You worry about them and work hard every day to provide for them, hoping they’ll grow up to be happy, healthy and independent adults. Yet as parents, we often scratch our heads trying to figure out how to teach our kids about money. In fact, some of us don’t talk with our children about money at all.

According to a recent T. Rowe Price® survey, 13 percent of parents surveyed said they never have financial conversations with their kids, while 59 percent said they only talk to their kids about money when their kids ask them about it.

Intuitively, we know it’s important to educate our children about the financial side of life, but what’s the best way to go about it? To answer this question, we looked to Gratus Capital’s Director of Financial Planning Kevin Woods, CFP® for some answers. To qualify his answers even further, we focused on children aged 11 to 25.

Before delving into the different age groups and their respective strategies, Woods believes it’s important that parents come to terms with the following two concepts. Once you do, you’ll have greater success helping your children become money-wise adults.

#1 – Understand Your Own Thoughts about Money

To help your children understand money, Woods says that you must first understand your own thoughts about money. “Every day as adults we make decisions that determine what we need and want,” said Woods. “This drives our lifestyle choices, including the cars we drive, the jewelry and clothes we wear, the house we own and all the extras that make us feel good

“However, living within your means and knowing what you can afford often starts with how we grew up and how our own parents helped us learn about discipline, sensibility, sacrifice, reward and goals when it comes to money. To educate your children, you have to come to terms with your own thoughts and expectations regarding money. Only then can you teach your children how to lead financially fulfilling and responsible lives.”

#2 – Understand the Impact of a Digitally-Charged Generation

According to Woods, today’s children are part of a generation that rarely struggles to get what it wants. In fact, most have never had to make a major sacrifice. Instead, many of today’s children primarily understand what makes them happy and how to get immediate gratification.

But why?

Because now more than ever, today’s generation of children are being highly influenced by products and services that promise to make them happy. Search engines are tracking your children’s behaviors and creating advertisements that match their individual search history. This bombardment of highly-targeted and customized advertising enables today’s children to see the very things they want to buy repeatedly. Whether it’s Facebook, Instagram, Snapchat or another digital channel, most kids can’t escape digital advertising.

Digital influence aside, what can you as a parent do to help your children establish good habits about spending, giving and saving for the future?

Since your children’s needs, wants, and goals will change depending on their age, Woods suggests these money-wise parenting strategies for the following ages:

The Formative Years: Children Aged 11 to 18

Most children receive money for allowances, birthdays, holidays and odd jobs such as babysitting and mowing lawns. At this time of your child’s life, you should explain three financial concepts to them:

  1. How much to save.
  2. How much to give back.
  3. How much they’re allowed to spend.

Woods suggests that children save no less than 20 percent for future needs, such as college, buying a car or attending a concert. He’s also a strong charitable giving advocate and recommends teaching children now about setting aside money for the sole purpose of giving back. He recommends five to ten percent be set aside for giving. The rest of the money should go toward what your child wants today – Starbucks, trips to the mall, etc.

Talk More to Bring Goals to Life

It’s very important to talk with your children throughout the year about their saving, spending, overall needs and wants, as well as their long-term goals. Woods suggests that parents have no fewer than four comprehensive financial conversations per year with their kids, and ideally 12. The more conversations you have, the more you help by reminding your children about their goals and checking in to see if they’re on target to accomplish them.

Spend More Time Together by Opening a Joint Account

Starting at age 11 and up is a perfect time to start buying some shares of stock or open a mutual fund. The key is for you and your child to establish what your child’s ongoing contribution goal will be. Over time, as your child sees his or her savings grow, this will instill the encouragement to save even more. This account also becomes one of the key financial conversations you’ll have throughout the year.

The Budgeting Years: Children Aged 19-25

Financial conversations between you and your children will vary greatly at age 19, perhaps even starting a bit younger. The focus now turns to budgeting, says Woods. For children who go off to college, Woods recommends that you and your child establish a budget for both their everyday and monthly needs. They’ll have fixed expenses, such as food and housing; however, they’ll also have variable expenses including entertainment, weekend traveling with friends, etc.

A monthly amount of money allotted to your child strengthens their decision-making ability surrounding how to make money last.

Many savings apps can be quite useful in helping your son or daughter to budget more responsibly. PCWorld has provided a nice roundup of budgeting apps for tracking savings and spending.

What’s more, Woods recommends that your child have a summer job and be solely responsible for saving no less than the money needed for the extra spending they may want throughout the school year and summer.

By allotting a monthly college budget and instilling upon your student that he or she is responsible for the extra spending they desire, when your child graduates college, they will have built a foundation for knowing how to live within an established budget.

Watch Out for Credit Card Magnetism

According to a recent Experian College Graduate Survey Report, one in five of the college students surveyed gives their college an F grade on preparing them to understand how credit works. What’s more, of those surveyed, 58 percent have a credit card and had the following personal experiences: 33 percent made a late payment, 31 percent maxed out a card, 23 percent had a card declined, and 15 percent missed a payment.

Given these statistics, it’s imperative that parents and their college-age children maintain open and ongoing communication about their child’s credit card usage. Like most financial vehicles, credit cards have their pros and cons. However, as with any effective financial tool, it needs to be managed, says Woods.

Beware the Taxman

When your adult child starts their first professional job, it’s very important that they understand taxes and how to manage what is left over. Too often, young adults forget to take taxes into consideration within their saving and budgeting planning.

Woods recommends that parents encourage their adult children to pursue four positive financial habits:

  1. Contribute 10 to 15 percent of their newly-found income to their company’s 401(k) or a similar retirement plan. If their company doesn’t have a retirement plan, which can be true for many small businesses, then contribute to an Individual Retirement Account (IRA).
  2. Make a list of monthly expenses to determine how much is available to afford rent, such as mobile phone, gas, car payments, food, etc. Additionally, there are new expenses, such as auto and renter’s insurance, that need to be accounted for.
  3. Establish a second savings or investment account, in addition to a 401(k) or IRA, and contribute to it each month.
  4. Set all savings and investment contributions so that the funds are deposited automatically, alleviating monthly decision-making around surplus income and increasing the likelihood the money is saved.

In Closing

It’s been our experience at Gratus Capital that parents who start educating their children about money during their formative years, such as talking about the costs of operating their home, including the mortgage, property taxes, electricity, heating and so on, help their children go on to be far more money-wise and successful simply due to the open dialogue between parent and child about life’s financial responsibilities and expectations.

At Gratus, we’re financial life counselors who advocate not just for your strong financial future, but that of your child’s. If you have any questions about your financial future, or that of your child’s, please contact us. Finance, budgeting, and investment management are just the beginning of our expertise.

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The above article is intended to provide generalized financial information; it does not give personalized tax, investment, legal, or other professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other matters that affect you or your business.