We have to talk to our kids about money – no matter how uncomfortable it feels
In March 1942, an 11-year-old boy took the decision of a lifetime and invested all his savings in the stock market. The $114.75 (£89.42) he had saved since age six bought him three shares of Cities Service preferred stock. This was the beginning of a multibillion-dollar investment journey, one that would see him become the pre-eminent investor of our time. This was Warren Buffett’s first venture into the stock market.
Buffett, one of the world’s most successful investors, credits his father, Howard Buffet, for inspiring his love of investing. His father’s background in stockbroking no doubt played an invaluable role in helping to build his son’s booming empire. But there’s a lesson for all parents in this relationship – we must talk to our children about money to set them up for success in later life.
Our capacity for financial understanding is directly impacted by what we learn about money at a young age, so starting the conversation about finances early on is key to a child’s future financial success. But for many families, money is still a taboo subject. Some 25 per cent of parents say they find it difficult to talk to their children about money, and more than half of adults say they haven’t discussed their will with their family despite many assigning their money to their children.
According to the latest OECD figures on financial literacy, the UK ranks below average for financial education. Financial literacy has been included in the National Curriculum since 2014, yet young Britons are falling behind their counterparts across the globe in terms of managing their money. As parents, we have a responsibility to improve our children’s financial understanding through opening up the conversation and teaching lessons in the home.
Many parents feel ill-equipped to broach the topic with their children, or don’t know when it’s best to start. Leading banks encourage parents to start the conversation from a young age and continue it into early adulthood. By just five years old children can grasp the idea of having to purchase merchandise, making this is a perfect time to introduce the concept of money. Once they reach their teens, HSBC advises that children are introduced to the benefits of earning interest. When they reach their late teens, parents should drive home the importance of lifelong financial independence.