• September 2010

Financial adviser Nancy Hartsock teaches children the financial facts of life

By Nancy A. Hartsock
Financial Adviser and Financial Planning Specialist
The Hasenberg Hartsock Group at Morgan Stanley Smith Barney

By default, parents are usually the primary source of a child’s financial education. However, many young people may receive allowances—or even sizable inheritances—without a sound base of knowledge in saving, budgeting, investing, and financial planning. To help the children in your life develop a responsible attitude about money, it might help to consider these points.

Be a role model

There is a significant relationship between the way children view money and their parents’ spending habits. Instead of viewing money and personal finance as a forbidden topic, discuss your own financial goals and plans.

The level and amount of information shared is up to you, but bring the younger generation into at least a portion of your plans. How you deal with money issues—from the monthly bills to planning the family vacation of a lifetime—are important and long-lasting lessons about money management and the value of money.

Encourage Savings and Investments

One of the simplest ways to encourage a responsible attitude about money is to teach children to save.

This could include designating a portion of a child’s allowance to a savings account or making gifts of cash directly to an account in their name. Discuss account statements together, and stress the concept of “paying yourself first” with dedicated, regular deposits.

For younger children, set modest, attainable savings goals. For older children, encourage the development of a long-term savings plan for the purchase of a large-ticket item like a computer or a car.

Consider an occasional “matching grant” to encourage regular deposits and help keep goals visible. Take the time to explain basic investment types such as cash instruments, stocks, and bonds.

Make investing interesting by engaging in conversation about companies that provide popular children’s products such as toys or clothing.

Develop a Sense of Financial Empowerment

Developing responsible spending habits means encouraging well-thought-out choices.

1. Guide and advise rather than dictate how money should be saved and spent. Keep goals visible with pictures or create charts that plot the growth of funds needed.

2. Take children on window-shopping trips to compare prices and products and adopt the mind-set that every trip to a store is an exercise leading to a potential purchase.

3. To limit impulse buying, consider instituting a rule that prices and products be compared at a minimum of three locations.

Give Unto Others

Involve children in your financial decisions regarding philanthropy.

1. Discuss the merits of gift applications you may have received and weigh the advantages and limits of each.

2. Explain the tax advantages of charitable giving, but at the same time stress the altruistic goals of giving. Even a contribution to a canned food drive or the creation of a holiday basket for a needy family can grow into a family-wide event.

3. By helping children contribute time or money to a charitable cause, you can teach them that money is important in ways other than personal consumption.

Developing a sound knowledge of basic financial practices can often go a long way toward helping the children in your life achieve lifelong financial security.


About Nancy Hartsock

Nancy is a financial adviser and financial planning specialist with The Hasenberg Hartsock Group at Morgan Stanley Smith Barney in Washington, DC. She specializes in wealth management, financial planning, and multigenerational family work, helping clients reach their wealth goals through hard work and a common-sense approach to successful investing.

Before her career as a financial adviser, Nancy worked for 25 years in the health care industry, with the last 10 years in senior management as a business owner.

About Morgan Stanley Smith Barney LLC

Morgan Stanley Smith Barney LLC and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.

© 2010 Morgan Stanley Smith Barney LLC. Member SIPC.