Discussing family wealth, budgets and financial plans with your children can be an uncomfortable conversation to initiate as a parent. How and when should you start? Who will facilitate these discussions? I understand these concerns, and that’s why, today, I’ll share some insights on how families can navigate these essential conversations.
Facilitating discussions around money
There are a lot of emotions that are tied into money conversations, and it can be a triggering topic for people. If you are finding it difficult to have this conversation with them, you can bring in a multifamily office that will serve as a neutral 3rd party to do this. If you are still debating whether or not you should have this conversation, let these compelling reasons encourage you today:
- Financial Responsibility: Teaching children about money instils a sense of responsibility in them and helps them understand that money isn’t limitless and should be managed wisely.
- Future Success: Financially literate children are better equipped to navigate the complexities of adulthood – from budgeting and saving to investing and debt management.
- Values and Priorities: Money conversations provide an opportunity to discuss family values and priorities. It also helps children understand the importance of charitable giving, saving for goals, and planning for the future.
- Avoiding Pitfalls: Financial literacy can protect children from common financial pitfalls like overspending, debt accumulation and falling victim to financial scams.
Establishing a budget for your child
A budget is not about being restrictive, it’s about creating a plan. Just like adults budget to allocate money to the things that matter most, children can benefit from learning this skill. Here’s a simple guideline:
- Preschool Years: Teach basic money concepts by using everyday examples. When they receive an allowance or gift money, discuss saving a portion, spending a portion, and perhaps even sharing a portion.
- Elementary School: Start providing a small allowance. Also, provide treats tied to responsibilities (like chores). This teaches kids that money is earned and can be budgeted for different purposes.
- Middle and High School: As children grow, so can the complexity of their budget. Encourage them to save for specific goals, like buying a toy or gadget, and introduce concepts like income, expenses, and savings percentages.
The Role of a Multifamily Office
While teaching your children about money is primarily a parental responsibility, a multifamily office can play a pivotal role in facilitating these discussions.
- Neutral Third Party: Sometimes, children may be more receptive to financial advice from a neutral third party. A multifamily office can act as a trusted source of information, helping children understand complex financial concepts without the emotional baggage that may come from discussions with parents.
- Expert Guidance: Multifamily offices have financial experts who can provide age-appropriate financial education to children. They can explain investment strategies, savings plans, and the importance of diversification in a way that’s easy for children to understand.
- Family Legacy Planning: A multifamily office can help families incorporate their values and financial priorities into a comprehensive legacy plan. This includes trusts, strategies for charitable giving, investments and preserving wealth for future generations.
So, start those money conversations early, be transparent, and consider leveraging the expertise of a multifamily office to ensure your children’s financial success.