Practical ways to give kids a healthy attitude toward money

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A lemonade stand is a simple way for kids to learn about money. But parents should take care not to sugar-coat the results. If kids think they’ve made $100 profit after investing $60 of their parents’ money and five hours of time, they’ve missed one of life’s first lessons about the cost of doing business.

All children need to learn about money, especially those who may one day inherit a sizable estate and be asked to steward generational wealth into the future. The big question is when to start.

“The sooner you do it, the better,” says Robyn Hooper, Vancouver-based family enterprise advisor for the Trella Advisory Group.
Starting is easy, Hooper says – just let kids handle some money, and talk about it. Discuss how they feel about money, too.

“Getting them to understand their own financial archetype, or to think about why they feel certain ways about money, is important,” Hooper says. “The more you are aware of your own biases with money, the better.”

For children younger than 5

It depends on the kid, but basic numeracy easily leads to early conversations about money, says Martha Simmons, chief operating officer of Toronto-based multi-family office Forthlane Partners. Normalize these conversations and encourage questions such as: How much do things cost? What is a dollar? Why do parents work? Kids can also participate in some of the simple financial transactions going on around them.

“A kid can order in a restaurant as soon as they can speak, so why not give them that ability?” asks Simmons. “A parent can give them money to pay for their own candy at the store. And as they grow, you can give them more and more responsibility.”

Can you instill values in kids? Hooper thinks so, but says the key is for parents to model the behaviour they hope to see in their children.

“At this age we find it’s very easy to focus on giving to others,” says Simmons, making it the perfect time to nurture values such as generosity. “If the family really values philanthropy, which many of our families do, this is when you start to have those kinds of conversations.”

Hooper says giving to others might mean saving tooth fairy money to give to charity or choosing a birthday present for a friend. Make sure you discuss the price.

Ages 5 to 10

This is a good time to introduce budgeting, says Simmons, by starting an allowance and encouraging kids to save up to buy things they want. They may begin to feel the confidence and power that comes with saving their money to achieve a goal. They’ll also get acquainted with the feeling of not always getting what they want.

This is a good age to let children in on the cost of their activities, too, Simmons says, such as summer camp, private school or tennis lessons. Kids will begin to contextualize their family’s wealth, and this understanding can also foster gratitude.

“I would definitely say there’s no purpose in hiding it,” says Hooper. She points out that kids can Google their parents’ recent business sale and see the $300 million price tag for themselves.

Steve Legler, a Montreal-based facilitator for high-net-worth families, agrees that it’s okay to talk about family wealth. “I have a client who was talking about selling their house and buying a bigger one,” says Legler. “Their kids are 8, 10, 12 years old and she was wondering: ‘Should we talk to the kids about that?’” The answer is: of course.

“You don’t have to go into the specifics,” says Legler, “but you have to make it a welcome subject for discussion between the generations so the kids will feel comfortable talking about it. And so you can start to educate them.”

Ages 10 to 15

The early teen years are a good time to start a stock portfolio – real or fantasy – and introduce your children to your investment team, Simmons says. A family office should actively embrace this.

“We want to grow with the family, and so we want to be with the kids,” says Simmons. “Teenagers are inquisitive and want to learn, so we’re really happy to engage with them.”

If the kids’ portfolios are a bust, don’t bail them out, Hooper says.

Families should also put their networks to work, tapping them for mentorship and other opportunities. “High-net-worth families have so much opportunity to give them that visceral experience, by attending meetings or going through training or getting mentors.”

Ages 15 and up

Time to get a job, Simmons says. Teens need to learn how to have a boss, receive a paycheque and understand what an after-tax salary looks like. They should also participate in filing their tax return.

Hooper says this is a good age to get a credit card, set up investment accounts and research the costs of living and costs of housing, including a deep understanding of leverage and real estate.

To keep lines of communication open, Hooper suggests parents stay on top of modern finance trends such as digital banking, blockchain and cryptocurrencies. She also thinks impact investing will be a huge priority for the rising generation, and that families – and family offices – will need to stay informed to keep up.

“It’s a really complex world now, and I think parents who are at least trying to stay current with their kids are going to fare better than those who don’t,” Hooper says.

If you need to throw a Hail Mary pass – a financial boot camp of sorts – at an older child who needs to learn fast, Legler says it’s probably best to enlist someone outside the family to help. (Your family office should be able to assist.) But it’s much better to start young. Losing 20 bucks on a lemonade stand might be a sour experience, but the lesson is invaluable.

“You want to put your offspring in a position to make decisions and make mistakes when the stakes are small,” says Legler. “If you don’t give them those opportunities, you are increasing the chances that when they make their first big mistake, it’s a very costly one. And that’s not good for anyone.”

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