There is a right way to discuss finance around the dinner table… and a wrong way

Once your children become adults, it is natural you start having different conversations with them.

Where previously you might have discussed their hobbies or favourite bands, now, when sitting at the dinner table, the conversation might cover their careers and finances.

This is not only natural – it is desirable. Sharing your decades of experience will improve your children’s financial literacy, which in turn, will help them become wealthier and more successful.

That is why the poverty rate among people with low financial literacy is over twice that of people with high financial literacy, according to the Household, Income and Labour Dynamics in Australia survey (a nationally representative study of Australian households).

How to overcome their fear and lack of knowledge about finance

There is a right way and a wrong way to have these dinner-table discussions.

The wrong way is to deluge your children with information or push your opinions onto them because then you run the risk of making them feel overwhelmed or resentful.

The right way is to start small and keep the money talk going.

Make a point of asking their opinion about money and financial markets. This will plant the thought in their mind about maximising their savings and investing that money.

One of the keys to being a successful investor is time in the market, as long-term compounding is tremendously powerful. So, the earlier your children start, the wealthier they will finish. According to this Finder survey, three out of four Australians have never invested in shares:

• 4% because they are afraid to
• 12% because they do not know how to
• 39% because they do not have the spare cash

In other words, fear and ignorance hold many people back. Even the people who say they do not have enough cash are probably being held back by a lack of knowledge, because unless you live below the poverty line, there are steps you can take to free up money and invest, even if it is just a little bit at a time.

The more your children talk about money and financial markets, the more likely they are to naturally talk themselves out of any fear and ignorance they might have.

Why you should highlight your money mistakes

Another shrewd way to discuss finance is to tell stories about your money experiences – especially the bad ones.

Stories work well because people are far more likely to engage with emotional stories than dry lists of facts (which is why the media give us news ‘stories’ rather than bullet-points of information). Negative first-person stories are even more effective, because they make the storyteller more human and relatable, which in turn makes the audience more willing to listen to the message.

So, tell your children about financial tricks you fell for or poor investments you made. That will teach them what not to do – and, indirectly, what they should be doing.

 If you would like to have a confidential discussion about your family wealth, speak to Affinity Private Advisors today by calling 1300 769 304, emailing enquiries@affinityprivate.com.au or filling in this online form.