How to Teach the Next Generation About Financial Planning, Wealth Management

How to Teach the Next Generation About Financial Planning, Wealth Management

Teaching your children and grandchildren important financial planning lessons doesn’t have to involve a complicated, serious, sit-down conversation. In fact, a simple walk through the grocery store can do a lot!

How’s that?

Well, do you remember when candy bars sold for a dime? Tell them that, because your child or grandchild pays a lot more than that now, and it’s a perfect real-life example of how inflation works. You can make a walk through the grocery store aisles a fun teaching opportunity by comparing how much things, like a loaf of bread, sold for when you were their age, versus now.

This can also be an ideal situation to explain to the next generation (or the one after that!) why it’s so important to start saving early. You can start the conversation about compound interest and debt. You can share the progress of some of your retirement funds, or tell the story of your first successful stock purchase.

As a parent or grandparent, it’s important to help instill good financial lessons in your children and grandchildren. Our team of Sonoma County wealth advisors at Montgomery Taylor Wealth Management has come up with a few other methods on how this can be done.


It’s never too early to start planning for the future. Schedule a no-obligation conversation with the Montgomery Taylor Wealth Management team today.


Start With the Basics at an Early Age

How do you explain how money works? The difference between paper money and plastic spending? The concept that if you don’t have enough money, you can’t always get what you want? How saving early can help?

Children soak up more than you may think. They have likely watched their parents buy groceries at the market or shop for other things, like gifts, clothes or household appliances. Take these opportunities to discuss things they might be interested in buying, such as toys or candy.

If they share with you something they want, it can be a good exercise to work with them to save for the thing they desire. Discuss how they can save gifts, allowances and other money they may receive. Help them understand how much they’ll have to save in a week to get an item they want, a month or by a certain deadline.

You might even open a saving account for and/or with them and track the interest they receive. Show them compound interest tables (if they are of an appropriate age). The concept of how much even $5 can grow in 50 years can be impressive – and leave a lasting impression!

Children’s biggest desires at a young age may be something small, like a toy or the newest video game, but as they get older, this will likely turn into more expensive items such as clothes, smart phones or laptops; then cars. As they get to be adults, it’ll be even bigger things, like a house. Having a foundation early on can help them navigate these expenses later in life.

Whole Wealth Management

Once a child understands how money works, it’s important to take it to the next level – whole wealth management.

What does debt do to your finances? How do taxes work? What is a person’s net worth?

If it’s age-appropriate, tell them what your parents paid for their first home. It’s likely much lower than what you’d pay today. Make it clear that you couldn’t have afforded a house if you’d expected to pay what your parents paid – and that they shouldn’t expect to purchase a house for current prices, either.

Introduce the concept of appreciation, investing and even charitable giving. If appropriate, this could also start a conversation about estate planning and an inheritance. This blog post may help: Inheritances: Financial Planning Tips for You and Your Beneficiaries.

Retirement Planning

Another important lesson is retirement planning. Sure, retirement can be a difficult concept when a child is young, but you can introduce the concept of employer-matches early – offer to match every dollar they save with $0.50, $1, or a reward of your choice. Then explain to them that they can be incentivized throughout their life when they save.

Don’t think kids can’t understand a 401(k)? They can!

After you’ve matched a child’s savings, help them understand that that’s what an eventual employer may do to help them save for the future – when they have their own kids or grandkids!

Breaking down financial planning and retirement planning into simple terms can help you start complex conversations early on and lay a sound foundation for their future. Again, if appropriate, show them what can happen when they don’t plan! This guide may help: Navigating Retirement in Sonoma County.


Taxes can be an especially complex concept for a child – and some adults! But it’s an important one to explain.

Money is subject to taxes in many ways, but they often appear as hidden costs, especially if you’re not aware of them.

For young children, you may want to introduce the idea of sales tax. If you’re having lunch at a restaurant that costs $20, explain why a $20 bill may not be enough – because the sales tax will drive the price higher. When you start to account for taxes in your everyday life, these costs can become less of a surprise.

The Value of Giving

Taxes can be a great segue into charitable giving and how helping your community through money you’ve saved or what you may have in excess of your needs, can help others – and yourself. Talk about organizations you donate to and why.

Get their ideas for where they want to donate. You might give a joint donation to areas they’re interested in. Are they discussing any issues at school that they’d like to help out with?

The Benefit of Getting the Right Help

A very important financial lesson that is often skipped is the value of professional help!

Take your children or grandchildren to meetings with your wealth advisor. Maybe give them some shares of stock or mutual funds to oversee and let them discuss with your wealth advisor how they’re doing, how the money is managed and how progress is tracked.

Learning about assets, appreciation, losses, capital gains and other tricky concepts can help them see how complicated a person’s financial life can become and how the right financial advisor can help.

At Montgomery Taylor Wealth Management, we discuss our clients’ goals, their concerns, their needs, their risk tolerance. We discuss clients’ portfolios, diversification, stocks, bonds and the market. We encourage clients to bring their children and grandchildren to meetings, when appropriate, because as Sonoma County wealth advisors, we understand how important early lessons about finances can be. Young adults may even want to follow our Facebook page.

Montgomery Taylor Realistic Financial Planning