Are Your Children Financially Savvy?

There are many lessons and tokens of wisdom families can pass down to younger generations. One imperative topic that all parents should discuss with their children is that of personal finances. Simply ask yourself, what advice did I wish I know when I was a teenager starting at my first job? It’s best that parents inspire good habits and financial practices now so they don’t have to worry later. On average, exposure to financial education decreases the likelihood of carrying a credit balance by 21%. Here are a few suggestions on how to teach children to be financially savvy:

• For someone who has never had access or to their own money, saving can seem daunting and a bit confusing. However, children do not have a lot of necessary expenses to cover so now is a great time for them to learn how to budget. After each pay day, have them set a certain amount of money aside, but make sure there is some left over from their last pay check by the time they receive their next pay check. This is an easy way to identify and evaluate their spending and saving habits.

• Educating children at an early age about the concept and process of investing money will pay dividends for them in the future. Savings accounts are important to maintain and are safer than investing, but do not earn as much as actual investments. Slowly begin to introduce websites, apps, and networks that allow children to gain experience with investing in markets without using real money.

• Signing up for a credit card can be a strategic tool to help improve their future financial status. However, when first applying at a young age, credit cards can create bad savings habits that result in debt. If the child has the financial responsibility to not spend money that they do not have, then encourage them to apply for one. The limits are low in case the card is abused, but the interest rates may range upwards of 20%.

Have you had this conversation with your children yet? How have you tried to integrate personal finance into your children’s lifestyle? Oppenheimer Financial Professionals are here to help you prepare and teach your children about personal finance.