Financial health is like any other health: parents set the example.
July 21, 2017
There are many aspects of wellness — physical, emotional, and financial. What these have in common is that children learn from their parents. From a balanced meal to a balanced checkbook, parents are the primary influencers of future behavior. However, some parents seem to be reticent when discussing money. It may be a case of “don’t do as I do, do as I say.”
According to an article in MarketWatch by Henry K. Hebeler, “Young people are saving far too little… Historical savings rates were 11.2 percent of disposable income from 1952 through 1984… we save only about 5 percent now… The sum of the savings losses from 1985 through 2015 is larger than $16 trillion in today’s dollars…”
No matter your financial situation, the best thing you can do as a parent is be open and honest with your children, and teach them through example. Talk with them about the basics of money-management skills: living within your means, saving for retirement, and setting aside an amount for charitable contributions.
Especially when your kids are younger, you can talk about different ways their allowance can be used. Break it down in terms of immediate gratification (entertainment), saving toward a goal (that coveted dirt bike), and paying it forward (charitable cause of their choice). It’s never too early to start the conversation about money management.
As your children get older, financial responsibility becomes even more important. High school is a good age for them to learn the value of a holding down a part-time job, living within their means (without racking up credit card debt), and saving for the future. Sit down with your kids and show them how to create a budget based on real-life expenses, such as rent, utilities, and groceries. Take the opportunity to be honest with them about your past mistakes. And encourage them to set goals for the future, like moving out on their own — that should pique their interest!
Next, teach them the importance of a tax-deferred retirement account. What may look like small investments now can grow into a hefty amount 30 years down the road with sustained and consistent contributions. The best part? When you get into the habit of saving at a young age, you don’t even miss that money.
Finally, charitable giving is an essential lesson in selflessness and self-discipline. When you give back a portion of what you’ve been fortunate to attain, you develop a stronger sense of fiscal responsibility not only to yourself, but also to your community.
All of these money management habits can be learned at a very young age, from parents who set the example.
Author of this article
Bryan Leber, MD, specializes in pediatrics. He is a guest columnist and located at IU Health Physicians – Methodist Medical Plaza South, 8820 S. Meridian St., Suite 125, in Indianapolis. He can be reached by calling the office at 317.865.6600.