I have addressed this question many, many times…so here is an attempt to tell you what all you should know – it is a cut n paste of many of my articles from the past…and at the top is a gist of the presentation that Pattu made for his PhD students:

http://freefincal.com/an-evening-with-young-earners/

read on….

I deal with many kids in their 20’s and am normally shocked how little they know about personal finance! Here is a class 101 for parents on what their kids should know (I guess it is like sex education for the parents – they know it is important, but they are personally so confused, they do not know where to start!).

Your kids should know the following:

a. Generic:

1. The power of compounding: your kid learnt compounding in class 7 or earlier, build on that. There are enough stories on this blog itself about compounding ( http://www.subramoney.com/2010/10/innumeracy-not-understanding-mathematics/) is surely a decent place to start.

2. The cost of delaying investments is huge.

3. Start small, but make a start.

4. Generally about investing, saving, etc. – this has to be in the family lingo.

http://www.subramoney.com/2013/06/childrens-attitude-towards-money/

b. Specifically:

1. What is your family income, family budget and investments.

2. Can you afford to pay for his / her education, hobbies, and marriage expenses. Many parents do not discuss these things with the kids. Honestly it is not the financial planner who can do this job – it is YOU.

3. How much money you have set aside for YOUR own retirement – and what you plan to do if you find yourself short of money, maybe at your age of 85?

4. Nominations: If suppose you and your spouse were to be killed in the same accident what should your children do? Have you created a ‘what our children should know about our money’ folder? at least ‘what your spouse should know’ folder?

5. Why your standard of living can be very different from your sibling – financial choices and their consequences.

All this has to be done unemotionally – maybe you need help to do this – but it is nice to have a heart to heart financial talk with the other stake holders.

It is not easy for kids to know whether a $ 50,000 per year college is a legitimate demand or an impossible demand. They cannot ask / not ask on the basis of what their friends do!