If you don’t teach your children about money, someone else in their life will. Whether they learn these lessons from friends, relatives or their favorite television shows, the lessons they learn will likely not be the ones you would have taught them.
Unfortunately, with as much effort as you may have put into teaching your children about money, the Wall Street Journal reports that many grow into adults without an accurate understanding of how to create and follow a budget, pay their bills, develop a savings or invest their money.
For some children the lessons will come easier than others. My oldest daughter grew up to be the saver that I was when I was younger and my middle boy is even more frugal than I ever was. However, my daughter’s twin brother has an entirely different viewpoint about money and struggles to save anything. They received the same lessons, in the same environment and have slightly different ideas about how to spend and save.
The lessons are important, but so is taking into account the difference in your child’s individual personality, desire and ability to generalize information. One startling fact about learning finance in the classroom is that the information doesn’t often translate into results in the real world. The question you might be asking is – if most high school students have mandatory financial education, why do so many people struggle with foundational concepts?
Studies have demonstrated the subject that has a significant impact on your child’s ability to understand budgets, saving and investments – math. Almost all decisions about budgeting and saving involve understanding the implications of numbers. Without using strong math skills, your children may rely on emotion to make to their decisions – and emotions are not reliable.
This means it’s important your children receive a strong math education at school, AND that you spend time talking with them at home about money. It’s easy to do this in a relaxed setting around the dinner table each night. Don’t make it into a “lesson,” but rather talk about the financial decisions you made that day.
Spending money on lunch out every day at work, checking account fees, investing, saving, grocery shopping, window shopping and refurbishing your home are all excellent examples of talking about money without creating a lesson.
Children learn more about who you are and what you believe by watching what you DO with your life and not listening to the lectures you give. This same concept holds true about how you value cleanliness, health and wellness, sleep, nutrition and your family. What you DO is more powerful than what you SAY.
Talking about subjects also removes the stigma that’s often attached by society to specific subjects. Topics like money, death and sex often become taboo, which then increases the risk your child will develop ideas in private that don’t revolve around truth.
The Truth is . . .
The truth is money, sex and death are a part of all our lives – and the more we talk about them, the less uncomfortable it becomes to learn more and understand how they integrate into our own life.
Children of wealthy parents may assume their parents don’t talk about money because they are poor, when in fact parents didn’t want their children to brag. However, making your financial situation a common conversation encourages your children to accept it as common and not something to brag about or be ashamed of – as long as you feel it isn’t.
Money has symbolic value to you and your family – and unless you identify what it symbolizes and address it head on, then your children are destined to continue to carry those emotions forward. When you speak frankly, associations with money don’t pile up and children are less likely to act selfishly in the short term.
Researchers have found children who focus on money, act more selfishly toward their friends. Avoiding discussions about money increases the psychological weight children associate with the topic. And, by sharing your fears about being broke, you may also increase your child’s fear.
I made that mistake when my youngest boy was growing up. I thought I was being matter of fact about my lack of funds, but he interpreted the information as fearful, even though the bills got paid, we stayed in the house and there was food in the cabinets.
We didn’t go out to lunch, there were no extras, but we were stable. For my youngest boy, it wasn’t enough. He watched his father remarry, move his step children into a brand new home and didn’t know how to handle the emotions that went with feeling his father had financially abandoned us.
Those emotions were channeled into fear about losing everything – even though we never were. He became extremely frugal, saving every dime and spending nothing. He and his father bonded over basketball and sports, but he continues to struggle with an imbalanced financial blueprint as he goes through college.
No matter how rational, matter-of-fact or open you are – HOW your children interpret the information is also based on their own personality traits.
Summer financial camps are a good start if you think your child would enjoy the camp experience, and financial classes are good adjuncts – but neither of these options takes the place of mom talking to her children.
This is because the effects of these classes, camps and one time lectures wear off over time. You might be able to correlate this to your doctor recommending specific lifestyle changes. At first, you’re motivated and interested but it isn’t long before you go back to old habits. Your children are the same.
Encourage your children to save their money. Young children may use a clear glass jar so they can watch their savings grow. Piggy banks are traditional, but don’t offer young children any visual feedback about how much they’ve put away. You and your child can decorate their savings jar, making it more personal and a lot more fun.
Children as young as 12 can learn about banking, savings and checking accounts by starting an account. This is a good way to teach them about earning interest – and how the more money you have in the account, the more interest it earns.
Think about giving your children a commission and not an allowance. This means the money they earn is based on the work they do – just like when they grow up and get a job or become an adult. Keeping their room clean, taking out the garbage, mowing the lawn, cleaning bathrooms, vacuum, dusting and dishes are all fair game.
Before your children leave home, be sure you talk about the dangers of credit and credit cards. This is easily a conversation you can incorporate into dinner time conversations or when you’re out shopping.
This means it’s better to wait to purchase something you want until you can truly afford it. Otherwise, the interest paid on the money will mean the cost of the item is many times more than it was in the store.
Just after my divorce, I had to use credit cards to stay afloat. It has taken years to pay off the debt – most of which was spent on food that was long ago eaten and gone. That was a lesson I shared with the children. While I didn’t have a choice at the time, it was something they’ll remember and hopefully never fall into that trap.
Teaching your children about money, saving, budgeting and investing starts when they are young and – like many parenting functions – doesn’t end until you have died. You might be surprised at the number of times and ways children come back for advice, with questions and needing your support as they grow.