December 16, 2019

Giving the Gift of Financial Literacy to Your Loved Ones

Written by Barry J Swaim, CFP ®, Posted in

This holiday season replace traditional gifts with one that will last a lifetime.

As you make your list and check it twice this year, consider moving away from traditional, tangible gifts in favor of a lesson that will last long past the holiday season: financial literacy. It’s truly the gift that keeps on giving, and it’s appropriate for children, your friends, and even your parents.

Money Lessons for Kids

Even the straight-A students in your life likely aren’t getting much financial education at school. Teaching them money smarts from a young age will pay dividends in the future – figuratively and literally! Here are two common methods for teaching children smart money habits:

1.     The Classic Allowance

Research from the University of Cambridge found that children form money habits by the time they’re seven years old. So, starting early with discussions about money is a necessity. Beginning at about age three, institute a small weekly or monthly allowance in exchange for basic chores that can grow with the child’s age. It doesn’t have to be much money, even for older children. Simply having access to an allowance gives kids the opportunity to learn how to manage it and tying it to household responsibilities reinforces that it’s important to work for what we earn. Discuss things like saving up for a large purchase, using a savings account or avoiding impulse buying at the mall to instill solid money values.

2.     The Four Boxes

If you prefer to guide your children further on how to use their allowance, consider the Four Boxes method. This is also referred to as the GISS approach because the boxes are broken down into Giving, Investing, Saving, and Spending. Make it fun by letting your kids decorate each box (or jar, or piggy bank or whatever you choose), then discuss what percentage of their allowance should go into each box.

Money placed into the Giving Box should go to a charity of the child’s choosing. Promote generosity by setting a predetermined amount and celebrating when it’s reached. Then, either mail a check together or deliver the donation in person if the charity is local.

The Investing Box is about long-term money goals, which could be something like a car or college tuition, or something else meaningful to the child. Discuss options for growing the investment, like a CD or savings bond, and explain the concept of interest to older children.

Kids can use their Savings Box for shorter-term goals, like that new video game they’ve been wanting. Talk with them about why this is box is different than the Investing Box, and how to plan for different types of money goals.

The Spending Box is available for short-term purchases like a toy, movie ticket or new book. This is the money they can keep with them in a wallet or purse and use it as they’d like. Having some agency over how they use this portion of their allowance helps them feel independent and consider how they want to manage it.

Utilizing either the Classic Allowance method or GISS before the age of seven can help ensure kids develop positive money habits to serve them well in adulthood.

Friends and Financials

Peer pressure doesn’t disappear once we become adults, and if you’re the one in your circle of friends who is great at saving or a whiz at understanding investments, teach your friends your money management ways.

Now, this can be a bit tricky if people in your friend circle consider the subject of money taboo, or if they feel shame around their lack of skills or knowledge about finances. However, an unwillingness to discuss money topics only serves to reinforce these negative feelings. Plus, your friends are the people you rely on for advice, so sharing what you know about this topic might ignite some truly beneficial conversations.

If you’re planning to be the first to bring up the topic of money with your friends, consider framing it in a way that highlights how you overcame challenges using useful tools. You could gift a book, suggest your favorite money management app or recommend a podcast you find useful. This way, you don’t have to get into the nitty-gritty of your finances – or theirs – but you’re offering up avenues of support and, hopefully, opening the door for future financial discussions with your friends, too.

If you prefer a more indirect approach, consider taking charge as a social director for your next get together. If fancy dinners out tend to be the norm for your friends, change things up and invite everyone to your place to cook together instead. Chances are, if you’ve been feeling your typical social scene is too expensive, others in the group are feeling the same way. Not only will your friends have fun trying something new together, but they may also be secretly grateful for the financial change of pace, too.

Influencing Your Parents

When you’re hoping to pass along the gift of financial literacy to your loved ones, your parents might be your toughest crowd. After all, the typical nature of the parent-child relationship is for children to ask parents for advice, not the other way around.

If you want to share financial literacy tools with your parents, it’s a good idea to begin gingerly. In fact, you may want to wade slowly into the conversation, possibly not even mentioning money at first. One approach to try is to broach the subject of what sorts of medical decisions your parents would want you to make on their behalf if the need arises. For example, you could ask where they prefer to live if they are no longer able to live at home. As you discuss options like nursing homes and assisted living facilities, you can transition into a conversation about money and ask whether they’ve set aside savings for long-term care, whether their house is paid off and more.

If you happen to find out that all your parents’ money is in a simple savings account, they could likely benefit from your financial know-how. Investing in the stock market can be an intimidating subject for many people, especially those who saw big losses during the recession in 2008, but it’s also a smart move over the long-term. You may be able to alleviate your parents’ fears and encourage them to make a few conservative investments. If they remain reluctant, however, switch tactics and encourage them to get life insurance and long-term care insurance instead. These policies could save them many thousands of dollars in the future.

Tying a Bow on Financial Literacy

If you’re ready to wrap a truly meaningful gift this holiday season, consider how you might pass along useful money tips to your loved ones. If financial know-how is one of your own special gifts, sharing it with children, friends and parents is a great way to spread joy during the holidays and beyond.

If you would like help regarding your financial plan please reach out to Accruent Wealth Advisors for a complimentary consultation. Please call (336) 760-4829 or email us at info@accruentadvisors.com. You can click here to schedule your consultation today.

About the Author
Barry J Swaim, CFP

Barry J. Swaim, CFP is the founder and president of Accruent Wealth Advisors. He received his BA degree from the University of North Carolina at Greensboro. Barry has also earned the professional certification of CERTIFIED FINANCIAL PLANNER practitioner from the Certified Financial Planner Board of Standards.