EP130: How Do You Talk To Your Kids About Money?

Interview with Timothy Smith / a.k.a. The Financial Dad

HOSTED BY PAUL SULLIVAN

Why don't parents talk more about personal finance with their children? You talk to them about all the ways to keep them safe - dating, drugs, drinking, doing the right thing in tough situations. All super important, and so, too, is understanding financial choices - and the consequences they can have. Tim Smith, the Financial Dad, says too many parents don't understand personal finance themselves. He's here to offer actionable advice. 

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Transcript

00;00;00;07 - 00;00;23;01
Timothy Smith
Something that's important for a good financial advisor, like a good teacher. You know, and I go back to my father with this. Yeah. And he taught philosophy. So I was a little different. But, you know, a little conceptual for me, but, is is to make it simple is to take something that's complicated and try to make it simple for people.

00;00;23;04 - 00;00;39;18
Timothy Smith
I think good teachers do that. I think good financial advisors educate their clients and try to put them in a position to make better decisions for themselves.

00;00;39;20 - 00;01;02;14
Paul Sullivan
Welcome to the Company of Dad podcast. After 120 plus episodes, we're doing something different this season. I'm still your host, Paul Sullivan, and we're still focused on lead dads, working moms, and how small changes at home or work can have a big impact on their lives. What's new is each episode now promises to deliver actionable advice on some area of concern at home or at work.

00;01;02;16 - 00;01;26;19
Paul Sullivan
Short. Direct. Again. Actionable. Five questions. Five answers. This week our guest is Tim Smith. Also known as the Financial Dad. We're going to focus his podcast on tips he gives parents to help them educate their children on financial decisions they're going to have to make in life. His day job is as the founder and chief executive of Aurora Private Wealth, based in Sarasota, Florida.

00;01;26;22 - 00;01;44;18
Paul Sullivan
But we're here to talk about his passion for financial literacy and to establish his bona fides. He's a married father of three children, all adults, two daughters and a son launched off into the world. So, Tim, welcome to the company. Thank you Paul.

00;01;44;20 - 00;01;46;28
Timothy Smith
Thanks, Paul, very much. Nice to be here.

00;01;47;00 - 00;01;54;19
Paul Sullivan
Let's start with the obvious thing. You know what is the financial dad? And why do you start it with with your kids?

00;01;54;21 - 00;02;13;03
Timothy Smith
And your dad is a literacy program for younger people. I have a son who, when he was graduating college, asked if I could do a seminar on personal finance for him and his friends, who were all graduating together and going into corporate jobs. And I said yes. And they were like, gee, you know, they don't teach this in college.

00;02;13;03 - 00;02;38;13
Timothy Smith
I wish somebody had done this for us before. And, that launched that became my children all saying to me, you should teach young people about personal finance. You'd be. Yeah, they thought I'd be good at it. I kind of thanks. And, so with their help, with the help in particular with my two daughters, we launched something called the Financial Dad, which is, videos.

00;02;38;13 - 00;03;06;25
Timothy Smith
And, we're about to launch a podcast that helps people with the financial topics that would be, you know, that you would expect them to be interested in at their ages. So, you know, we we focus on the college, primarily the college age to young adulthood. Maybe up to 30, 35, that kind of thing. And we're we're just trying to help them understand, the world of personal finance better.

00;03;06;28 - 00;03;28;00
Timothy Smith
And I think it works really well because my daughters ask me actual questions. You know, they are, financially illiterate. Forgive me. I love you to both of you, but they have no finance background at all. One is an actress. One is involved in marketing and public relations and that kind of thing. Never really studied personal finance in any way.

00;03;28;03 - 00;03;50;13
Timothy Smith
So they have the natural questions that young people would ask. And I just I love answering them. I love educated and my my father was a college professor for almost 60 years. So I think I got the teacher gene, you know, that sort of thing. You know, I love to explain things to people, and I just enjoy it when their eyes light up and they get it, you know, that kind of thing.

00;03;50;13 - 00;03;54;28
Timothy Smith
So, you know, I, I truly, truly enjoy doing this.

00;03;55;01 - 00;04;15;02
Paul Sullivan
All right, let's get our question, too. I mean, you just said you evolve it. You establish your your credentials here. You've run this wealth management firm for decades now. Your dad was a college professor. You've got, you know, kids who gamely participate in this, but you kind of have a leg up, over mostly dads. I mean, this is what you do day in and day out.

00;04;15;02 - 00;04;31;02
Paul Sullivan
You help adults make better financial decisions. So, you know, what advice do you give to parents, who may not have that that background to help their kids learn basic financial literacy?

00;04;31;04 - 00;04;51;04
Timothy Smith
Well, I think, you know, the parents fall into two categories people who have an interest in personal finance and people who don't. For those people who have some kind of an interest in personal finance, you know, I can spend time with them and then they can work sort of with their children, if you will. If they don't have an interest or an aptitude for personal finance.

00;04;51;06 - 00;05;22;07
Timothy Smith
You know, I'm, I'm always happy to talk to their kids if they would like some help. But my advice to them is typically more along the lines of, hey, you know, if you have a financial advisor, ask that advisor to speak to your kids. You know that that person, believe me, that person, there's a huge thing in financial services where financial advisors want to hold on to not only their clients, but the kids of their clients, for a variety of competitive reasons.

00;05;22;07 - 00;05;44;20
Timothy Smith
And, you know, try not to lose the business. So they will usually be very happy to talk to the children of their clients and give them, you know, free financial advice, basically. You know, they're not going to generally speaking, they're not going to charge them or, you know, say, well, you know, you don't have any money with me, so I'm not going to help you.

00;05;44;22 - 00;06;09;12
Timothy Smith
Most financial advisors, I think, will be very, very helpful. Now, if you don't have a financial advisor, you kind of have, you know, a couple of choices. One is to find a financial advisor who would speak to your kids. Right. That's a simple one. The second, I guess, would be to send them to the financial dad, you know, and let them, learn from what?

00;06;09;14 - 00;06;44;09
Timothy Smith
The content that we have put up, online and, you know, enjoy, how we are helping them. But in the, in the non self-serving, side of the answer, I think that, helping them find resources, whether it is financial advisors or even their own accountant, if they have somebody who prepares tax returns, a lot of accountants have pretty broad general knowledge of financial matters and can be really helpful with general questions.

00;06;44;11 - 00;07;20;18
Timothy Smith
They usually, probably won't want to or shouldn't get into individualized advice about something like, how should I invest my money? Right. Because that's, you know, I wouldn't tell them how to do a tax return. And, you know, generally it's my job to help people invest their money. But, you know, so anybody who is in their orbit in their circle of professionals, friends, etc. could come in and help them with their own children if they really just don't have the knowledge, again, the aptitude to do it themselves.

00;07;20;18 - 00;07;30;02
Timothy Smith
So I think that that would be probably the best way to go short of googling, you know, financial help for young people or financial literacy or what have you.

00;07;30;09 - 00;07;53;12
Paul Sullivan
Yeah. I mean, that's it's I love it. It's great. You know, you question three as I'm listening to the answers to question to 1 or 2. Question three, you know, we would be horrible parents if we did not talk to our children about about drinking, about drugs, about sex. I mean, those are things that no parent is not going to have that conversation, however difficult it is with a chill.

00;07;53;13 - 00;08;14;23
Paul Sullivan
On the flip side, if we as parents, get sick, we get cancer, heart disease, something like that. We would sort of at the appropriate time, bring our children in so they know what's going on with their mom and dad. But when it comes to money, plenty of parents never have that talk with their kids around how they should manage money.

00;08;14;23 - 00;08;45;13
Paul Sullivan
And the flip side of it to to do that, you know, illness analogy, they never tell their kids how much money they have, whether they have $1,000, $1 million, $100 million. How do you help parents realize how important it is, or this financial literacy conversation to at least originate with their parent, even if other people like yourself fill in the details with with their expertise.

00;08;45;15 - 00;09;12;19
Timothy Smith
But I can tell you that, along the way, as you know, I'm a certified financial planner, so I tend to be holistic in my work with a client. And along the way, you tend to develop a pretty good relationship with that client, with, you know, a couple typically, and along the way, they will often bring up the topic of their children and their children's financial situations.

00;09;12;22 - 00;09;46;01
Timothy Smith
And that opens the door for the possibility of discussing, you know, how are your children with money? Have you talked about them? With them? About money? About your money? Their money? In most cases, the kids are asking their parents questions about finances. And so the door is usually somewhat open for the conversation. You know, I mean, I've, I've had clients whose kids had addictions or had very serious problems of various kinds.

00;09;46;01 - 00;10;11;15
Timothy Smith
And, you know, they're they're the parents primary concern is not, what money we have that we're leaving to you. Their primary concern is how do we keep this kid financially solvent and get them through, rehab or, you know, some sort of a problem like that? And parents obviously take to heart every chain of their children.

00;10;11;17 - 00;10;34;18
Timothy Smith
You know, the parent feels right. So you if you empathize with people at all, you can only, you feel it with them, of course. But I think that, in the development of that relationship, you typically are going to, have a conversation about the children in general in particular estate planning when it comes to that.

00;10;34;18 - 00;10;53;14
Paul Sullivan
Yeah. But that, that part that's more sophisticated stuff to them. I'm thinking like, you know, you said, you know, I've got three daughters. You send your, your high school age daughters or sons off to a party. And we've all been parties. We know what we know what a party is like. It's going to be slightly different. You would never send them off to that party and not say, you know, please don't drink.

00;10;53;16 - 00;11;11;03
Paul Sullivan
Or if you do drink, please don't drive. You would have some sort of talk with them. And instead, if I'm hearing you correctly, it's like your clients are coming to you saying, well, yeah, we should talk to them, about money. We would not like the course of, like, being a parent. We often have conversations. It could be awkward, but.

00;11;11;03 - 00;11;31;03
Paul Sullivan
Well, ultimately either protect our children or help them develop into adults. Talking about finances is crucial to them. What do you think is the impediment that parents face to get them to have that conversation, to go to you first? I wouldn't go to you. You know, if you were my doctor, I wouldn't say, I don't know, you know, should I should I talk to my kids about drinking, drugs and sex?

00;11;31;03 - 00;11;44;00
Paul Sullivan
Your doctor would look at me like, what are you doing? Like, well, yeah, of course. What are you, an idiot? Like, yeah, I got to go do this. So what? Why do you think? Not just you, but for natives. Parents are afraid to have that conversation directly with they. Do they not really know it well enough themselves? Are they?

00;11;44;02 - 00;11;44;22
Paul Sullivan
They leery?

00;11;44;22 - 00;12;00;26
Timothy Smith
What? Yes, of course that that's a big part of it. I think that a lot of, laypeople, if I could use that term, folks without financial background or training or experience in personal finance, it gives them anxiety.

00;12;00;29 - 00;12;01;18
Paul Sullivan
Right?

00;12;01;20 - 00;12;35;26
Timothy Smith
You know, in their lives and so they're going to be more reactive in dealing with their own children about if the kid asks a question, they'll do their best to ask the question or steer them. But a lot of people just aren't comfortable with these topics in general. They're not knowledgeable of these topics in general. And so, it's it's listen, I think most parents know a lot more about, you know, sex and drugs and, you know, those things than they know about personal finance.

00;12;35;29 - 00;13;06;13
Timothy Smith
I mean, literally, I it's, we live those other things, or we largely experience those other things when we're teenagers or young adults. But personal finance is something where most people are making their way as they go themselves, you know, throughout their lives. Okay. So it's there, isn't there simply isn't the, comfort level, knowledge level, that you might have with other topics that you would now sit down and say, you know, okay, let me explain to you.

00;13;06;13 - 00;13;27;27
Timothy Smith
You're now 22 or you're now 19 in college or whatever it is I want to explain some things to you about how something work. I think I think, you know, the one other thing. Just. I'll make this point quickly. The same way that manufacturing has just in time delivery. Yeah. When a kid wants or needs to know something is just the time to tell them.

00;13;27;27 - 00;13;29;02
Paul Sullivan
Just in time parenting.

00;13;29;04 - 00;13;44;04
Timothy Smith
Because they'll. Yeah. Because they'll remember what they needed to know as opposed to, okay, you're 22. Let me tell you 30 things and see if you remember the four years from now when, when something first hits you that you needed to know that for, you know what I mean? So.

00;13;44;05 - 00;13;55;17
Paul Sullivan
So are you telling me, Tim, that you didn't, like, sit, sit in your comfy chair with your daughter and say, you know, girls, when I was 17, that's when I fell in love with compound interest. And you tell me that was the conversation you have with them.

00;13;55;20 - 00;14;09;18
Timothy Smith
Now for for me, it was mutual funds, but that's a totally separate issue. Yeah. I, I've told my wife, you know, my first love will always be the stock market. So she has to understand, you know, but yeah, that's, that's a good that's a good line, Paul. That's about it.

00;14;09;22 - 00;14;31;00
Paul Sullivan
All right. This is good. Question for, you know, when my daughters were were younger, a Barbie doll in my town cost $10. And so it was really easy for me to do what I call Barbie doll math. You ten doll. You know, they learn math in ten frames and all this, and you could say, like, you know, how much is that car worth?

00;14;31;00 - 00;14;54;18
Paul Sullivan
Well, that would be, you know, for 4000 Barbie dolls is like, oh, my goodness, 4000 Barbie dolls. How much is somebody's house worth? And you could equate it in, in Barbie dolls. For I have three daughters. It was easy. And they could they could feel the, the sort of enormity of the cost of, of certain things because all they really wanted was at that $10 basic, you know, Barbie doll.

00;14;54;18 - 00;15;12;21
Paul Sullivan
And I tell you that story because I want to know, like, how do you advise, you know, the dad working moms parent, how do you advise them to use everyday experiences to to draw those analogies and teach financial lessons to their, their children?

00;15;12;24 - 00;15;42;19
Timothy Smith
Well, I get it sort of comes back to their, their parenting style. There are parents who are, you know, more hands off. And so there's not much to teach them, you know what I mean? They their personal style doesn't lend itself to, the sort of example that, you know, that you gave there. So part of it is know your client and know where you can make a contribution or nod or encourage them or not.

00;15;42;22 - 00;16;07;01
Timothy Smith
Where those where you feel you can encourage them. I think, it's just a matter of, of using simple examples myself that they might be able to turn around and use with, with their children. You know, I think something that's important for a good financial advisor, like a good teacher, you know, and I go back to my father with this.

00;16;07;01 - 00;16;43;14
Timothy Smith
Yeah. And he taught philosophy, so I it's a little different. But, you know, a little conceptual for me, but, is is to make it simple is to take something that's complicated and try to make it simple for people. And, so I think good teachers do that. I think good financial advisors educate their clients and try to put them in a position to make better decisions for themselves, so that that's my style with a parent who is a client, it would be, look, take this concept, try to make it simple.

00;16;43;14 - 00;17;00;26
Timothy Smith
I'll try to make it simple for you. And now you can make that simple for your child and use similar language or what have you. Yeah. To make it simpler for your child, you know, I think, I think that's the way that financial advisors can do it is certainly by that I do it. But I think that's the way that financial advisors can do it.

00;17;00;26 - 00;17;12;28
Timothy Smith
It's to make it simple for the parents, give them examples that are simple for them. And from there that and put it in language they think their child will understand better soon.

00;17;12;28 - 00;17;31;13
Paul Sullivan
Great. Tomorrow. Question five not to go negative in the last one, but you know, what are some of the common, you know, finance mistakes that you've seen. Parents can make an unintentional mistakes. But you know, what are some of the common words one you see in parents making and how can lead that, you know, really aim to to avoid those mistakes?

00;17;31;18 - 00;17;57;28
Timothy Smith
Yeah, I can tell you that the, I would say the most common thing that I see is that, in we all parents are examples for their children, right? We are the first example that they have of how to behave, how to live our lives, how to relate to other people. You know, the interaction between, spouses is their first, taste of relationships.

00;17;57;28 - 00;18;31;06
Timothy Smith
And, you know, what's what's the appropriate, behavior where, you know, yelling and screaming or talking it out. Right? You know, so I think that the biggest issue is parents who don't walk the talk, who make financial mistakes themselves. And, you know, their children experience this. I think that's kind of where it comes from, because financial mistakes tend to build anxiety.

00;18;31;09 - 00;18;41;08
Timothy Smith
Okay. So as an example, maybe the number one financial mistake, I have seen people who made, you know, $800,000 a year spending $1 million, right.

00;18;41;08 - 00;18;43;13
Paul Sullivan
Math doesn't work. That doesn't pencil out.

00;18;43;13 - 00;19;09;11
Timothy Smith
Credit cards, second home loans. You know, I mean, everything you can imagine to finance a lifestyle that they simply can't afford, someone that's not most people. Most people are hard working people who are just struggling to afford their lives and and aren't intentionally spending more than they should be. But some are. So that is a bad example to give to kids.

00;19;09;14 - 00;19;42;19
Timothy Smith
Some people are, you know, investment wise, they throw money into the stock market with no strategy, no knowledge, no, philosophy of what it is an appropriate way to invest. And then they complain when they get bad results and the kids see that, you know what I mean? And then there's their, there can be relationship problems with improper money management, the budgeting issues and the, the fights over money that you have.

00;19;42;22 - 00;20;11;29
Timothy Smith
So really what I'm trying to say is the, the errors of the parents have an impact on the kids, in, in both the informational aspect and the emotional aspects surrounding money, surrounding monetary decisions. And, you know, kids listen to their parent and they hear their parents talking and they hear, you know, oh, this got screwed up or that got screwed up or, you know, we we, we didn't get Wills done.

00;20;12;01 - 00;20;45;07
Timothy Smith
You know, and Sally just died and didn't have a will. Yeah. You know, so, I think I'm not giving you terribly good specifics, but I'm giving you more generalities that if parents aren't, getting professional advice, if they're not knowledgeable themselves. If money is distracting from a good life, a good home life for the kids and things like that, I think that's a big mistake for parents to make.

00;20;45;10 - 00;21;12;23
Timothy Smith
And I think that, a lot of parents could be much better at, you know, informing their children, but also, not making these kinds of financial mistakes, as I say, like budgeting issues, you know, not buying insurance. Don't. Do we have disability insurance? No, we don't have disability insurance. Do we have life insurance? No, I don't have any life insurance.

00;21;12;25 - 00;21;30;00
Timothy Smith
You know, taxes. I of, you know, we just throw numbers together at the end of the year, and there are, you know, there are pension plans. We could be taking advantage of for one K plans, things like that. But, you know, I missed five years of contributions to a retirement plan because I just was based.

00;21;30;02 - 00;22;11;20
Timothy Smith
Yeah. You know, kids pick up on this stuff, and, they may not pick up on the what, but they pick up on how they feel from their parents behaviors about it, you know? So, that that for me, is my sense of where parents can fail their kids financially, you know, by their mistakes. They're setting up their kids for anxiety over money or, you know, a lack of knowledge over money that can lead to those very same mistakes going forward and, living a life and anxiety about money.

00;22;11;20 - 00;22;15;12
Timothy Smith
It's not a pleasant life, you know what I mean? For a lot of people.

00;22;15;14 - 00;22;39;11
Paul Sullivan
Yeah. Tim Smith, the financial dad, thank you so much for being my guest today on the company Dads podcast. As promised, five questions, five answers. Thank you. Thank you. But as I sometimes do, you know, I've enjoyed this. I want to ask one bonus question. This is the book. Okay, six questions here. You know, you may have, you know, clients who have small business owners, big business owners, you know, entrepreneurial people.

00;22;39;13 - 00;23;04;21
Paul Sullivan
And there is a real bent in society like, oh, I want to be entrepreneurial. But being an entrepreneur is very difficult and it's not for everyone. How do you help? Parents, you know, understand that, you know, perhaps their kids may not be entrepreneurs, but, you know, through the right degree of financial education, financial literacy, you can teach them to be entrepreneurial, if not entrepreneurs.

00;23;04;23 - 00;23;38;01
Timothy Smith
Yeah. You know, that's a amazing question. I have I have kind of a philosophy that might violate your question in a sense, entrepreneurial ism to me. And I've been on my own for 30 years. And business, is a mindset almost more than anything else. It's a you you have a visionary nature. You see something and you think it can be better and you're motivated to try to change it.

00;23;38;03 - 00;24;07;10
Timothy Smith
You like working with people, you like organizing, you like creating. Those are attributes and skills that I don't know that parents could say, you know, you should try to be this kind of a person and it would be good for you. Okay. I think we're parents can really help kids is in, knowing what's an entrepreneurial attribute or mindset.

00;24;07;12 - 00;24;27;04
Timothy Smith
And if a kid doesn't have a whole set, try to steer them away. You know, if their mindset is, I want to go in in the morning at 9:00, I want to go home at five, and I want to go to the, you know, or I just want to be with my family. I don't want to have to worry about nights and weekends or, you know, I don't want to think about work when I'm not there.

00;24;27;07 - 00;24;50;03
Timothy Smith
Entrepreneurs are on 24 seven. It's just the nature of, you know, yeah, having so much in your head that you're working on. And, so, you know, if a child expresses those kinds of leanings to a parent and then says, yeah, but I want to create $1 billion company, I think it would be good for the parent to say, you know, not not sorry.

00;24;50;09 - 00;25;15;10
Timothy Smith
I'm not so sure that that would be the best direction for you. On the other hand, if a kid is, you know, in a 9 to 5 kind of job, feels, you know, strangled, is able to articulate a vision of something that they think they could be doing. And creating and seems to have the drive, the organizational skills.

00;25;15;17 - 00;25;42;10
Timothy Smith
A little bit of financial skill is helpful. Yeah. I took a year of accounting, and God knows it's been one of the best things I, I took in college, you know, as a, as an entrepreneur, you know, so if they have those attributes and they're unhappy in what they're doing, the ability for parents to support that child in making a transition, I think, would be really wonderful.

00;25;42;13 - 00;25;59;22
Timothy Smith
And, I know for me, you know, my parents were wonderful when I went to them one day and said, hey, I've been working at this company for ten years. I've had it. And I feel that I feel like I'm just stifling and I need to get out. And I, you know, it's going to be a bit of a transition.

00;25;59;22 - 00;26;08;26
Timothy Smith
Just need to know you. Can you back me if I need help, you know. And they were all for it. And, you know, I've never looked back since that day.

00;26;08;26 - 00;26;16;29
Paul Sullivan
That's great. Tim and I wish I could have been a fly on the wall in that room with your philosophy professor. Dad, as he was said, you know.

00;26;17;01 - 00;26;18;12
Timothy Smith
Well, Socrates would have said.

00;26;18;12 - 00;26;26;06
Paul Sullivan
Yeah, yeah, well, you know, Marcus Aurelius, Tim Smith, the finance, the dad. Thank you again for being my guest on the company.

00;26;26;10 - 00;26;29;06
Timothy Smith
Thank you for the pleasure. Thank you.

00;26;29;08 - 00;26;54;17
Paul Sullivan
Thank you for listening to the Company of Dads podcast. I also want to thank the people who make this podcast and everything else that we do at the Company of Dads. Possible. Helder Mira, who is our audio producer Lindsay Decker, handles all of our social media. Terry Brennan, who's helping us with the newsletter and audience acquisition, Emily Servin, who is our web maestro, and of course, Evan Roosevelt, who is working side by side with me.

00;26;54;17 - 00;27;12;10
Paul Sullivan
And many of the things that we do here at The Company of Dads. It's a great team. And we're we're just trying to bring you the best in fatherhood. Remember, the one stop shop for everything is our newsletter, the dad. Sign up at the Company of dads.com backslash. The dad. Thank you again for listening.