go a long way to helping avoid this seemingly apocalyptic future.

Studies show that helping kids begin understanding money as early as Kindergarten can offer many benefits. Being introduced this early to money can eventually reduce chances of being exploited by unscrupulous predators. Having financial confidence gives young people a sense of empowerment, self-sufficiency and better enables them to make their own way in the world. As your child’s new found skills develop, parents can have confidence knowing their kids have the resources to address basic financial decisions and are better able to handle money.

The question becomes, what age is appropriate to begin exposing kids to money and how can we best engage them in meaningful, fun learning experiences? “Children as young as three years old can grasp financial concepts like saving and spending,” according to Beth Kobliner, author of the New York Times bestseller Get a Financial Life.14 Further, a University of Cambridge study revealed that kids’ money habits are formed by age 7 and that “… children develop financial and economic understanding when they have personal economic experiences rather than studying learning material such as texts.”15

With this in mind, an important starting point is to first identify the key skills that can be developed young, then consider the setting we create to best help our children flourish. Using a “Three Jar” technique, Ron Lieber in his book The Opposite of Spoiled, urges kids to start receiving an allowance for even nominal chores around the home. Money can be an effective tool for learning e.g. pay kids an allowance with clear expectations of how it is earned and how it will be used. On a weekly payday, parents can encourage that the funds be separated into three categories to model how grown-ups handle money. Physical containers such as jars be used to make the lesson more tangible:

1. Spend: Spending money can be the easiest to learn and may require little teaching. Parents need to help kids understand why some things are worth spending money on, while others may not be, and offer the concept of value and benefit received for funds expended.

2. Save: Learning delayed gratification, i.e. that not all things can be had right when we want them, and how to save to acquire them in the future, can provide a strong base that helps discourage materialism and entitlement.

3. Give: Providing a sense that we

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