Financial knowledge is not part of our DNA, it is something that we learn. Unlike mathematics and sports, personal finances are not taught in their entirety in school if they are taught at all. Therefore it is the job of parents to educate their children in terms of finance. However it is easy to make mistakes and this article outlines the five ways you might stunt your child’s financial growth.
There has been a lot of money invested into research to see why children fall into certain traps such as teen pregnancy, underage drinking etc and many of these early problems have been traced back to the lack of communication. Whilst a lack of financial education may not be as serious as drug addiction but it does have long term consequences that can be severe. Keeping quiet on the subject of money gives out a message that it is either not important or something to fear and never bring up. Neither will help with the financial realities that children will face as they grow up and by not discussing this information your child’s financial growth could be adversely affected.
If you are not willing to teach your child good financial habits the media and school system become the main sources of information by default.
Coming a close second to keeping silent about finances is the people whom only seem to talk about finances when things are good. The financial world and personal finances are not a movie though where the animals burst into joyous song; it is something that is full of potential problems. On the whole it is better to be honest about problems whether this is late bills, flat stocks etc and you can then get the help of the entire family in solving the problems. By seeing the problems as a solving exercise for the family it will lessen the stress on the person that is keeping the household budget together. Doing this will also teach your child to approach financial difficulties as you would any other problems and whilst Looking at financial matters as a problem-solving exercise for the family will also lessen the they can be challenging, there are always solutions. This is another way to ensure that you are helping your child’s financial growth.
The Money Tree
As the old saying goes “Money doesn’t grow on trees,” and whilst we often have this saying ready to spout when we are asked for money, but our actions often go against it. It is too easy to be inconsistent when handing cash to children, whether in the form of earned allowance or a simple gift.
Wanting to give your children money is natural, after all you want them to enjoy growing up and not have anything withheld, but easy money policies can damage families. Learning that money is earned and is given for extra chores are a great way to begin to teach your child to how money is traditionally made. Cash gifts are fine as long as they are explained, communication is key.
The best way to ensure that you are giving a consistent message is to have ground rules and any purchases have to be talked about before they are made, if they are over a certain monetary value.
Birds and Bees before Stocks and Bonds
At what age do you think your child is ready to start investing? The sooner, the better and whilst stocks and bonds may look daunting, the basic concepts can easily be explained. Children can distinguish brands from an early age such as Disney who make products ranging from movies, magazines, books, video games, toys, and apparel isn’t hard to grasp. It is important that you remember to try to cover all types of investments. While you may prefer bond investing, your child will not necessarily gravitate to that versus something like business ownership. There is no need to be an authority on every type of investment; it will not be long before your child will begin to seek out information of their own. Your job is to catch their interest and encourage your child’s financial growth.
Monkey See, Monkey Do
Although trying to teach positive financial lessons to your children is commendable, the message will be a waste of time if you don’t practice good financial habits. Possibly the best thing you can do to help your child’s financial growth is to help yourself by fixing your own financial weaknesses as this will put you in a better place to teach your children.
At the end of the day until there is a financial course taught as readily as mathematics is, you are the only teacher for your child when it comes to personal finance. It’s a big responsibility, but it is easier if you communicate with your child, lending good habits and reinforcing what you say.