Our Founder Kevin Heaton recently contributed thought leadership to OppUniversity on 8 #Money Habits Parents Should Start Modeling Right Now along with Alexandra Fung, Caroline Vencil, Jonathan Huang, Deb Meyer and others — Give it a read in full, and Kevin’s thoughts are below:
1. Discuss Money
Kevin Heaton, CFO at i3 Family Office Services
The most important habit to model is to discuss money. Talk about it, read about it, ask questions, discuss it. I would much prefer my 9-year-old make mistakes with her money now rather than at 29 or 39, and so we discuss it.
All of our children are bombarded with a view of hyper-reality, hyper-consumerism through social media: Instagram would have you believe that a $60,000 Birkin bag is an acceptably normal purchase, and afterward should be worn while posed on a waterfall in some exotic location, yacht framed in background. That is manufactured reality, and counter-productive if the growth of existing wealth is the goal.
Heaton recommends focusing on three main topics:
1. Work for Money
Work for Money is the start: Children who work for their money either through household duties, school achievement or other earned reward/recognition experiences value the reward. More important, it is less about the amount and more about the transaction itself, and the opportunity to discuss money in a coached, supportive environment. Start as early as possible: a child at 5 can help with small tasks for a piggy bank reward. Once a child has money, they must next understand that even if they can’t see the money it does exist. Last, they can only spend the same dollar once.
2. How Money Works
How Money Works: Earning money is not enough; the child should next understand that income and expenses are a part of having money. How much will you earn, what will you spend the money on by choice, are there set expenses you have to spend the money on to live comfortably? This is the opportunity to explain budgeting, taxes, utilities and other expenses, and plan for small ‘want-to-have’ and large ‘want-to-have’ purchases. It’s also a great time to introduce setting aside amounts for education, sport activities, or charitable gifts for the future. There will also come a time to discuss setting aside a fixed amount for investment.
3. Make Money Work for You
Make Money Work for You: Many families cover the first two points well, but never discuss borrowing and lending, stocks, investments, and asset management. They will discuss saving, but saving is not investing. To start to teach your child about investing, create a graph—for the refrigerator or in an app or spreadsheet depending upon the child’s age—and have your child pick one thing they love that has a public company association: a toy, a movie, shoes, an amusement park, a food. Then start to graph the price together—if you bought one share for $8 this day, it would be worth + or – XX this day. Begin to discuss what a share of stock is, why some are more expensive than others, how you can earn or lose money, and how one buys a share of stock. After a period of time, you may wish to pick a specific stock or fund or other investment of which the child has a keen interest to make a small investment.
All of this is important, but as with most things, effective communication—discussion about money matters—is the start.Read this article in full
8 Money Habits Parents Should Start Modeling Right Now from OppU