Most parents’ goal for their children is to be financially independent once they leave the nest. So, how do they get there? Whitney Reagan, senior wealth advisor, and Christina Lynn, Ph.D., director, wealth strategist, share strategies and tips for helping your child learn how to be financially savvy and independent as they approach adulthood.

Transcript

Whitney Reagan: Parenting is a challenge on its own, but an even bigger challenge is trying to raise your kids to be financially independent. If you’re looking for more guidance around this specific topic, please keep listening. Welcome, welcome to Your Life Simplified. I’m Whitney Reagan, wealth advisor here at Mariner, and I am joined today by a very special guest. I’m lucky enough to call her a friend and a colleague. Christina Lynn is a practice management consultant here at Mariner, and she’s also a Ph.D., a CERTIFIED FINANCIAL PLANNER^® and an Accredited Financial Counselor®. You are impressive, Christina! How are you today?

Christina Lynn: Good, thanks, Whitney. Excited to talk about our two favorite topics, money and kids.

Whitney: I love that you’re so passionate and authentic about the topic of personal financial planning, but even more so, raising our kids to be financially savvy. You’re so passionate that you even wrote a book about it, and I think today that I would love to just discuss some of the topics that you dive into in your book, and maybe more specifically, offer some guidance to our listeners because I know at least for me, I would love to get your help here and some of your expertise so that I don’t mess up my kids since they’re still young.

Christina: Well, yeah, let’s toss around some ideas. There’s no one right way to do it, but we can talk about some strategies. I like it.

Whitney: I do want to jump right in, but first I want to say I love how you structured your book because it feels like it’s really a guide for parents to help them into almost pushing their kids out the door, into letting go of the reins and helping them make mature financial decisions on their own. Am I reading that right?

Christina: Yeah. The ultimate goal that I think we have as parents is we want them to be financially savvy and financially independent once they leave the nest.

Whitney: Correct. And something that I think about a lot is that we — I mean, maybe not trying to be negative here, but we don’t want our kids to be spoiled or feel entitled, and hopefully raising them in a way that maybe you can help us with is going to help not do those things.

Christina: That’s the goal. We all have different challenges when it comes to raising financially savvy kids, but that is one thing that I’m struggling with. I mean, we both have great jobs. We want what’s best for our kids, but there’s a fine line between enabling them or spoiling them and showering them with the good things in life that we want for them.

Whitney: Exactly. So we’re definitely on the same page here. I’m going to jump right in and ask you for some advice. Since I have you here, I might as well take the opportunity. When is the best time to, or maybe even the best way to offer incentives for our kids? Is it giving them an allowance or giving them money when they get good grades or if they do something good at school or if they’re behaving well? I mean the list goes on, but I guess I also wonder when should they have their first job? And I mean, I could go on, maybe I’ll stop there just to let you kind of answer some of those questions.

Christina: Yeah, the question around financial incentives and allowance is a common one. I think we tend to default to whatever our parents did. If we found it somewhat helpful, we want to just go ahead and do that for our kids. And the research actually doesn’t substantiate the benefits of allowance or financial incentives. It doesn’t say that it’s not effective. There’s just no evidence to say that it is effective. At the end of the day, our kids are not going to learn any financial lessons from us by spending free money. So, if you want to go ahead and provide an allowance or provide financial incentives for getting good grades, for example, go ahead and do that. What I would suggest is to be as consistent as possible with it because if you tell your kid, “Hey, I’m going to commit to giving you a weekly or a monthly allowance,” and then you forget to do that one month or you’re late with it or short, your kids are going to remember that, and it actually can have a counter effect and the opposite of what you’re aiming for. So go ahead and do it. Be consistent if you decide to go that route. But what’s more important is them earning their own income, whether that be you paying them for jobs around the house that you offer to them and they volunteer to sign up for or going to get a job. And also a secondary effective solution to this is conversations around money, talking about issues around finances that come up — that has more weight than a financial incentive or an allowance would.

Whitney: I like that you talked about earning your own money, and because I think the importance of earning and that you have to do some sort of work to earn the benefit of it and to understand it — I love that idea. The allowance, I guess is kind of just, it’s to each their own. If they feel like it’s going to work for them, then they should go ahead and do it. But your main point is if you start a program, just stick to it and make sure you’re consistent in how you are approaching that specifically in an incentive with your children. And then I liked what you just talked about, and I wanted to explore that a little bit further. And you said talking about money, which, of course, I think having those open conversations are really, really valuable in your family. But you said talking about issues with money. Can you expand on that and give us some examples?

Christina: Yeah, so what comes to mind for this one is every child is unique. And so one child is going to struggle with one issue around money where another kid, their issue around money is going to be really different. So, to use my two kids as an example, one’s a natural saver and my other isn’t. And so how I’m working with my older child around money looks really different than when I’m with my younger child who just wants to spend everything, every dollar burns a hole in his pocket. So that’s really what I meant by issues around money. The issues are endless.

Whitney: And I was going to ask you about this later, but it kind of came up organically. You said each child is unique, and that was actually one of your chapters in your book. So, leaning into your child’s uniqueness, you already kind of touched on it, but do you want to expand a little bit further on that and how we can make this part of raising our kids more meaningful, and how do we do it?

Christina: So, there’s a part about parenting that’s not so fun. And when it comes to teaching our kids to be financially savvy, the reality is that we’re going to witness our kids make mistake around money after mistake around money. And the trick is to be really patient with those mistakes and use them as an opportunity for learning a valuable money lesson. And so being patient in addressing those mistakes — So, let me give you an example. My daughter I love, and this happened to both of them. They got text messages months apart, but it was some sort of scam. They clicked on a link that enticed them, and they put in their debit card information to it. And so yeah, right off the bat it was tempting to get upset that they would do such a thing, so I really had to pump the brakes and remain calm and walk them through it and have the lesson that they learned from that experience be one of, “Okay, I learned to not click on everything that I receive, that some things are too good to be true,” rather than the lesson be, “Mom gets mad if I make a mistake around my debit card.” So, yes—

Whitney: I bet that was a good opportunity for you to practice some mindfulness yourself.

Christina: Yeah, I know my blood pressure rises just remembering it.

Whitney: But I think that the way that you probably approached it with each of your children was probably a little different for each of them because of their personalities, because of how they react to things. And that’s pinpointing on leaning into the uniqueness of each child. And I also think about — this is probably kind of cheesy, but I love the StrengthsFinder, like the Gallup StrengthsFinder. It’s kind of a personality assessment to find out your top strengths that identify you. And I always think about leaning into your strengths because it’s what you naturally do best. And I think about my kids and what their strengths are, and I feel like this is kind of what you’re saying — and hopefully I’m reading it correctly —but lean into their strengths too and how you’re going to teach them about money.

Christina: You nailed it. I think the temptation, at least for me, is to sort of hone in on the things that I’m frustrated with. So I have to make a really conscious effort to pivot that and find the strengths in it. There’s a rough rule of thumb with this [which] is you want two positive interactions around money with your kids for every one negative one. And so if you do catch your kids stealing, for example, or something else that’s real negative, we need to find opportunities to reinforce strengths that they have or something good that they did around their finances to balance it out.

Whitney: That is fantastic advice. It reminds me of a compliment sandwich.

Christina: Yeah, ask, offer, ask. Yeah,

Whitney: Yeah. Okay. Before we go on to my next question, what about first jobs? Is there a good timing to have them get their first job, or is this just kind of each family is different too?

Christina: Yeah, this one is strongly rooted in the personal experiences of both parents. And so, a good starting point is to have a conversation with your spouse, or if you are raising your kid with a partner, come to an agreement about what your expectation or desire is around this because likely you will have really different experiences around this. And again, like you said, there is no right approach to this, but in general, the research indicates that having a job, allowing them the opportunity to earn their own income and spend that income on their own, like within their own bank account, that is a foundational element of helping your kid become financially savvy in adulthood. So that didn’t really answer your question, how I’m handling it—

Whitney: No, but that was still awesome.

Christina: Okay. My kids are at this age right now, so they’re 15 and 16, and my daughter is on her second job. My son just works for his dad but still earns income. So I personally think when they’re of the legal age to get a job, that’s when I start holding back from just buying everything for them to making decisions of thinking critically about the things that they come to me wanting. I’ll say, well, that’s really something that you should be buying with your own money.

Whitney: Love it. I love that. And I also want to emphasize what you said about having the conversation with your partner or your spouse, because I mean, parenting is challenging. You run into things like this all the time. I mean, this morning I even ran into this with my husband where he said that the kids could have iPad time, and I’m like, wait a second. We did not talk about that together, and I’m not sure that this is a great idea. So definitely having that conversation ahead of time is a good point. So, another chapter that actually piqued my interest as a wealth advisor and felt relevant to me was future-proofing your children, if I can say it, because a lot of what we talk about with our clients are college funding and funding a 529 plan for your children or your grandchildren. And it feels like that is enough to start funding it and help your children pay for college. But what I’m understanding, I think, is that that’s not enough to really have your kids be financially independent or financially savvy. There’s more to it.

Christina: So yeah, there’s more to the college education discussion. It’s important to step back and look at the longer-term financial repercussions from going to college. It is more than just saving for college. Something that you should find a way to slip into the conversation with your teenager is about the inverse relationship between student loans and spending money. Also, the life lesson that financial independence is not on how much money is made, it’s on how money is managed. That’s the key.

Whitney: So, the inverse relationship of student loans — So if your student loan, if you have a higher student loan, then your spending is going to be lower.

Christina: Lower, right. The average teenager just doesn’t connect the dots on it. So they might think, yeah, I can just go to whatever college is my top choice major in whatever I want, and they don’t think the next step then, well, if I do that, this is how much money I should expect to pay in a student loan repayment, and that’s going to eat into how much money I have to spend on rent and going out to eat and going shopping and doing fun things.

Whitney: So, I think the moral of the story there is as a wealth advisor and as parents and grandparents or whoever has children, the college funding and saving for college alone is not going to be the end-all, be-all for raising your kids to be financially independent. We need to have more of these conversations around helping them understand saving and spending and what that looks like.

Christina: Exactly.

Whitney: Okay. I have one final question, and I saved it for last because I know when we’ve talked about your book in the past — and again, we could talk for hours about this, but it’s only one short episode —but when we’ve talked about your book in the past, you said that this is your favorite thing to talk about and it kind of ties your book up into a nice little bow, and it’s talking about letting go of the reins. What does this mean? And is this a way for us to gauge ourselves as parents as successfully raising our kids, or how should we look at that?

Christina: Yeah. So when I say letting go of the reins, what I mean is supporting your child’s autonomy around money more and more as they get older. So much so that by the time that they leave the nest, you want them to be more or less financially independent with their own account. And the reason that this is so important to me is because this is where the bulk of the research evidence points to this is what makes such a difference in raising up financially savvy kids.

Whitney: Wow. I saw a statistic the other day, and it said 60% of parents of adult children have helped their children financially in the last year. I mean, think about that: 60%, that’s more than half of parents out there that answered that are still helping their adult children financially. And I don’t think that that’s necessarily a bad thing, but me as an adult child, I would love to have that financial freedom, or my goal is to be financially free from my parents. And so I think this whole discussion and all of your guidance here is really valuable to help empower the children as much as the adults.

Christina: Yeah, every case is different, every person is different. So, it’s not wrong to want to support your adult children. Working with your advisor can help you answer the question, can you afford it? But for those of you who that’s not appealing to you, teaching your kids to be financially independent before they leave the nest is going to make it much more likely that they’ll be financially savvy and independent in adulthood. So you can do things, you can foster this by giving them choices while they’re under your roof. Things like giving them the authority to spend the money in their checking account the way they want, giving them choices around what activities or how they want to spend their money on clothes. One time my son blew his entire school shopping budget on a pair of shoes. I nearly had a heart attack, but I let him learn that lesson in hopes that he would remember the repercussions from that the next year.

Whitney: I love that. And also focusing on letting them make their own mistakes and learning from those financial mistakes. I think that is all we have time for, but I love this conversation so much, especially because my kids are little and I feel like I’m already learning from you with your children being like your couple of children being teenagers. So, thank you, Christina, for joining us today. I felt like that was very impactful and valuable for the listeners, and I hope that everyone enjoyed it as much as I did. So, thanks for joining us, Christina, and thank you to the listeners for listening in and hearing some of these insights that came from Christina.

And if you enjoyed what you heard today and don’t want to miss out on any more insights from experts like Christina or myself, then please like, subscribe or follow wherever you listen to your podcasts. And we hope to see you again next time, and we hope you have a fantastic rest of your week!

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