Your children and grandchildren look to you for guidance—but many of us leave one taboo topic off the table: money. Preparing your children and grandchildren for the future with good financial habits early in life can save them (and you) a considerable amount of stress. Don’t know where to start? Here are 5 money conversations to get you started.
Engage in Open Dialogue
- Don’t hide your mistakes. Everyone struggles financially from time to time. It is okay that your family knows that managing money is not always easy. In fact, it might save them from the same misstep.
- Normalize the discussion and put your children and grandchildren ahead of the curve when it comes to smart investments and loan opportunities.
- Talk about ways your children and grandchildren can achieve their financial goals—what tools are available to them to help? How do they start? You can remember how overwhelming financial matters can seem when you are young. Jump start the process for them.
The Credit Trap
- Explain to your children and grandchildren what credit is and why they want good credit. How paying their bills on time leads to strong credit history.
- When do your check your credit score? How often? Why? Explain to them the importance of keeping tabs on their credit score and how it affects their financial stability.
- Building credit often means car loans and credit cards. Talk about interest rates and fees for these types of credit sources. Map it out for them. Keeping $1,500 on a credit card at 20% interest leads to an additional $300 of debt in a year. Doing that year over year can cost tens of thousands of dollars.
To Invest or Not Invest
- The biggest obstacle to our children and grandchildren is actually taking their money out of the bank and investing it in other ways. Why? Because after paying for daycare, housing, car loans, and day to day expenses there isn’t a lot left. When do they decide to invest? Why does it make sense?
- Show them the magic of compound interest – an investment with a 6% return will DOUBLE in 12 years. Show them how their money can make money for them with the power of time (and why “catching up” isn’t always an option with compound interest).
- We all have different risk tolerance levels and investing does not have to be high risk. Talk about low-risk ways to invest – CDs, mutual funds, conservative portfolios.
How Long Do They Want to Work
- Begin to teach your children and grandchildren the benefits of retirement accounts and employer matches along with other benefits an employer may offer, such as HSA or FSA accounts.
- Discussing other long-term retirement savings options such as a traditional and Roth IRAs and the difference between the two.
- Talk about the use of Whole/Universal Life Insurance as an investment and collateral for transactions later in life.
Estate Planning, Wills, Trusts
- The best financial plan will get you nowhere if it is not aligned with your Will or Trust.
- Have an open conversation with your children and grandchildren about what they can expect from your estate. Be transparent. Hiding things now will only tear your family apart later.
- Encourage them to set up their own Will or Trust before they dive too deep into financial planning. The easiest time to get set up properly is before their financial products multiply.
Money conversations may be hard, but we make setting up your Will or Trust easy. Give us a call today at 605-777-1772 or contact us to set up your initial no cost meeting. Let us help ensure you are set up to accomplish your goals so your children and grandchildren can learn from your success.