Prac ce Management
Talking to Kids About Money
By Stacy Allred, Director, Wealth Structuring Group at Bank of America Merrill Lynch
When children edge toward adulthood, how do you make sure they have the knowledge to make smart financial
decisions?
It’s cri cal to recognize that becoming financially independent is a journey—one that may take longer in today’s
uncertain economy. Fortunately, there are ways that allow parents to ease the journey to financial autonomy.
Here are six ideas for providing educa on about money ma ers.
1. Share informa on.
Children o en learn a family’s values best by observing those principles in ac on. It can be helpful to ease into
sharing elements of financial strategy. Rather than revealing your en re investment por olio, perhaps start by
reviewing a college savings account once each quarter.
2. Explain the importance of budge ng and saving.
Parents can foster solid financial habits in their children by asking them what they are saving for right now and
what that goal is going to cost. Sit down and discuss the basics of money management, or if there’s resistance to
your involvement, bring in your Financial Advisor. They can help kids create a budget, learn basic skills and
discuss planning their financial future.
3. Use philanthropy as a teaching tool.
You can learn important skills — researching, decision making and accountability — through philanthropy. Also,
it’s a great way for siblings to learn how to make joint financial decisions. For example, children can be allo ed a
giving budget and charged with jointly evalua ng chari es and deciding which ones to support.
4. Introduce inves ng.
Inves ng smaller sums with limited consequences is a great way to learn about making informed choices and
managing risk. One op on is to open custodial accounts and let your child work with your Financial Advisor to
create and evaluate a small por olio. Explain that it’s not about never making a mistake; it’s about learning from
those you make.
5. Let them falter.
Whether it’s a bad investment or a splurge, a misstep is bound to happen. When one occurs, resist the urge to
rescue your child financially. If you take away the consequences, you do your child a disservice. Instead, talk it
through and work out a way to solve the problem together, whether that means cu ng back on spending or
ge ng a part‐