Five Money Lessons From a Dad — and a Financial Adviser

A dad and his son sit outside on a bench and talk.

(Image credit: Getty Images)

published 5 September 2024

As a financial adviser and a father, I know firsthand the importance of instilling good money habits in children from an early age. My 21-year-old daughter recently started an internship, and our conversations about money have become more meaningful and frequent. These discussions have reinforced my belief in modeling good financial behavior and maintaining open lines of communication.

Here are five key lessons I've learned on this journey.

Lesson 1: Remember, your kids are watching and learning.

From a young age, children often pick up on our actions even more than our words. Everyday decisions, like choosing a more affordable box of cereal at the grocery store or explaining why we’re saving up for a big family purchase, become valuable teaching moments. Discussing why certain luxuries aren't immediately affordable and emphasizing the value of saving and delayed gratification builds a foundation of financial awareness and responsibility.

From just $107.88 $24.99 for Kiplinger Personal Finance

Be a smarter, better informed investor.

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

As children grow into different phases of their lives, these conversations naturally evolve. What starts as simple lessons about saving pocket money can turn into discussions about managing a paycheck, understanding credit and planning for major life expenses, such as college or a first car.

Despite our efforts, children might resist advice with a simple, “You only live once, so why not enjoy it?” This underscores the need for ongoing dialogue. Teaching financial prudence and alignment is not about having one big “finance talk” but about consistently sharing thoughts and decisions, helping children understand wealth management through a holistic approach.

Lesson 2: Promote financial unity and collaboration.

Parental differences in handling money can lead to confusion for kids. In many households, one parent may be a saver while the other is a spender. These differences highlight the necessity for parents to work together and present a united front when teaching financial values. Open discussions about financial priorities and strategies ensure that children receive consistent messages, helping them understand and appreciate diverse financial perspectives.

It’s also important for parents to find common ground and create a cohesive financial plan that reflects their shared values. This might involve setting joint financial goals, agreeing on spending limits or developing a family budget. By demonstrating collaboration and compromise, parents can teach their children the importance of working together toward mutual financial objectives.

Introducing tools, such as budgeting apps, can be a great way to help children track their spending and learn to live within their means. These apps can provide visual representations of where money is going, making it easier for children to grasp the concept of budgeting. Emphasizing the practice of spending less than they earn and saving for future emergencies can provide them with financial stability.

Sharing stories of successful savers, like Warren Buffett, can illustrate the power of compounding and the benefits of starting early. Most of Buffett's wealth accumulated after age 65, showcasing the long-term gains of consistent saving. These stories can inspire children to understand that time and patience are some of the most valuable assets in their financial journey.

Lesson 4: Start early.

Every generation faces unique financial challenges, yet some truths remain constant. Living below your means, being a diligent saver and allowing your money to compound over time are timeless principles. Acknowledging the difficulties younger generations face, like the current challenges in buying a home, helps tailor these lessons to their realities while reinforcing these fundamental concepts. Discussing historical financial challenges and how previous generations overcame them can provide valuable context and reassurance to young adults facing their own financial hurdles.

Starting financial education early is key. Whether it’s birthday gifts, part-time jobs or significant life events, these moments provide opportunities to teach children about saving, spending and giving. Encouraging them to divide money into categories — savings, needs and charity — can instill a balanced financial mindset. Even small investments can grow substantially over time, and with today’s technology, anyone can start investing with minimal amounts. Explaining the concept of “paying yourself first” and setting aside a portion of any money received for savings can establish a lifelong habit of financial responsibility.

Using real-life scenarios can be effective hands-on financial lessons like involving your children in family budgeting decisions or planning a vacation. Show them the costs involved, the significance of saving for such events and how to make trade-offs to stay within a budget. This hands-on approach can make financial concepts more tangible and understandable.

It is vital to teach children about the significance of credit and how to use it responsibly. Explain how credit scores work, the impact of debt, and the importance of paying off credit card balances in full each month. These lessons can help them avoid common financial pitfalls and build a strong credit history.

Introducing the idea of charitable giving early on is also beneficial. Discuss the value of helping others and the various ways to give back, whether through donations, volunteering or supporting causes they care about. This can instill a sense of social responsibility and empathy alongside financial knowledge.

Teaching good financial habits to our children is a journey that requires patience, consistency and openness. Fostering an environment where children feel comfortable asking financial questions is crucial. When they start their first full-time jobs or face financial decisions, knowing they can seek advice helps them feel secure and supported. Encourage them to ask questions about money management and be ready to guide them through complex concepts, such as understanding their first paycheck or choosing investment options. You may learn something too.

Investment advisory services offered through SEIA, LLC. Securities offered through Signature Estate Securities, LLC member FINRA/SIPC. 2121 Avenue of the Stars, Suite 1600, Los Angeles, CA 90067, (310) 712-2323

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

TOPICS

Frank Legan is a Cleveland-based author and a Financial Adviser with SEIA. Frank spends his days designing and implementing personalized financial planning strategies for corporate executives, business owners, artists, families and retirees. He focuses on lifetime income planning strategies, investment advice and estate planning services. He also works with businesses to develop strategic and succession planning strategies.