Growing up with wealth comes with certain perks, but also presents its own set of unique challenges. Kids and grandkids may not understand why they're given certain privileges or how to responsibly manage the money they come into. Teaching children about money isn't easy for anyone, let alone those who have never known financial hardships, but it's critical to emphasize the importance of hard work and the value of a dollar to the younger generation. This article will cover some best practices for ultra-wealthy families who want to impart wise lessons about money to their kids and grandkids. From instilling strong money habits to teaching children how to set financial goals and invest—we'll touch on all these topics as we discover ways in which families can successfully pass down financial knowledge from one generation to another.
Best Practices When Teaching Children About Money
Ultra-wealthy families who want to teach their children and grandchildren how to manage their money should start early. One might begin by educating the younger generations about basic concepts like setting savings goals, budgeting, comparison shopping, credit cards, and compound interest to foster good money habits and a deep understanding that lasts a lifetime. Additionally, kids should learn through practical experiences like having and using a bank account with an allowance-style of funding for activities and regular expenses. Encouraging them to use an app that helps them save, budget, and invest their money can also be extremely beneficial. In addition, teaching the next generation how their family’s wealth effectively works, how it was created, and how it generates income can be fundamental in ensuring they value the hard work that has gone into it rather than spending it frivolously.
Another way to approach the topic of money with younger children is to explain what wants are versus needs and how to differentiate them. For example, even a child can understand the difference between wanting a toy from the store and needing food from the grocery store. As they get older, involving them in discussions about investments is a good idea so they begin to comprehend how one can put their money to work for them. No matter how one chooses to tackle it, teaching the next generation about money early on will give them a strong financial foundation so they can responsibly manage their future finances and possible inheritance in a way that leads to long-term success.
Takeaway: Start Early and Talk Openly
In our society, financial education isn’t generally a big focus in school, and talking about money is often considered somewhat taboo. Children can potentially grow up with very limited financial knowledge unless their families choose to educate them—and this can be the case whether they come from an affluent background or not. But there are ways parents and grandparents can pass along their knowledge in a kid-friendly manner from discussing financial topics openly and funding a bank account with an allowance they’ve earned to encouraging them to use money apps and explaining how the family earns and maintains its wealth. Taking these steps and more will help ensure that future generations appreciate the family fortune and understand how to preserve and grow it.