The conventional wisdom is that in polite company one should never talk about money, politics or religion. I disagree with at least one-third of that advice; not only do I think that it’s OK to talk about money, I think that it’s vitally important to do so. Some of the best financial knowledge that I have accumulated over the years started in conversations with my parents, spouse and financial advisor.
Prior to getting married, Michael and I had each been working for years and flying solo financially. We were each used to doing things our own ways. But we soon realized that in order to form a financial partnership, we had to talk about how we would handle money we were each bringing in. We needed to talk about what our long-term goals were and how we would reach them.
Create a plan – together
We first agreed that we would need to discuss any purchase over $500. We also established a spending budget using the envelope system supported by an online tracking system. Then, we talked about our big goals. We wanted to buy a house. After meeting our 401(k) and emergency savings goal as well as living expenses, there was not a lot left to put towards saving for a house. So, we crafted a plan to save towards our goal of a down payment.
As we progressed in our careers, our incomes also got bigger which allowed us to take a portion of any salary increases and put that towards our other goals rather than just an increase in our standard of living. Discussing, planning and concretely documenting our goals, helped keep us focused on what we truly wanted long-term.
Talk with family
We also talked with both of our parents about what we should be prepared for in the future. My parents stressed saving for future needs like retirement and college for our children. And so our college savings for the girls started early. Michaels parents stressed the importance of life insurance – something as new entrepreneurs we were missing in our portfolio.
My parents used a trusted investment advisor and financial planner. When I was younger and before I got married I was invited to some of those advisor meetings, as they were held in my parents’ home. I listened and learned that planning was the key to financial success. That and compound savings.
Financial Literacy Month
This April, during Financial Literacy Month, I urge you to talk with your kids about how you set short and long-term goals. Explain how you save and invest and why you save and invest. Talk about the impact of inflation on both your family budget and your family goals.
And since your children watch what you do much more than listen to what you say, show them your financial behavior. For example, do you take advantage of discount offers on groceries to stay within your food budget? Buying in bulk? Explain your strategy with your kids as you shop. Talk about the differences in prices and how that impacts your budget’s bottom line.
Keep the money talk going
Continue talking about money in your family. Ask each one of your kids to write down a money question they have. Then start answering them at dinner or lunch or anytime the family is gathered. Write a money question or two yourself. Seeing you do this will raise this activity in its importance in your children’s eyes.
Ask the youngest kids to create and decorate the money question box and keep it on the kitchen counter with pencils and paper so questions can be written and placed in the box easily for future conversations.
The more you talk about money, the more the value of those conversations and lessons will “compound” over time. And before your very eyes you will see your kids grow into young adults that are smart about money and that know how to set goals and plan for the future.