The Planner's Perspective: Teaching Financial Responsibility
By Paul Morrone, CFP ®, CPA, MSA
To put it bluntly, our nation’s children receive what I would call a disgracefully small amount of personal financial education.
As social service programs and employee benefits become increasingly sparse and complex, the child of today is going to have to be proficient from the start of their working career to tackle many of the decisions they are faced with on day of their job. I remember filling out my first W-4 for a part time job and was convinced that it was written in Chinese (Exemptions? Allowances? Dependents?) I was 16 years old and was barely figuring out how to put gas in my car. Luckily, my father told me how to fill it out prior to me showing up that day and I was confident handing it in that I had made the right decision. While this just a silly example, it does reinforce the fact that most children receive the majority (however little that may be) of their financial education from their parents. It’s never too early to introduce concepts such as budgeting and spending to a child, which is the core of any financial plan and can help to build healthy habits from the start.
One of the best ways to educate a child about financial responsibility is when they first start to drive. This provides parents with an opportunity to explain the concept of cost/benefit as well as provide a child with perspective as to what it means from a dollars and sense perspective to own something of value. Of course, I’m not suggesting that the child has to pay for everything themselves, but informing them as to the cost of the vehicle, gas and maintenance (and translating that into how many hours or days they would have to work to obtain it all) are all relevant once the vehicle is in the driveway.
Taking it a step further, reviewing the concept of insurance, its costs, and what all those numbers on the policy declaration page actually mean are life skills they need as they grow up and move out of your house. It’s not uncommon for a parent to simply add a child to their existing auto policy, throw a current insurance card in the glove box and never bring it up in conversation. Missing those key education points can lead to some potentially life altering consequences. You don’t want your child to be the one that simply purchases the state minimum level of insurance (which is absurdly low in CT, not enough for any driver) and then gets into an accident!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual