Wealth Column: How to talk to adult children about their money

When our children are born, we have hopes and dreams for their futures.

We want them to be successful, confident and happy. As they grow, we can help to show them the way, and while it can be hard to watch them leave the nest, there are still things we can do to guide them.

One great way to help your children be successful is teach them the value of saving and being smart with their money. As a nod to Financial Literacy Month this April, we've got some tips on how to help your kids set themselves up for success as they start their adult lives.

Save Early and Often

It's important to discuss saving for retirement with your children as soon as possible. It may seem difficult to convince a 20-something-year-old that now is the time to save for something that's still 40 plus years in the future, but showing them the numbers may help.

The power of compounding interest is an incredible thing. Don't believe us? Check it out for yourself. The U.S. Securities and Exchange Commission's website has a great compound interest calculator that shows just how impactful it can be for your finances. Here's an example. You start with investing with $1,000 and put away just $200 per month for 40 years. Over that time period you will have saved $97,000 of your income. But thanks to the power of compound interest, with a hypothetical 6 percent rate of return, you would actually have $381,714.44. That's a difference of $284,714.44 thanks to saving early and often.

Good vs. Bad Debt

For many of us, debt is simply a part of life. And that's okay. Yes, really. What's important to understand, and to explain to your children, is the difference between efficient and inefficient debt.

For example, if your son or daughter has racked up credit card debt, that is what we would call inefficient debt. That kind of debt has no chance of earning them a return and is simply a drain on resources. A home mortgage on the other hand is something we'd consider efficient debt. That's because the money you are spending on home mortgage interest can actually help you to pay less in taxes, thanks to the home mortgage interest deduction, and it's covering an investment that will hopefully earn a return.

One point of note here, is to discuss not taking on so much efficient debt that your child's monthly payments are out of reach. Being smart with money includes being reasonable with how much he or she can afford.

Budgeting For Beginners

Think back to when you got your first job. It's an exciting time. You have this newfound income and a whole career ahead of you, but it is also likely the first time you had to manage large amounts of money on your own.

If this is the case for your child as well, give them a helping hand by suggesting a budgeting mechanism.

This can be as simple as drawing it up with pen and paper, or using one of the many budgeting websites or apps available to help keep track of spending. Over time, these more structured budgets may not be necessary, but they can be a huge help as your child starts his or her journey into the working world.

It may seem like our kids don't need us as they grow up, but if approached respectfully, you may find that your children will be happy to accept your advice as they begin their new, adult lives.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.