The time of year when children head back to school provides an excellent opportunity to evaluate what they are learning — and what we are teaching them. As parents and grandparents, we teach them to read and write, to wash the car and mow the lawn, to bait a hook and build a fire. We intentionally pass on to future generations the lessons we have learned about life. Too frequently, though, we don’t take the time to talk to our children and grandchildren about financial wisdom and the lessons we have learned about making, growing, and protecting our money.
Financial topics often can be complex and confusing, so it is important to tailor the conversation to the child’s age and maturity level. For example, when a child is younger than 12, give him or her a piggy bank to encourage early savings. When the child accompanies you to the grocery store, prompt a conversation about budgeting and smart shopping. When you tell your children stories about your life and the lessons you have learned, share with them your experiences regarding saving and buying. These formative years are the perfect time to instill in your children or grandchildren a curiosity about accomplishing their dreams, and developing a discipline of earning and saving will be critical for them to achieve those dreams in later years.
A child in the mid-teens is capable of tackling more complex concepts and practices regarding money. This child may have a bank account and learn the responsibility of checks and debit cards, balancing a checkbook, and utilizing online accounts. A summer or part-time job can help the teenager appreciate the value of saving money and the hard work and discipline it takes to increase that account balance. Teenagers can actively participate in the parents’ financial activities — paying bills, making charitable contributions, shifting funds among various accounts, projecting retirement balances and capabilities, completing tax returns, and even meeting with the family’s financial advisors. Ask the financial advisor to help explain how stocks, bonds and packaged products like mutual funds can provide superior long-term investment returns to meet major future financial needs. The practice of telling personal stories regarding savings and investments should continue throughout these years. Take the child along to buy a new or used car and work through the details of an auto loan to help them understand how interest payments, especially on depreciating assets like automobiles, compound the reduction in savings. Explain how your home was bought and then help them understand the complexity of mortgage payments. Through these stories and practical lessons, young people will attain knowledge that will prepare them to achieve their own long-term financial, professional, and personal goals.
As a young adult headed off to college or to a first job, your child or grandchild should have a firm understanding of personal finance. In these years, a parent or grandparent can contribute by helping the young adults apply the lessons they earned in earlier years. As they review funding opportunities for college, engage them in a dialogue regarding the dangers of graduating with excessive student debt. When they start earning a regular income, coach them through setting up and contributing to their own retirement plans and investment accounts. As the young adults buy their first car or home, remind them of the lessons about debt that you imparted previously. When they begin to discuss starting a family, address the use of life and disability insurance to provide financial protection to their spouse and children in the event of an accident. Continue to involve them in conversations with your advisors, and if needed, help them transition to their own independent relationships with advisors. Communicating your experiences may help the young person navigate a quicker path to their own success and avoid many financial pitfalls along the way.
If you are intimidated by the responsibility of communicating the complexities of financial literacy, relax and know that you are not alone. In the state of Mississippi, there are two organizations that are augmenting your efforts with significant events this month. The Mississippi Council on Economic Education provides resources to teachers to facilitate education on economics, financial literacy, and entrepreneurship. They offer fun and practical resources to help schools engage our students with the long-term goal of developing future generations of Mississippians that are more financially and economically capable. On Sept. 25 they are bringing Dennis Lockhart, president and CEO of the Federal Reserve of Atlanta, as their guest speaker at the Eleventh Annual U.S. Senator Thad Cochran Forum on American Enterprise. If you would like to attend, you may find more information at MCEE’s website, www.mscee.org.
In addition, State Treasurer Lynn Fitch has partnered with MCEE and other companies and organizations in Mississippi to kick-off the Treasurer’s Education About Money (TEAM) initiative, which is deploying a modular, online financial literacy curriculum in our schools. The curriculum is provided by EverFi, a private company that builds community coalitions to introduce their online training programs to students and adults. The curriculum provided by both MCEE and EverFi is robust and helpful, but the classroom and online resources cannot replace the wisdom and guidance of a parent or grandparent passed down throughout the formative pre-teen, teen, and early adult years.
» Mark Blackwell is the Mississippi Area Executive for Regions Private Wealth Management. He can be reached at email@example.com. Further resources for acquiring and passing on financial wisdom may be accessed at regions.com/advice.