By Neil Sosler & Marc Singer

Many parents are uncomfortable discussing finances with their children.  In our modern world, with constant marketing by credit card companies to young individuals, delaying this familial conversation could lead to a financial fiasco that could alter the rest of your child’s future.    

Communication is the first place to start when teaching your children about finances. Talk with your kids.  Understand what their expectations are regarding your financial assistance and what they will be responsible for paying as they get older. Perception and reality usually are quite different.  For example, you may decide to pay for college tuition, but graduate school will be in their column. Some surveys indicate that over 75% of college students and over 10% of teenagers have credit cards.  With our “must have it now” society and access to easy credit, the temptation to get in over one’s head is barely avoidable.

A second part of the discussion should focus on the topic of credit.  Children should learn to spend cash before they are given credit.  They need to experience the “burn of the spend”.  If they do not see the money leave their pocket when they first become consumers, they will never understand the ramifications of overspending on credit. Credit provides us with the convenience and ability to pay for important and/or large items over time. However, credit also seductively lures us to live above our means. If you use credit poorly (running up balances on high interest credit cards with little chance of realizing income to pay them off), it could take years to clean up the mess.  We won’t even broach the subject of declaring bankruptcy to escape the obligation of making good on the debt incurred.  Don’t expect your kids to understand the details immediately.  It is a learning process fraught with mistakes along the way.

The next area to delve into with your children is goal-oriented behavior.  Make sure they understand that most people have limited resources to some extent and that every purchase decision is an important one.  If a young child thinks they can use their allowance to buy candy and go to the movies when they only have enough money to do one or the other, they will learn the consequences of their decisions.  An effective approach to teach financial decision-making is to allow them to purchase a desired item with their own money – this usually dissuades them from following through with their demand for the ‘toy of the week’.

Investment Education

Many physicians use UGMA accounts to accumulate funds, commonly in excess of $100,000, by the time their children become adults.   It is very important that children are “financially mature” prior to having access to such significant assets.   While legally they may be entitled to the funds, many parents neglect to inform their children of the money’s existence. Children need to be educated in the creation and management of wealth. Setting a good example for them to follow is a priority.

Upcoming Seminar Topics

Singer Xenos is an established wealth management firm specializing in physicians with $500,000-plus in investments.  We manage over $500 million in assets such as retirement plans, annuities and personal accounts, with an emphasis on wealth building and protection from malpractice claims.