Financial literacy may be the most valuable legacy you can leave your children, according to Ted Rechtshaffen, a financial columnist. In a recent article, he emphasizes that having financially secure children and grandchildren depends less on inheritance size and more on the financial muscles they build through teaching and experience.
Rechtshaffen cites an old proverb: “Hard times create strong individuals; strong individuals create good times; good times create weak individuals; weak individuals create hard times.” He observes this cycle often when working with wealthier clients who want to help their adult children, especially given rising real estate costs and living expenses in Canada.
Three Core Questions About Helping Adult Children
Rechtshaffen identifies three key questions parents face when financially assisting adult children: Can I afford to help? How do I manage unequal needs among siblings? How can I ensure the money is used wisely?
On affordability, he recommends thorough financial planning to project future finances with and without gifting, allowing parents to see if they can comfortably give. For unequal needs, the general rule is to give equally to all children to avoid favoritism, though extenuating circumstances may justify exceptions.
Teaching Financial Responsibility Starts Early
The third question—ensuring wise spending—requires a lifetime of parenting. Rechtshaffen shares a personal example: his 24-year-old daughter, who runs her own business, negotiated a car purchase fiercely, unwilling to compromise. She said, “I worked hard for that money. Let them work hard for theirs.” He notes that if he had been paying, the outcome would likely have been more expensive.
He and his wife often tell their children, “We have some money … you are poor.” While no longer true for his daughter, the message is clear: young people must build their own wealth regardless of family resources.
Four Ways to Improve Financial Odds
Rechtshaffen outlines four strategies to foster financial responsibility:
- Teach the connection between work and money from a young age. This can include paying for specific chores, encouraging a lemonade stand, or shoveling snow for neighbors.
- Involve children in financial decisions. Let them see budgeting, saving, and negotiating in action.
- Encourage entrepreneurship. Starting small businesses builds confidence and money management skills.
- Model responsible behavior. Parents should demonstrate prudent spending and saving habits.
The article concludes that while not everyone has the same financial skills or desires, building a foundation of responsibility and resilience is key to long-term success.
