In 1970, Teach Your Children, a song written by Graham Nash, was released by Crosby Stills, Nash & Young on their album Déjà Vu. The song was prompted by a photograph Nash had seen depicting a child with an angry expression holding a toy weapon in Central Park.
Fast forward 46 years, and Nash's song seems equally as important when considering the massive transfer of wealth that is going to take place over the next few decades. Some estimate that a staggering $30 trillion in wealth will soon be transferring from Baby Boomers to Generation X to Millennials.
So 2016's question is: Are we teaching our children well? We have always found that most clients want their children to have the best opportunities. Additionally, while the majority feels confident about leaving an inheritance, they worry about the impact their wealth will have on their children. A frequent question asked of advisors is when should I start this education process? Most parents have no trouble teaching their kids subjects like reading, writing and math. However, the money-based conversations that add to a child's financial literacy lack traction.
Most parents tend to start thinking about their child's ability to achieve self-fulfillment and earn money when they are in junior high school. Conversations about careers, advanced education or technical schools generally get started around the high school years. Parents hope they have taught their children to live within their means, assess their values, and set goals. Important understandings of giving, charity work, the concept of credit and how credit cards and credit reports can impact their lives seem to evolve into a daily lecture.
These lectures are important. Today, college seniors are graduating with an embarrassingly high level of credit card and student loan debt and dismal job opportunities, as unemployment rates for workers under age 25 remain at historically high levels.
So when should you start this educational process? In a word, early!
Here are ways to start early providing a foundation for a productive and financially fit life for your children.
Adopt the role of becoming your child's financial advisor. Planning is a collaborative process. Because of this communication, listening and learning, parents create an opportunity to transfer financial education and responsibility to their child.
Build your financial curriculum, including a hierarchy of financial skills, just like a teacher would. Remember that young children might have limited patience and knowledge. So do not give little Jane or Johnny Warren Buffett's favorite book The Intelligent Investor as a 6 year old birthday present.
Read books with your child. You would be amazed at the tools at your disposal. From ages 3 to 7 or 8, you can consider the Berenstain Bears series like The Berenstain Bears Get the Gimmies or Trouble with Money. There is also Demi's One Grain of Rice: A Mathematical Folk Tale or Richard Scarry's What Do People Do All Day?
Play games. It is also good to see how many games (yes-the old fashioned board games that require children to look up and interact) that are available. For example, Hasbro's Monopoly Junior or The Game of Life are frequently recommended.
Talk about money issues. As they grow older, begin to discuss the topics of budgeting, saving and planning. Teach them how to avoid impulse buying and what delayed gratification means. Additionally, the amount of resource material that is available online is worth researching.
Working with your financial advisor is also an important resource. They are equipped with additional resources at their disposal and will be more than happy to help you with this journey.
Don't forget to remember Nash's song and the lyrics. My favorite lines: "You, who are on the road must have a code that you can live by" and ."so just look at them and sigh and know they love you."
Andy Muldoon is a senior vice president of The Trust Company in Chattanooga and may be reached at amuldoon@thetrust.com or (423) 308-6834.