By FPA members Elaine King, CFP®, CDFA™ and Philip Herzberg, CFP®, MSF
Last Updated: January 3, 2011
Do you have the enthusiasm and determination to educate and empower your teenagers and college-age children with the essential financial virtues and literacy skills to thrive in 2011?
Remember that through ongoing family financial conversations, you will have a proactive and positively influential role in helping your children formulate and follow-through on their ultimately successful 2011 New Year’s “Financial Resolutions.” Also, nurture and build on your children’s money management skills in 2011 by encouraging and guiding them to follow these essential pointers:
Direct your children’s efforts to setting money resolution goals in a SMART format
- Teach your kids to compose, practice, and pursue their financial goals according to a goal-management technique referred to as SMART (Specific, Measurable, Achievable, Realistic, Time-Based). Start by establishing tangible, short-term money goals, such as saving 10 percent of earnings over the next three months. Also, over the next three to six month period, your children can discipline themselves to not charge their large expenses to a credit card, except for emergency purposes.
- In channeling your children’s efforts toward achieving financial success, you should have them also jot down their intermediate and longer-term money objectives to visualize and reinforce their significance. Relay to your teenage and college-age children to allocate money every month to financial resolutions and cut down on expenses that may be preventing them form accomplishing their SMART goals.
Embark on helping your children develop sound financial habits by collaborating with them on utilizing online resources and tools, such as Mint.com and Bundle.com, to track expenses. In addition, show them how to use an online savings calculator to figure out how much money they need to conserve monthly and for how long in order to reach an attainable SMART goal.
Expand and cultivate impactful financial planning life skills for your children in 2011
- In 2011, strive to communicate to your teenagers and college-age children the importance of setting aside savings to pay themselves first before defraying bills and other expenses. In addition, assist your children to learn about credit and debit by reviewing a credit-card statement (i.e. teach them about interest rates and penalties for late penalties). Make it a New Year’s initiative to let your children borrow a small amount of money to educate them about the concept of debt and how to utilize a credit card wisely for purchases.
- Emphasize the teachings of the time value of money to incorporate this into retirement planning over their life to take advantage of compounding interest. You may consider the possibility of helping your children set up a Roth Individual Retirement Account (Roth IRA) to allow them to put some earned money away for their nest egg. Ensure that your children capitalize on contributing to their company retirement plans [401(k), Roth 401(k), 403(b)], if the organization or company they are employed with offers a retirement plan.
- Be exemplary in modeling responsible and healthy financial attributes and decision-making to your household members. Continue to stress to your children how to comparison shop and live within their means. Express and share your own New Year’s Financial Resolutions with everybody, and reward or recognize those in your family who get ahead in achieving their concrete goals.
Set your children up to flourish in 2011! Make it your resolution to reinforce and grow your children’s financial literacy skills with the tools to prepare them to take a prodigious step toward their own financial independence.
FPA member Elaine King, CFP®, CDFA™, is the Author of Family & Money Matters. FPA member Philip Herzberg, CFP®, MSF, is Director of Media Relations & Public Awareness for FPA of Miami-Dade.