Q & A with Steve Lear: Summer is a great time to talk to your kids about money

Affiance Financial |

Why talk to your kids during the summer?

Summer is a great time because your kids aren’t preoccupied with school. You can plan a discussion around an outing or a picnic. Everyone is more relaxed, and your kids aren’t likely to have as many excuses about being too busy.

What ages do you have in mind?

High school juniors and seniors, college-aged kids, and recent graduates.

What are the key messages?

We have a huge need to teach young people to be responsible about finances. We also need to talk to them about the purpose of money. This doesn’t mean only what it can buy; it also means understanding the concept of opportunity cost.

What’s an opportunity cost?

Money is not just about dollars, it’s also about time and emotions. Opportunity cost isn’t something we really talk about. Every choice represents an option, so it’s important to consider all the possible consequences of your options so that you can deliberately eliminate the ones that aren’t right.

For example, buying a house is not just about spending money on a mortgage. It means needing to pay for furnishings and ongoing maintenance, which are additional financial costs. Moreover, by committing money to a mortgage, you might not have any left for travel. Or it might mean that you spend all your weekends working on the house and yard instead of going on family picnics and bike rides. Those are all opportunity costs.

Risk is also tied up in opportunity cost. We typically think of risk as representing danger, loss, or being wrong. This is a negative perception, because risk is also about missed opportunity. In the 21st century, we have come to idealize safety and security.

What would you advise young people starting out in the world?

  • Pay yourself first
  • Consider opportunity cost when evaluating risk
  • Have appreciation of others
  • Create value for others
  • You are not entitled to anything
  • Finally, take care of yourself first. This may involve being less idealistic and more pragmatic. You need to make sure you can support yourself on what you’ll be earning, and start accumulating a net worth which eventually will create an income stream for when you no longer can or want to work. Otherwise, you’ll end up financially dependent on someone else.

What can parents specifically ask their kids?

  • “In three years, what has to occur for you to feel good about your finances?”
  • “What types of activities give you energy?”
  • If your child is in college, ask him or her to create a budget for the next year  by August 1.
  • Then, discuss the budget and give them a fixed lump sum, telling them that’s all they will get.
  • Think about having the grandparents talk to the kids instead. There may be things grandparents can ask or say that parents can’t.

Affiance Financial can also help your family conduct a workshop about finances. We can help ask what might be difficult questions, in an atmosphere of trust. For more information, please contact your financial planner.


Registered representatives offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA, SIPC. Cetera Advisor Networks LLC and Affiance Financial are not affiliated. Advisory services also offered through Affiance Financial.