A Comprehensive Financial Planning Checklist – For Kids!

No one wishes to raise financially irresponsible children or set out to intentionally teach their kids bad money habits. But if you don’t set a good example early on, teach your kids the basics, foster smart decision-making and reinforce good money management habits, you may wind up doing just that.

It’s also important that kids understand the market’s capacity to be volatile and the economy’s tendency to be cyclical.

Studies show that financial lessons are crucial when raising children, especially when bringing kids up during a recession or economic downturn. It’s obviously easy to get them excited about investing and saving when returns and rates are off the charts, but kids need to understand that they can’t only put money away for college, retirement or a rainy day when the market is good.

But how do you talk about the recession, investing and the stock market with your kids?

It’s important to note here that raising financially responsible children takes more than just a lecture or an afternoon covering the following points. Good financial habits are made and cemented with small, every-day choices. Talking to your kids regularly about topics like the economy, banking, interest, investing, markets, saving, etc., is the best way to make them well-informed adults who make sound financial decisions someday.

What we hope to do with this article is give parents a platform to start the conversation. Think of it as a comprehensive financial planning checklist for talking about money with your kids.

Help Them Understand the Big Picture

It’s easy for kids to get scared, overwhelmed and discouraged when things seem uncertain. While you don’t want to upset your children, and you don’t want to burden them with all of your financial anxieties, it’s important to be honest and clear so they understand how things will impact them, their communities, their friends and the world.

Use your judgment and take into consideration their ages. Obviously, older children are capable of processing and understanding more than younger children. You may want to plan ahead for the discussion, think about the points you’d like to cover and decide on the topics you should avoid until later.

Remember that the more money-management skills children learn now, the more topics they’re exposed to and practice as young people, the better off they’ll be as adults.

Show the Importance and Benefit of Going to a Professional for Help

Young children think their parents know everything (about finances, anyway), but it’s important to let them know that you don’t know everything, and that you ask for help when you need it. Let them know that, perhaps in the same way you went to school to learn a skill or trade, that there are professional financial advisors whose higher education focused on financial topics so they could become experts and help other people make smart financial decisions. Introduce them to your financial advisor and explain that these are the people you turn to when you need money-management advice you can trust.

This will help kids understand that it’s OK to not know everything and that there are people who can help answer their questions and give guidance when needed.

Talk to us! Contact PAX Financial Group to see how we can help you – and your children – plan for the future.

Instill the Value of Saving Early

Believe it or not, most kids are fascinated by the concept of compounding interest: The longer money sits earning interest, the more your money will grow. This blog post will help you start the conversation, explain interest, and really drive home the importance of saving early and the value of saving: PAX Explains: What is Compound Interest?

Show the Difference Between Needs and Wants

If you live paycheck to paycheck and spend frivolously, but tell your kids they should save their birthday money rather than spend it all on Fortnite V-Bucks, you can expect the “do as I say, not as I do” lesson to fall on deaf ears.

Instead, let your kids see that there are things that we need to spend money on – like education, housing, clothing and groceries – and things we want to spend money on – like gadgets, vacations, toys and, yes, in-game purchases. Teach your kids that it’s OK to spend on wants, but the needs have to be taken care of first.

Explain the Market and Volatility

Bull and bear markets. Volatility. Hedge funds and mutual funds. If you’re not sure about the stock market terminology, this is a great time to brush up yourself, so that you can in turn help your children understand it as well.

At PAX Financial Group, we welcome clients to bring their children to financial reviews, workshops and discussions when appropriate. As a father of four, I enjoy the opportunity to pass on my financial knowledge to not just one generation, but two!

Teach the Importance of an Emergency Fund and Budget

Even the youngest of children can start understanding the ideas of budgeting and saving.

One of the easiest ways to show young children is to have them choose a special game or toy they want to buy. Help them figure out how much they need to save, set a goal of when they’d like to buy the item, and determine a plan to earn and save to meet the goal. Let them help you create a comprehensive financial plan, if you will, for the purchase they want to make.

Children can earn by doing chores around the house, offering to do small jobs for friends, family and neighbors, or saving money they receive as gifts. If your child says they want to spend the money on something else in the meantime, remind them that buying something else may affect their plan to buy the special item they’ve been saving for.

When they’ve finally saved enough, make a big deal about the purchase, and go back and review the savings plan and goal with your child. Did it take more time or less than they expected to save enough money? What could they have done differently? How can they save more, faster, in the future?

Explain How Changes in Life Can Affect Your Financial Goals

Children need to know that, like most things in life, the economy will have ups and downs.

They should also understand, especially now, that things can happen that are beyond our control that can still have a major impact on our financial situation, such as being furloughed from a job, being laid-off or receiving unexpected medical bills.

The lesson here is to tell them, this is exactly why we save. These are just the sort of rainy days we plan for.

There will always be uncertainty – that’s just the way the world works. But it’s also why we need to raise our kids to understand the ups and downs and to become well-informed, recession-proof savers.

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

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