Raising Money-Smart Children Starts Earlier Than You Think — Barrons.com

By Jonathan I. Shenkman

Most parents want to pass along good money habits to their children. After all, understanding how money works, and how to use it to improve your life, is an essential lifelong skill. The challenge is that most children have little interest in personal finance until they graduate college. When they suddenly need to pay rent, they start to pay attention, but by then they're already playing catch-up.

Parents often ask me for advice on instilling strong financial values and foundational knowledge early so the basics feel familiar when their children eventually take responsibility for their own money. I always say the key is making the lessons accessible and meaningful at each stage of a child's development.

Drawing on nearly two decades of working with families, having my own children, and being a child once myself, I've identified three practical strategies that help children build financial confidence from a young age.

Engage in relevant casual money talk. As a parent, I've long ago realized that the best way to get my children engaged in a topic is to simply introduce an idea and let them develop an interest on their own. Young children are naturally inquisitive. If you bring up an interesting topic, they will follow up with lots of questions.

On a family road trip this past summer, after stopping at both Walmart and Target, I casually mentioned to my 9-year-old that she owns both of those stores. The intrigue generated some questions from her, which sparked conversation, and ultimately led to a discussion about the difference between owning companies by buying stocks and lending a company money with bonds. I used her lemonade stand to further illustrate the concept. If she wanted some money to expand her stand, she could sell me a share of her business, and I can be a part-owner (i.e. stock ownership) or I can lend her the money, and she can pay me back with interest later, which would make me a bondholder. The same concepts are applicable to large companies. While she wasn't inclined to give up any of her lemonade stand profits, she now understood the difference between stocks and bonds.

Sensing I was on a roll, I also showed her on my phone the many companies that make toys or games she is familiar with that she could partially own. I showed her that the maker of Barbie is Mattel and the owner of the game Monopoly is Hasbro, both publicly traded companies. This led to 10 minutes of her searching for a company, looking up what they were trading for, and whether they paid a dividend.

This entire exchange was under 30 minutes, but it had a lasting impact. A few weeks ago, we were waiting at our gate for a flight back to New York, and my daughter asked to use my phone to "look up companies." The key is starting these types of conversations early, not forcing them, and meeting children where they are in life. Discussing toys, lemonade stands, and companies that children are familiar with is a lot more effective than discussing earnings per share, Ebitda, and technical analysis.

Embrace healthy financial habits. Your children are watching. One thing every parent should remember is that your children are watching you. We've all had that moment, when we say or do something we shouldn't, only to hear or see our child repeat it minutes later. Money habits work the same way. Many of the financial behaviors we carry into adulthood, both healthy and unhealthy, come directly from how we were raised.

I work with wealthy clients who will never run out of money in their lifetime yet struggle to spend an extra $20 on a small convenience because they grew up with parents who saved every penny out of fear. Others feel pressure to buy the latest luxury items because that was the norm in their childhood homes. Some adults become stressed, or even physically uncomfortable, at the mention of money because finances were a constant source of tension when they were young.

Of course, many families model the opposite: living within their means, saving consistently, and avoiding unnecessary spending. Plenty of investors recall watching relatives review stock quotes in The Wall Street Journal, collect dividend checks, or use their resources to support loved ones and meaningful causes.

A crucial part of raising children with a healthy relationship with money is embracing healthy financial habits yourself. Treat money as a tool to achieve your goals, not a score card, not a source of anxiety, and that mind-set will naturally pass to the next generation. Act and speak intentionally about money in front of your children. They're paying attention.

Incorporating financial literacy into the school curriculum. There has been a growing push to include personal finance education in school curricula. It's a worthwhile goal, but the challenge lies in making the material digestible for students who aren't naturally thinking about money yet.

A more effective approach is what I call the "slow drip" method, which is introducing financial concepts gradually throughout elementary, middle, and high school rather than relying on a single senior--year course. The lessons that stuck with me as a student were the ones I encountered repeatedly. A one--off personal finance class at the end of high school is easy to forget, but exposure to investing, planning, and financial decision-making over many years helps embed these ideas so they resurface later when students enter the real world.

Practically, this could mean dedicating a few history classes to the evolution of markets, the history of the U.S. stock market, and major investment bubbles. Math classes could incorporate budgeting, the time value of money, compound growth, and basic insurance statistics. Revisiting and building on these real-world concepts throughout a child's academic journey would be invaluable.

Unlike the strategies parents can implement at home, this effort requires collaboration with school boards and educators. However, the long--term payoff of financially confident, better--prepared young adults is well worth the effort.

Keep in mind that you were once a child: It helps to think back to your own childhood and remember what actually captured your attention. When I was growing up, my priorities were simple: playing sports, hanging out with friends, and getting a decent grade to avoid my parents' dismay. Personal finance wasn't even on my radar. Looking back, though, I realize how much I benefited from casual conversations about money and seeing strong financial role models in my parents and grandparents. My father even had me open a Roth IRA at 16 when I had my first summer job. I would have benefited even further by having these concepts woven naturally into my school curriculum.

By meeting children where they are and introducing money lessons in small, meaningful ways, parents can give children a head start toward confidence, competence, and a healthy relationship with money.

Jonathan I. Shenkman, AIF, is the president and chief investment officer of ParkBridge Wealth Management and is based in New York. His practice addresses all aspects of a client's retirement planning, including collaborating with other trusted advisors to help facilitate and manage various tax, estate and financial planning strategies to achieve the client's goals.

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