Teaching Your Children About Money

What you say – or don’t say – about money matters may have a profound effect on how your kids will handle their finances later on. When it comes to teaching your children to save and invest, open and honest talks about money should begin at an early age. Here are some things to know before you get started.

Parents are generally believed to be the single most powerful influence in their children's long-term financial lives.

With such influence, it seems logical parents would jump at the opportunity to teach solid life lessons about good money management. However, this isn’t always the case.

Many families grew up not talking about money, treating the subject as a very private affair, following the behaviors of their grandparents and parents. It may be uncomfortable for many people to bring up money because they were never taught how to talk about it themselves.

While speaking openly about money is not always easy for parents, the truth is parents are teaching their children about money every day.

Here are some tips on how to get started:

• Explain the concept of earning money. Talk about going to work and what the money you earn pays for.
• Respect money. Show how small amounts of change saved in a jar can add up to a large sum of money.
• Give your children an allowance. Think about tying their allowance to weekly chores, which may help instill the concept of earnings.
• Help set savings goals. Help your child figure out how long it will take to save for something he or she wants to buy.
• Match their savings. Give your child incentive and help increase their savings quicker.

Understanding the value of saving begins simply and grows over time. Saving may not have meaning for your child until your child sees what it can do - that you save up for things you want. Making the concepts of money and saving concrete for children is something parents have been doing for generations with piggy banks, jars, or savings accounts.

Today’s tech-savvy kids have a number of online tools and apps available to help them grasp these timeless concepts. These resources and countless others can help reinforce the basics of money management in fun and interactive ways. They also give tips on taking your child’s money management skills to the next level, which may include considering how to:

• Make spending decisions
• Open a savings account
• Give to charity

Helping your children understand the basics of saving is a great foundation for introducing them when they’re older to your financial institution and even to investing. Many banks and investment firms offer relationship pricing, which can enable young savers to open accounts without standard minimum balance requirements—particularly when the account is connected to a parent’s broader household relationship.

Parents may also consider opening a Uniform Transfers to Minors Act (UTMA) account, which can be a useful tool for building long-term savings. However, it’s important to evaluate whether any associated fees are reasonable relative to the amount being saved. Keep in mind that assets in a UTMA account legally belong to the child and will transfer to their control at the age of majority in your state (typically 18), which may also impact future financial aid eligibility.

Even young children can begin to grasp basic investing concepts. If they save enough to invest in something tangible—like a mutual fund—they can start learning about financial management and the responsibilities that come with handling larger sums. It’s also essential to explain that investing involves risks, including the potential loss of principal.

Introducing children to the benefits of working with a financial advisor can help them develop a stronger sense of financial responsibility and prepare them for future decision-making.

• Take advantage of time as a family to teach your children about money.
• For very young children, talk about money basics in short, simple conversations.
• Use a variety of resources to help build your child’s money skills and knowledge.
• Help your child establish positive money habits by giving an allowance and showing ways he or she can save.
• Be a role model when it comes to handling money matters and having responsible conversations about money, spending, and saving.

Mutual Funds are subject to risks of the underlying investments in the fund. Investment returns may fluctuate and are subject to market volatility, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.

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Investment products and services are offered through Wells Fargo Advisors. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company.

Wells Fargo Bank, N.A. (“the Bank”) offers various banking, advisory, fiduciary and custody products and services, including discretionary portfolio management. Wells Fargo affiliates, including Financial Advisors of Wells Fargo Advisors, may be paid an ongoing or one-time referral fee in relation to clients referred to the Bank. In these instances, the Bank is responsible for the day-to-day management of any referred accounts.

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