Wisdom, vision, wealth: How parents can instill enduring financial habits

American history is filled with entrepreneurs who built fortunes by dint of hard work, sacrifice and vision. But as many great families have discovered, passing on that fortune from generation to generation without also passing on wisdom and sound financial habits is a recipe for short-lived prosperity.

The answer is education. Yet today, only 20 states require a course in personal finance to graduate high school. That means that, for the present at least, teaching the next generation to properly value money from a young age falls to parents and to the financial planners entrusted with the family's long-term financial health. 

As an advisor and the mother of two young boys, I've thought deeply about how to instill positive habits that promote financial literacy from an early age. How do we create opportunities for our children to engage with money in a way that's not just beneficial to themselves, but for others, too? How can we help them develop a mindset of giving and creating rather than just consuming? And of course, how can we help them secure and grow the money they inherit and earn over their lives so that one day they can pass it down to their heirs, building a legacy with purpose?

Here are a few strategies to consider in pursuit of that goal.

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Instill saving and earning habits early on

It's hard for children to wrap their minds around money if they can't actually see and touch a dollar bill. Even though most banking is done online these days, bring young kids into a brick-and-mortar bank to open a high-yield savings account. ​​My 3-year-old loves to deposit his dollar (and get his lollipop). 

As children get older, involve them in the investing process. Teach them what compound interest is and let them experience the trade-off of risk and reward — a lesson best learned when the stakes are lower. 

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In addition to a regular allowance, encourage children to earn money by taking on additional tasks around the house or neighborhood. This will help them understand the relationship between effort and reward, build good work habits and experience being a value-creator within their family or community. 

Encourage intentional spending

Help children think critically about their purchases. When one son's birthday is coming up, for example, we've embraced a tradition of taking the other to Dollar Tree and letting him pick out gifts for his brother. It's an activity that fosters thoughtfulness and ownership.

Deciding what to spend money on, and what not to, will prepare them to navigate bigger decisions later, such as managing debt or living within their means. 

Include kids in the family's financial journey

Involve children in financial decisions in an age-appropriate way. At the grocery store, let them weigh in on what to purchase. Is the name brand ice cream worth the price — even if it means forgoing toppings because it busts the family budget? 

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As they get older, include them in researching and choosing which charities to support. Many organizations allow families to directly sponsor individuals, families or communities in need. Personalizing the experience helps instill the lifelong joy of giving and demonstrates the impact of collective action.

Start the generational wealth conversation

At the appropriate time, include the next generation in meetings with financial advisors. This will help them understand the "why" behind the family wealth and equip them to be responsible stewards going forward. 

Wealth passed down without a vision is bound to be treated by the next generation as simple currency rather than as a tool to effect positive change. As advisors and as parents, we can help ensure that the financial and intangible benefits of wealth endure for generations to come.