By Tom Berquist, SVP Marketing & Co-Operative Affairs
As a father of three, I can confidently say there are a handful of conversations we as parents tend to avoid having with our kids until absolutely necessary. You know, the ones that are often used to describe the lifestyle of rock stars – sex, drugs and alcohol. As uncomfortable as these conversations can be, this open dialogue is a cornerstone of raising responsible kids. And let’s not stop there. I believe there is one more critical topic that parents should be adding to the list – money.
By talking with teens about money, we are preparing them to make wiser financial decisions in the long-run. I’ve found that baking these conversations into some type of financial milestone – like getting their first job, applying for their first credit card, graduation, buying a car, or moving out – makes for a more natural teaching moment.
You’re probably thinking the “money talk” must be easy for me since I’m in the financial industry. There may be some semblance of truth to that, but, in my attempts to raise three financially independent adults, I’ve learned that real-life experiences have been the most powerful tool to open discussions around financial health:
Plan for the Future –When my son Eric decided to move out of the house, we used BECU budgeting tools to help him make informed decisions about what priorities he should be spending his money on. Through this process he saw the importance of setting money aside for future financial decisions.
Establish Spending Habits – With a new job comes greater responsibility and more expendable income. My wife and I use these moments to talk to the kids about setting up realistic budgets and their impact on future financial goals.
Start Saving Early – The impact of compounding interest was something that I wish I knew about earlier on, so the power of saving early is something that we really emphasize in our household. When our boys were younger, we encouraged them to save a portion of the money they received as birthday gifts from their grandparents and then from their first jobs. It was always interesting to watch how differently each of the boys handled their money, and the lessons it taught them.
One son tends to save as much as possible and is very frugal with his spending (the ant), while another tends to be a bit more of a spendthrift, but is learning from his mistakes (the grasshopper). And my third son tends to fall in between.
In addition, when the boys were young, I provided them with a small amount of money to invest in their favorite company. As you might imagine, well-known brands like Apple, Nike and Disney were selected. This activity turned out to be a great real-time education in investing, business and economics. The boys actively tracked their small holdings and overtime began to understand the concept around risk and return, the difference between insured savings and investments in stock, diversification, and how the economy, competition, and business strategy can impact the performance of a stock.
Borrow Responsibly – Walking our sons through the pros and cons of having access to credit has helped them learn how to evaluate the true cost of a credit card and interest. When a child starts college it’s a great time for a student credit card to help them understand how this type of borrowing works. But choose wisely. While the perks listed in marketing materials sound great, they don’t paint the full picture.
Whether your child is a more natural spender or saver, the reality is that the financial health conversation isn’t just one talk, but an ongoing effort to find moments to reinforce smart money management. This continued conversation helps demonstrate how all financial choices are tied together and emphasizes the importance of making strategic choices early on.