Dear Parents: The Conversation Just as Important as the Birds & Bees

Talking to your children isn’t always an easy thing to do, especially if they happen to be a member of Generation Z or a Millennial (young people born in the mid-1980s to mid-2000s). These young people can often be found with some kind of device in their hands, earbuds in their ears or sharing videos with their friends on Snapchat. Sometimes it is hard to find a moment when I’ve got his undivided attention, when he isn’t moving a mile a minute.

As children begin to edge into adulthood most parents have already had the birds and bees talk with their kids. However, there is another important topic that is almost as dreaded for both parents and kids: personal finance.

It can be awkward to bring up the word “finance” with your children. In fact, a survey showed that parents are nearly as uncomfortable talking to their children about money as they are discussing sex.

Yet, as parents it’s our duty to guide our children on financial topics as they reach major milestones in their lives such as getting their first job, going to college and buying a home.

As a mom to an 18-year old son who is just about to finish his first semester of college and someone who works in the financial services industry, I understand how essential it is to make time to talk to my son about this important topic because it will impact his entire life. However, parents are not expected to be financial experts. There are great resources and materials available to help you. For example, the company I work for, Bank of America has partnered with Khan Academy to develop BetterMoneyHabits.com, a free online resource that combines Khan Academy’s expertise in online learning with our financial know-how to deliver unbiased and easy-to-understand information on a wide range of personal finance topics.

However, there are ways you can jump start the conversation at home. Here are some ideas for talking about finance during key life moments where a little parental advice comes in handy.

First Job: First job means first paycheck and first big spending decision. This is the perfect time to help your teenager or young adult understand the importance of saving money and how to budget to avoid overspending. The word budget may seem scary to some, but it’s simply knowing how much you make and how much you spend. Have your children think about their monthly expenses, items that they’d like to buy and then show them how much they have left over. Talk to your child about needs versus wants and how to make trade-offs. A significant part of any budget is savings. If your child would like to buy a big-ticket item (new computer, new car) it can help motivate them to start saving. Routinely setting aside just a bit of money for savings is a valuable habit to teach your children. Having the discipline to regularly put aside money is hard enough for many adults, and learning the habit early can make saving throughout your young adult’s life much easier.

First Credit Card or Loan: The credit conversation is a tough one. The average American household carries more than $7,000 in credit card debt and nearly two-thirds of college students graduate with some form of student loan debt. Yet despite our reliance on plastic and loans, few parents know how to explain the complexities of borrowing money. Thankfully there are many resources available to help parents, such as your local banks and online sites where you can get more information on how credit works. Even if your financial knowledge is limited, guidance is critical in teaching your child to ask good questions when making financial decisions. This will help your child avoid making impulsive decisions and potentially taking on too much debt.

• Is this purchase or loan necessary? Do you need it right now?
• Could you save money for a few months to pay for it instead of borrowing money?
• Do you have enough money in your budget to cover the monthly payment?
• Does this purchase or loan affect your ability to pay for a future expense?

Asking smart questions will help your child avoid making impulsive decisions and potentially taking on too much debt.

This is a recent conversation I just had with my own son before sending him off to college in Chicago. One day he may want to attend graduate school, or buy a home. We talked about the importance of establishing credit and not taking on more than you can handle. We helped him open a credit card and made sure he knew the questions he needed to ask himself before using his credit card instead of his debit card.

First Home: While we’re on the topic of home buying, for parents of older millennials, your children might also be talking to you about purchasing their first home. Buying a home is a big purchase and one way you can help prepare your children is to have an open conversation. Help them think about the decision and answer questions like:

• Can you afford the monthly payment?
• Do you have enough for a down payment?
• Do you plan to live there for at least five years?
• Do you need help from me?

This last question is an important one. According to a recent Bank of America Homebuyer Insights Report, two-thirds (66 percent) of first-time millennial buyers still expect some type of help from their parents when buying a home. There are many ways you can help your children with their first home – whether it’s giving them a gift for the down payment, helping them co-sign or providing them with a loan. However, you need to be clear on what you can do and talk to experts (like a mortgage officer, CPA or lawyer) to understand the best way you can provide assistance.

Whether it’s talking about the birds and the bees or financial decisions, difficult conversations are essential for your children’s growth. Working in finance, I have seen what a difference these types of conversations can have on how people approach their everyday financial needs. The trick is to start early – and over time, you’ll teach your children how to live healthier financial lives.

Town and Country resident Jackie Yoon is the St. Louis Market President for Bank of America and head of U.S. Trust Bank of America’s practice for the Midwest region