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When is the best time to talk finance with your kids?

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When I speak with established pharmacy owners about what worries them, health, work stress and retirement readiness all make the list. As I help prepare them for succession, another concern often emerges – wanting to ensure their children grow to be happy, productive and successful adults.

By Mike Jaczko, BSc. Phm, RPh, CIM®

Entitlement leading to affluenza

I often observe two common attitudes among children from well-off families – “affluenza” and entitlement. To prevent these attitudes from emerging, I urge parents to teach kids from an early age the concepts of consequences and accountability. Some children are often given too much too early, and as a result, wind up taking things for granted. Realistic rules must be set from a very early stage. In turn, there should be real consequences if they don’t obey those rules. For example, a child who receives an iPhone for their birthday and a week later loses it at school. Their natural response is likely to go to their parents and say they need another one. If the parents say yes, there are no consequences or accountability for their actions.

Family communication

Communication is a fleeting experience in today’s hectic and time-crunched world. With both parents and children busier than ever, kids can feel overwhelmed and not listened to. To prevent this, you should structure time for regular communication.

My clients know I am big believer in regular family meetings where every member has a voice and a chance to contribute items to the agenda. As a result, on decisions like vacations or sports activities, kids feel they have real input.

Giving back and learning to live within your means

Charitable giving can be a valuable tool to get kids engaged and learning about the importance of helping others. I recommend assigning each of your children responsibility for a charitable gift of $50 or $100. In turn, they can then research a charity, make a recommendation on where the money should go, and donate the funds.

Providing your children an allowance from an early age is another valuable tool which helps to develop their understanding and ability to manage finances. One idea for parents is to divide allowances into three parts: some to spend, some to be saved and some to be donated to charity. As your children get older, I support giving your teens a budget for things like clothing. Once that money is gone, it’s gone. A typical problem for kids in well-off families is separating needs and wants. They need to learn to defer gratification. Kids should value the concept of saving for something they want. Living within a budget will help them to separate needs and wants and set the stage for managing personal finances in the future.

Tough love for some adult children

I often witness pharmacy owner parents dealing with children in their 20s or early 30s who are unmotivated, drifting through life, and still living at home. I am a big believer in tough love if all else fails – essentially telling adult children they’re on their own and nudging them out of the nest. In the long run, it’s the right thing to do to help them build a successful future for themselves.

Being a parent is often tougher than being a pharmacy owner. But the effort you make now is well worth the gains in the future.

Mike Jaczko, a pharmacist by background, is a portfolio manager and partner of KJ Harrison, a Toronto-based private investment management firm serving individuals and families across Canada. For more information on this topic, email mjaczko@kjharrison.com.