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So when fathers hear that one-third of the members of Generation Z feel unprepared to manage their finances, as a recent MassMutual survey reported, they’ll be champing at the bit to give a few tips. For Father’s Day, we asked some finance professionals for the best financial advice they give their own kids.
Here are their six key tips:
1. Start learning about money at a young age
Jim DeGaetano took matters into his own hands when it came to teaching his kids about money.
DeGaetano, the founder and CEO of Diamond Wealth Advisors in Carlisle, Pa., wrote a children’s book called “Larry the Bunny Saves His Money” to help teach his kids, who were ages 4 and 6 at the time, about saving and spending.
“Essentially, this cute little bunny named Larry gets paid 10 carrots each day,” DeGaetano said about his book, which is available on Amazon. “Larry always remembers what his father taught him: ‘Every time you work and get your pay, save two carrots for another day.’”
Maintaining the conversation about finances as kids grow up is as important as starting when they’re young, said Ashley Folkes, a managing partner at Inspired Wealth Solutions in Hoover, Ala. “[Young people] have the ability to dictate their entire financial future by making good decisions today, rather than their financial future being dictated to them by bad financial decisions today,” he said.
Folkes plans to pass this advice along to his 3-year-old son. “I want to teach him the lessons I have learned from my bad decisions,” he said.
One way to help your kids learn about the value of a dollar is to pay them an allowance for doing chores — and to start at an early age, said Paul LaPiana, the head of brand, product and affiliated distribution at MassMutual in Park City, Utah. Then, he said, they’ll be better prepared to save, invest and spend wisely in adulthood.
That discipline of working, understanding the value of money and saving is critical for kids, he said. “A piece of that will allow them to understand that — when they’re coming out of college, coming out of high school, starting their first job — it will be something that is already in the DNA of who they are.”
2. Understand that time is your most valuable asset
“One person said to me a long time ago [that] the eighth wonder of the world is the compounding of money over time,” LaPiana said. “So all you have to do is start saving as early as you can and let time help you reach your goals and objectives.”
Brandon Gibson, a wealth manager at Gibson Wealth Management in Dallas, Texas, agrees with that sentiment. His advice for his 12-year-old daughter? “Start early and be aggressive.”
He continued: “If she can save 10% or 15% right out of college and invest 100% in stock index funds, I have little doubt that she will have all she needs to retire in her mid- to late 50s.”
3. Invest in yourself
Blake Street has a very simple piece of advice. The adviser and founding partner of Warren Street Wealth Advisors in Tustin, Calif., says simply: “Invest in yourself.”
When you’re young, he says, amassing money is not nearly as important as building relationships and gaining knowledge and skills. “Find whatever your edge and passion is careerwise and lean into it as hard as you can,” he said.
And that doesn’t necessarily mean seeking out more education, noted Devin Pope, a senior adviser and managing director at Nilsine Partners in Cottonwood Heights, Utah, who is the father of two children ages 8 and 11. It could also mean taking advantage of opportunities to learn new skills and new experiences. Breaking a bad habit, organizing your personal or professional life and setting goals for your career or your physical and mental health can all be part of this investment.
“You’re never going to know what you like if you don’t give it a shot. You have to try [something] at least once,” Pope said.
4. Start out with a cushion to give yourself financial flexibility
While working at his first job and attending college in the evenings, Sean M. Pearson, now a financial adviser and associate vice president at Ameriprise Financial Services in Conshohocken, Pa., lived at home and got some advice from his own dad.
Pearson said his father understood that the expenses associated with living alone — things like paying rent and buying furniture — would put a strain on his son’s finances, and so he gave Pearson the choice to keep living at home.
This allowed Pearson to save up some money, giving him a cushion to protect him in case of emergency.
As young people strike out on their own, he said, many start out with student loans and other types of debt, which makes it hard to build a cash cushion, he said.
“Your financial journey is a marathon, not a sprint,” said Pearson, who now has a 14-year-old son and an 11-year-old daughter. “It still helps to begin the journey with a head start.”
Even if a young person doesn’t have the option of living at home after high school like Pearson did, they can still look for ways to establish a financial cushion — whether that means cutting back on spending or saving more of their monthly income — to give them more financial flexibility in the future.
5. Regularly contribute to your 401(k)
Many dads emphasize the importance of contributing money to a retirement fund, whether it’s an IRA or an employer-sponsored 401(k) or Roth 401(k).
Ian Weinberg, founder and CEO of Family Wealth & Pension Management in Woodbury, N.Y., advised his 22-year-old son, who just started his first job, to contribute 10% of his salary to his company’s Roth 401(k).
“I believe the Roth is a no-brainer, especially if he’s in a lower tax bracket to begin with. [It’s a] powerful tool for long-term savings,” Weingberg said.
Weinberg also encouraged his son to make monthly contributions to other investments through mutual funds or fractional-share purchases, which let people invest in stocks based on a dollar amount rather than by purchasing whole shares of a company.
6. Prioritize happiness
Craig Hausz, the father of two teenage daughters, has one final piece of advice.
“Always spend money on what will make you happy, not what makes other people or friends happy,” said Hausz, who is CEO and managing partner at CMH Advisors in Dallas, Texas. People are less likely to remember what they did or didn’t spend money on if it was not meaningful to them, he said.
Chris Caltabiano, chief program officer at the Council for Economic Education, a nonprofit organization that provides financial education for students aged from kindergarten through high school, agrees. “Good financial management doesn’t mean always making the most pragmatic choice at the expense of creating memorable experiences,” Caltabiano said.
“Be sure to save enough to give yourself the opportunity to celebrate with your loved ones on Father’s Day and beyond,” Caltabiano added.
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