The million-dollar question: How do we teach our kids about money?
Families that we work with often ask how best to educate their children about money and finance. Although all three of my children are now financial professionals, I felt like a failure with this task when they were young. And I did try!
My failure was the result of several factors.
First, every child has a unique personality that governs their interests at various ages. If they are just not interested in learning about money when you try, you are rolling a boulder uphill.
Second, there are various ways to discuss financial issues, and not all these methods might work on any given child (or at any given time).
We tried allowances. We thought that perhaps the young one would allocate funds responsibly with a regular allowance “paycheck.” Wrong in general. We tried paying for chores — with no great outcome, either. We involved the children in our charitable giving choices, with little interest at the time.
I hear from some of the families we work with that they might have a child who is a “natural saver” (or the opposite). On rare occasions, we hear of a youngster who seems genuinely interested in the stock market and other investing topics. I think these families are lucky in this regard, and that my experience is more common.
So, what works to instill some responsible attitudes towards money in children? I am still not sure but have a few ideas.
A powerful factor might be seeing their parents’ behavior with money. Parents who exhibit spending less than they could, and communicating this openly, might teach their children to want to do the same as adults.
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Similarly, experiencing openly charitable parents might be a good example. It probably is a good idea to regularly discuss some of the financial decisions that parents make with their children. It seems prudent to also consider what your general behavior with money might teach the young ones. It is hard to be sure, but parents living from paycheck to paycheck might teach some bad habits or instead a resolve to “be different.”
Having a child work (especially as a teenager) would seemingly teach them to understand the relationship between labor and money. It seems powerful to understand that buying a desired object might require working for several hours (and paying taxes!). Conversely, giving children and teenagers objects that they want without any corresponding work sets a different example.
Don’t assume your children will learn about money (credit, credit cards, mortgages, auto loans and more) in school. Our children certainly did not. On the other hand, if your child’s school offers a course in basic personal finance, I’d encourage them to take it.
We noticed a marked understanding about money and work when our children joined the adult workforce. At times, they appeared shocked by the expense of rent, food, and clothing and how little their paychecks worked to cover these expenses. In time, a general maturation, a work life, and perhaps some of the examples we set at home ended up with excellent results.
Steven Podnos is a fee-only financial planner in Central Florida. He can be reached at Steven@wealthcarellc.com and at www.WealthCareLLC.com.
This article originally appeared on Florida Today: Financial lessons at an early age pay off later in life
