When you’re a new parent, you have a lot on your plate. Between learning how to care for your child’s physical and emotional needs and adapting your life around your new family member, you’re also trying to consider their future and what you may need to do now to help get them started on the best path to success. One area that may draw your attention is their future financial security. What habits will they need to develop to have a healthy relationship with money? What steps can you take while they’re young to prepare them for the expenses of the future?
These questions can feel overwhelming, especially while you’re still adjusting to parenthood, but even simple steps can have a big impact. According to the financial experts of Kiplinger Advisor Collective, the following seven steps are a good place to start. Below, they outline the steps and explain why taking each one will ensure your child is on the right trajectory for a successful financial future.
1. Become a financial role model
“Model the behaviour you want your child to adopt. The way you spend, save and even talk about money will greatly influence and impact your child's attitude toward money later in life. Set them up for success by improving your own financial values. Speaking openly and positively about money can also help shape a healthier relationship with money for your child.” — Andrea Woroch.
2. Talk to them about how money works
“Talk to your kids about money from a very early age. If you don't, they won't understand how money works and how to manage wants versus needs. This is good for you and them. If they understand how money works, they’re less likely to ask for expensive things and when they do, they won't continue to pester you if you say no.” — Trae Bodge.
3. Teach them and get them involved in decisions
“Parenthood is an extraordinary journey filled with countless responsibilities: among the most crucial is securing your child’s financial future. Opening a Registered Education Savings Plan (RESP) as a new parent can strategically help fund your child's education with tax advantages. Remember to also discuss responsible money habits early, maybe using an allowance or savings jars to teach saving and encourage goal setting. Involve them in financial decisions and, when they’re a teen, consider building their credit score by adding them to your credit lines or giving them a low-limit credit card to learn credit management.” — Ramona Ortega.
4. Set them up with life insurance coverage
“I would recommend ensuring your child has a life insurance policy in place as early as possible. Life insurance is a financial building block. Yes, you can overfund them and create tax-free wealth opportunities in the future, but I'm talking about basic life insurance without all the fancy bells and whistles. Get them covered, start the practice of financial security and build on it moving forward.” — Lyndsey Monahan.
5. Examine your own relationship with money
“Our beliefs about money are heavily influenced by our upbringing. One of the best things you can do for your child is to examine your own relationship with money. You have the opportunity to break generational patterns and avoid passing on unhelpful or limiting money beliefs. Cultivating a healthy money mindset and learning money management skills will allow you to lead by example for your child.” — Chianté Jones.
6. Invest in their finances and their self-worth
“Immediately begin investing in compounding assets. The two most essential are self-worth and financial investments. The first asset compounds their human capital, creating value for society and for themselves that increases their income over their life's course. The latter allows two decades more of time to compound financial education and returns. Both set a course toward better wealth and well-being.” — Dr. Preston D. Cherry.
7. Open an education savings account
“Establishing a dedicated education savings account, such as an RESP, is a great action parents can take to ensure their child gets off on the right financial foot. An RESP can help alleviate the rising cost of university tuition, while also providing numerous tax advantages. Parents can also use this education savings tool to teach the importance of financial responsibility.” — Greg Welborn.
This article was written by Kiplinger Advisor Collective from Kiplinger and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
