How to Get Your Teen Involved in Financial Planning
You may have never thought to bring your teen or adult child to your next financial planning – and chances are they haven’t either. After all, even the idea of financial planning is, for many teenagers, extremely boring.
But you might want to reconsider. It’s never too early to start showing your children the ropes of financial management or the realities of making decisions about money. While younger kids benefit from simpler and smaller lessons, your teen or young adult is likely ready (and possibly even in need of) some more insight into the realities of money management.
Here’s how to get started.
First, invite them in
Consider offering a seat at the financial table.
How you go about it will likely depend on your habits with money in general. Depending on your child and your relationship, you might want to start small – or you might be ready for full access to your family’s financial planning.
A few options for getting started:
- If you have a regular financial meeting with your spouse, consider asking your child to join in.
- Invite your child to a financial planning meeting with your advisor.
- Ask them for ideas on how to achieve a goal, and show your child how to run the numbers when making a decision – for example, on that new car or those student loans.
Whatever you do, be sure to encourage questions, worries, or ideas. You don’t have to do anything with this input right away, but be sure to give enough airtime to hear your child out. Even knowing that questions will be answered or worries listened to can help to build your child’s confidence with money.
Hand over the reins
Talk to your child about whether there’s some aspect of financial planning that you can delegate to him or her.
Depending on your child’s interests and maturity level, you might consider delegating:
- Your family’s charitable contributions
- The household grocery budget
- Finding better deals on internet, TV, or other services
- Shopping for a new car
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For young people with a strong social justice interest, quarterbacking your charitable contributions can provide an eye-opening lesson on the impact and administration of non-profits (as well as a chance to act on their interests). For those who haven’t had a lot of experience grasping the real-world cost of living, taking charge of one of your family’s budget items can also provide some important lessons and insights. And shopping around for a large purchase, like a new car, can give kids an opportunity to think about the balance between cost and benefit.
Of course, this method isn’t as simple as just handing over the reins: most kids need a little bit of guidance and support (and may have varying levels of tolerance for that support!).
But to the extent possible, give your child an opportunity to make a decision and act on it – and face the consequences if necessary. Learning how to prioritize money decisions is a vital lesson, one that teens can and will take with them into the real world.
Ask for help
Say what you will about kids these days: they are aces when it comes to the internet.
Take advantage of this skill set by asking for help with some aspect of your financial planning. Maybe your child can help you consider how much to save in your 401(k) next year, or perhaps he or she could give you some input as to how their 529 plan should be invested.
Of course, depending on what you ask, you might find that your child is in way over their head – that’s okay. You can help your child make sense of stocks and bonds, or explain the importance of checking deduction limits.
But you’ll never be able to convince them of the sheer amount of information a person has to understand in order to move around in the world financially without providing the opportunity to see it for themselves.
Even if your child only learns a little about the topic at hand, and even if you hear complaints about it, rest assured that you’ve given an important first exposure to some of the surprising complexity involved in modern financial planning.
Talk about your child’s financial needs and ideas
Maybe your child has an exciting home-business idea, wants to buy a new car, or needs to find a way to finance college. Whatever his or her interests and needs, at least one of them could probably benefit from prudent financial planning.
One of the best ways to help your children develop those skills is to engage them.
In fact, our client Carrie was shocked by how useful this method was.
Carrie told her advisor, “My daughter was asking for a new car for months leading up to her 16th birthday. So I asked her to run the numbers to show me that she understood what owning a car would require. A few days later she came back to me with an Excel spreadsheet and a new appreciation for the costs of being an adult – and blew me away by saying said she’d be happy to stick with using our car for free instead!”
Some kids take these types of projects on and run with them, while others might need a little more guidance in researching and putting together a financial plan. We recommend keeping the conversation positive, offering lots of encouragement, and, if it makes sense for you, providing some insight into your own financial operations.
Balancing the message with your child’s maturity
Keep in mind that for all their worldliness, teens are still kids. That means you might need to tailor your expectations to your child’s maturity level and facility for carrying out these kinds of tasks.
We tend to see better results – meaning kids who get interested and get the message – when parents:
- Create a project that aligns with their child’s existing interests. That might be a consumer product, like a car, or it might be charity, planning for college, or managing their sports budget.
- Offer plenty of positive help and support, but encourage self-direction. Financial planning is one area in life where “learning by doing” is a necessity for most people. Give you child a chance to do it their way, and help them build on that with additional information, tips, or questions.
- Respect their results. We’ve seen situations when an empowered child decides to support a charity that the parents aren’t crazy about. Unless it’s something completely out of the question or out of left field, consider letting it go. This is a test of your trust in your child’s abilities and, sometimes, a test of whether you can keep your cool under pressure from them.
- To avoid ‘bad’ results, set the rules early on. If you have bright lines about what types of outcomes you won’t accept, be sure to communicate about them at the outset. This can provide important guardrails on your child’s decision-making and are completely fair.
When it works, it works
We had another family of clients, parents Nora and Jim, who wanted their teen to provide input and ideas to their college budget plan. Their son, Mike, is a superb athlete and ambitious person, but as his parents discovered athletic scholarships aren’t necessarily enough to cover the costs of college.
Mike wanted to go to a school that could foster his many interests, and his parents were, rightly, concerned about the price.
Together, the family came to a milestone understanding. The ultimate decision about money matters – how much to contribute, how much to take in loans, etc. – would lie with Nora and Jim. However, all of Mike’s ideas, concerns, and preferences would be fully and respectfully discussed between the three of them.
The formality of their arrangement actually fostered additional closeness and helped them to clarify everyone’s needs and options.
In fact, the extra effort to open up the floor to Mike led to a serious improvement in their plan, as Mike’s determination to attend a particular school led him to negotiate a better scholarship and additional funding from another source.
Whatever you do, then, consider establishing some ground rules and an environment of mutual respect and partnership. The results might surprise you!
From “threenager” to teenager – and beyond
As we get older, many of us start thinking more and more about the ideas of legacy and opportunity for children and grandchildren.
Don’t leave these issues to hope: download our free guide to multi-generational financial planning and find out how to incorporate whole-family financial planning to your brood. We’ll cover some of the key issues, important investment considerations, and some of the common tools multi-generational planners use to make it all happen.
Download Keeping the Whole Family on Track today to get started!
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