Many clients have resolved to get a better handle on their finances in 2014. They have vowed to actually read your quarterly updates, meet at agreed-upon intervals, and not call you only on days when the S&P takes a nosedive.
Of course, if you have been in this business for some time, you know that financial resolutions are often abandoned faster than fitness resolutions. (At least fitness resolutions can mean stylish new gym clothes!) To keep your clients on track, encourage them to focus more on future generations than simply on themselves — namely, making sure their children are equipped with financial knowledge before they are launched into the real world.
Exact estimates for the several-trillion-dollar baby boomer wealth transfer to Gen Y and millennials vary greatly, but its immensity is certain. Unfortunately, we learned from the recent financial crisis that financial literacy is poor across all generations and income levels. This provides financial advisors with a unique opportunity to educate their current clients and build relationships that will last for generations.
Money talk in some families is almost as taboo as sex talk, but having a neutral third party guiding the conversation and providing educational resources is a tremendous benefit. Advisors can serve as a mediator for some of these conversations, meet one-on-one with clients’ children, or even host fun financial literacy seminars for clients’ children. Below is a sampling of age-appropriate activities and resources to get the ball rolling.
Children: Ages 8-12
At this age, financial instruction should focus on encouraging curiosity about money and finance instead of simply instructing. It is amazing how some activities in this age group will leave lasting impressions about money. Simple activities include:
- Have money-based games in the office such as Payday and Monopoly and invite clients’ children to play while their parents are meeting with their advisor.
- Teach the basics of compound interest by asking; “If I deposited $0.01 in the bank today and my account doubled every day, how much money would I have at the end of the month?” The answer may even surprise you!
- Have children talk about a goal they would like to save for and have them design their own piggy banks.
Teenagers: Ages 13-17
In this age group, teenagers already have some clearly defined views about money. Some teenagers work, some get an allowance. All of them have a sense of who the have and have-nots in their class are based on which kids in the class sport the latest tech gadgets first. Activities at this age should focus on articulating values around money and goal setting, stressing the importance of savings accounts, and building a financial vocabulary that includes weightier topics such as how the stock market works.
- Games like Payday will have greater importance as children may now have their own money to play with.
- When discussing higher financial topics consider introducing difficult concepts by following popular news stories: discussing the Twitter IPO vs. the Facebook IPO, what the new Xbox means for Microsoft or why people eagerly await Apple product launches.
- Teach kids how the math they learn in school actually has real-world applications by explaining how to build a budget, monitor a checking account and calculate simple and compound interest.
Young Adults: Ages 18 -22
Hopefully your clients’ children will have had some financial education prior to this, but if not, incorporate some of the previous activities with the following. In this age group, financial education can be frank as the lessons will be used almost immediately.
- Discuss the responsible use of credit.
- Assist with building an actual budget for college and beyond.
- Explain terminology around everyday financial matters: 401(k)s, insurance and taxes.
- Reinforce the idea that no matter the career path, understanding personal finance is important.
For more resources to share with clients, consider the following.