Nurturing Financial Confidence in the Next Generation: A Parent's Guide
Every parent dreams of a brighter future for their children, and ensuring financial well-being is a crucial aspect of that vision. According to a 2021 Guardian study, 57 percent of people believe that they are more likely to achieve a better quality of life and improved financial situations than their parents.
Here, we will explore four distinct and essential steps in providing your children with the right tools for them to lead financially confident lives.
1. Create a safe space for Financial Conversations
Initiating conversations with children about money may seem straightforward, but just like with any conversation pertaining this topic, it can be challenging. Normalizing discussions about finances is the first step in fostering financial confidence in your kids. You may begin this process by casually introducing the topic and creating an open space for your children to ask questions and start a dialogue.
For instance, when your teenager starts their first job, discuss with them how they plan to manage their earnings. Encourage them to consider allocating funds for savings, emergencies and personal goals. Allowing an open space where your children feel comfortable in seeking your advice helps your children become financially confident adults.
TIP: Don’t forget to speak with your children about the importance of retirement savings early as well. Many children do not understand the necessity of retirement planning at such a young age, but it can be helpful to explain to your children what type of options they have, especially when starting a new job that may offer retirement benefits.
2. Model Healthy Financial Behaviors
It is well known that children learn by example. In most cases, actions speak louder than words, and you can begin this journey by showing your children healthy financial habits. You may demonstrate responsible financial behavior by saving, making informed financial decisions, and planning for the future. Discuss these actions with your children to explain the practical side of managing money to build financial confidence and understanding. Remember, the earlier you start teaching and showing your children financial confidence, the more they will understand as they age.
3. Set boundaries Around Supporting Adult Children
Despite your best efforts, grown children may face financial challenges. In these situations, it is important to strike a balance between providing support and maintaining your own long-term financial goals. In times with such a challenging housing market, it is not uncommon to find your grown children still living at home. To avoid derailing your own financial strategy while your children live with you, establish clear boundaries for how long they are able to stay with you and the financial or domestic contributions you may want them to make.
4. Work with a Financial Professional
Confident planners often work with financial professionals to develop and stick to a long-term financial strategy. Seeking the guidance of a financial professional can not only improve your own financial confidence, but also that of your children. Where you may not have the answers to some questions, professionals will be able to guide you and your children to creating goals and guiding the process along the way. Introducing your children to your advisor can allow them to establish a trusting relationship where they may seek advice, even when they may be scared to come to you. This is also helpful for older children, who may be interested in estate planning, or seeking long-term care options when the unfortunate time comes.
Instilling financial confidence in the next generation is a shared responsibility. By fostering open conversations, modeling healthy financial behaviors, setting boundaries, and seeking professional guidance, parents can create a solid foundation in which their children have the resources and model to develop their own confidence. As we strive for a future in which each generation surpasses the last, these steps become invaluable in shaping a financially secure and confident tomorrow.