How to raise financially literate children

The award winning wealth management and investment experts Killik & Co have opened a new space on Devonshire Road – House of Killik Chiswick. The Chiswick Calendar is pleased to share their guest blogs on how best to plan and save to acquire the wealth to achieve your goals.

Killik & Co won “5-star Wealth Manager” at the Investors’ Chronicle and Financial Times Celebration of Investment Awards 2024

Parents often wish to leave a financial inheritance for their children, but what should that look like, and what else should you consider for an effective transfer of wealth? 

Identifying the right amount, the right time, and the right way to leave a financial inheritance is essential to good intergenerational planning; it can be the foundation that enables the sort of transformative experience every parent wishes for their child.

However, ending your planning once you have decided how to make the gift could leave a lot of value on the table and unwittingly contribute to future financial troubles.

Effective financial inheritances have three parts: the gift itself, knowledge of how to manage it and the mindset for how to live with it. The key to passing on all three successfully is to be proactive about discussing financial literacy with your children.

But as you will likely be aware, intergenerational discussions are often challenging. Even with the best intentions, these conversations don’t always land as we hope – but with patience and the right guidance, you can lay the groundwork for lasting financial confidence.

Please be aware that the value of your investments may fall as well as rise. The content of this article reflects our current understanding of UK legislation and only impacts those within the UK tax system. Tax treatment depends on personal circumstances, and the rules may be subject to future change. 

Growing a smart financial mindset

The journey around the formative corner from adolescence to adulthood is the best and the worst time for a child to receive a financial windfall.

While a financial boost at this age can open up possibilities to explore various dreams and opportunities, it could also result in your child learning an expensive lesson.

One of the best ways to set a child up to make sound financial decisions is to focus on helping them develop a savvy mindset. While educating them on concepts like market cycles and diversification are still helpful, understanding the benefits of saving for a rainy day is more likely to cause them to think twice before impulsively withdrawing their savings.

Here are three principles that can help grow a smart financial mindset.

1. Start talking about money early

Helping your child understand how you make financial decisions can be helpful at a young age, from sharing about the cost of groceries to setting money aside for higher-value purchases.

The ideal age to start talking about money will depend on your family’s circumstances, but we recommend doing this many years before they can legally manage their savings or investments. While youthful brains may be highly malleable, they do not change instantly and may take years to grow to financial maturity.

2. Encourage questions to aid their education

Unless your child is already interested in it, the technical knowledge or money management rules you share could go in one ear and out the other.

While it is tempting to think of financial literacy as something you can teach by sharing a guide or other educational content, it pays to remember that brains need to care about something before they adapt to accommodate living with it.

For example, suggesting ‘Saving is a good idea’ will likely have to pass through several rounds of a child asking ‘Why?’ before it becomes personally relevant to them.

3. Focus on what they are learning

You probably already know that the key to getting a child to care about anything is to meet them on their level.

Perhaps your child is interested in studying at a top university or starting a business. Sharing how to save towards these goals can be an effective way to help them build financial literacy – as it is all about their personal relationship to money and what they care about.

This can also offer a good measure of their financial literacy as it is not just about them learning how to manage money successfully, but also how well they internalise these principles.

More ways to build a financial inheritance

Raising financially literate children requires more than just handing them a gift and trusting they will make sound financial decisions; it also needs to be supported by the knowledge of how to spend the money and a sound financial mindset.

Regardless of how you plan to build a financial inheritance, our services can help you generate and protect wealth – from taking advantage of tax-efficient investing opportunities to creating a comprehensive financial plan that maps out key moments over your lifetime.

All of this means you can rest assured that when you combine your educational efforts with your own smart financial decisions, you can leave your loved ones with a firm financial foundation for the future.

To find out how Killik & Co can support you in saving, planning and investing for your family’s financial future, visit House of Killik Chiswick at 13 Devonshire Road.

There’s no need to book ahead, and there’s no charge for an initial conversation.

Alternatively, you can get in touch at chiswick@killik.com.

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