As a parent, our role is to love our children while teaching them skills that will benefit them throughout their lifetime.  Inclusive of this role is teaching our children personal finance. For many people, learning how to manage their personal finances often occurs through trial and error, serving as a substitute for a formal education.  Most schools do not teach personal finance leaving this task for the parents to fulfill.  Fortunately, assisting your children with developing a strong financial awareness can be effortless.  The key is to integrate age appropriate financial situations daily into their lives.  As parents, we should accept the challenge of teaching our children personal finance with gusto, knowing that this guidance is a gift that will benefit them a lifetime.

1.  As a gift, give your young child a toy cash register full of play money and a cart full of groceries.  Play grocery store with them.  Teach them to be comfortable with cash and smart with their purchases.

2.  Once your child can count money give them cash to pay for small purchases.  Encourage them to pay for the item then count the change on the difference of the purchase and the cash tendered on the transaction.  You may hold up the line for an extra minute or so, but that is okay because you are teaching your child a life skill.

3.  Stock your home with age appropriate games that teach money management skills; you want your child to be comfortable with numbers and math throughout their entire lives.  Games to consider are: Monopoly, Game of Life, Payday, Moneywise Kids, Money Bags, Easy Money, Exact Change and Careers. Make learning fun!

4.  Let your child fill out checks for school fundraisers followed by logging the amount into the check register.

5.  Don’t say to your child, I cannot afford to buy that item because I don’t have any money then turn around and charge it on your credit card, especially if it is an obviously frivolous purchase. Children learn by observation.  Tell the truth and set the example, “I have spent my budgeted allotment for the week, even though I want this item I am not going to purchase it today.”

6.  Establish a brokerage account for your child.  Assist them with choosing a few stocks of their favorite companies to invest in.  Review the brokerage statement and discuss how the investments can fluctuate monthly.  Define the purpose of this account with your child.  For example: “your brokerage account is a long-term savings account that you can access when you are no longer living at home.”

7.  In lieu of giving your child an allowance, give them lunch and entertainment money separately over the course of a week.  Determine the total amount of the weekly expenses that you are willing to pay for.  Once this dollar amount is established, give your child the allotted cash on the same day weekly.  Discuss with your child their options, such as bringing a lunch to school that they prepared at home to save money.  If they run out of money because of a poor financial decision, let them live with the consequences until their next pay day. Teach your child that living within a budget requires continuous planning and diligence.

As parents, it is our role to teach our children to grow into money-wise adults.  The key to giving them a successful financial future is to establish a strong foundation from a very young age.  Children, unlike adults, have the advantage of making negative financial choices that will not impact their lives for years in the future, and of which they can learn from.  Take the time now and bestow on your children the gift of a lifetime, financial acumen.  This will be one of the most impactful gifts you will ever give them, and ironically it really only costs you your time.

Brandt Kuhn, CFP® is a Managing Director & Partner at Beacon Pointe Wealth Advisors in Palm Desert. Brandt works with families to develop financial and investment plans to reach their financial goals.  Brandt can be contacted at bkuhn@beaconpointe.com or (760) 932-0962.

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