A finance exec says the best way to teach kids about money is also the hardest
Contributed to Business Insider by Jessica Mai
Parents are taking on the financial burden of their children more often than they should, a finance executive says. And that might be doing their kids more harm than good.
“It’s important to not always have mom and dad come in and save the day, because if you save the day, the lesson they learn is that mom and dad will be there to bail you out,” Brie Williams told Business Insider.
Williams is the vice president and head of practice management at State Street Global Advisors. She suggests letting children make healthy financial mistakes instead. Rather than spoiling them, that could mean letting them face the consequences of missing a cellphone bill payment or not budgeting for what they need. She outlines some more scenarios in a blog post.
“Making small mistakes while they’re still in a protected, secure environment at home – something that’s as small as a phone bill? are easier lessons to learn in a safer environment,” Williams said.
In addition to raising children to be financially educated, it’s also important to keep the topic of money open. According to “Supporting Investor Comprehension for a Productive Relationship: Developing Financial Knowledge,” a study from State Street Global Advisors, only 4% of families have meetings to discuss wealth matters, and 45% of families say wealth is not openly discussed.
But, according to Williams, feedback from the survey shows that parents are ready and want to empower themselves as well as their children. In fact, 65% or parents want their adviser to engage children directly about finances, and 62% want more information from their adviser about financially educating their children.
“Practicing responsible spending, saving, and conversations, and keeping money a little of an open conversation at home can continue to reinforce prudent stewards of wealth,” she said.
Letting your children make money mistakes might be hard, but it will help them build financial responsibility along the way.
“It’s hard for parents to allow a child to make even a small mistake because we want to help them, but it’s about really understanding this as an opportunity to learn a basic skill and teach them what they might do differently in a protected environment because both those good and bad money experiences will shape and help them be better,” Williams said.