By Chris Cassaday, CMFC®

It’s natural for parents to want to provide their children with a comfortable life; one that sets them up for success. Affluent parents, however, are capable of providing an unparalleled level of comfort for their children. While the intention is not negative, these circumstances could lead to negative consequences for children later in life. To alleviate the chances of affluent children becoming fiscally irresponsible adults, you can teach your children the value of material possessions while they are young.

1. Encourage Your Child to Experience Life Outside of Their Comfort Zone

Dr. Carl Jung, a Swiss psychiatrist, once said: “[Sometimes] one lives wrapped in cotton, protected from the cold and heat. It is not good never to be cold or hot.” If children are never exposed to “cold and hot” environments, they aren’t able to fully appreciate the circumstances that defined their comfort zone in the first place. Exposing children to the world outside of their own will allow them to understand that others’ lives may not be as comfortable or as easy as their own. One way to teach your children this is through volunteering and community service. My parents did this for me when they signed me up for a community service trip to New Mexico when I was just a teenager. I worked in many impoverished and underdeveloped neighborhoods in and around Santa Fe, and it truly broadened my perspective of just how lucky I was to have grown up in the community and household that I did. Exposure to new and different people, communities, and places can create a new perspective for your children on how fortunate they are.

2. Help Your Child Understand the Concept of “Delayed Gratification”

Chances are you’ve worked hard to ensure that your family is financially secure and that you can provide your children the things they desire. However, allowing your child to have everything they want without hesitation or delay can prove to be problematic. Learning the importance of delayed gratification is essential to fiscal responsibility. Urge your child to begin an outside-of-the-home job as early as possible to teach them the benefits of earning their own income and saving a portion of it to be able to buy things on their own. My father “urged” (or politely forced) me to get a job when I was 14 years old. As a young, distracted teenager, getting a job was the last thing I wanted to do, but in hindsight I am glad I began working at such an early age. It helped me learn that if I wanted something, I needed to work for it, and in some cases save up for bigger purchases, like tickets to a concert I wanted to attend. Teaching your children delayed gratification helps them understand that not everything is going to be handed to them, and that it takes hard work to sustain a comfortable living.

3. Telling Your Child “No” Can Help Differentiate Between Wants & Needs

As difficult as it may be to disappoint your children by not allowing them to have a toy, game, or piece of candy, telling them “no” every so often can prove to be beneficial in the long run. Telling your child no, and explaining to them why, will teach your child the difference between “wants” and “needs”. Once they understand this they should begin to realize that they don’t need to have everything just because they can afford it. This understanding will benefit them as they mature and begin to establish their own budget and spending habits.

4. Teach Your Child How to Have A Sense of “Healthy Skepticism”

Parents who instill a sense of “healthy skepticism” in their child are serving them well in many ways. One way this can be done is by sharing encounters with your child where money that you spent was not used how you thought it would be. I learned this lesson when I was 17 and took my first car to a shop to have repairs done. I impetuously paid a large sum to have my car fixed, and unfortunately found out later that the repair shop was notorious for overcharging their customers and the repairs could have been done at a much cheaper price. This lesson taught me to make sure I am fully aware of where my money is going and to use discretion in the future. Introducing this sense of awareness when your child is young is imperative as this practice will follow them through life, like when considering a major purchase or engaging in business negotiations. As your child ages and begins making purchases on their own, it’s important that they understand the benefit of carefully analyzing how and why they’re spending their money. This will also help them to understand that although they have the ability to spend, they still need to understand the value of their money.

In the words of my own father, Cassaday & Company, Inc. President & Founder Steve Cassaday, “our goal is to provide our clients with tools that can help them become good stewards of their wealth.” While conversations about money may be difficult to have with children, these four tips can act as a springboard for age-appropriate conversations and teachable moments. Your advisor is able to help facilitate these conversations, and is always available to answer any questions you might have regarding your own financial situation.

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