Personal Finances - 2017

Parents, are you Getting Your Children Ready for the Finance World They Will Face?

By Mo Vidwans

A friend of mine tells me this story: when his son was about 7 or 8 years old, he came home one day from school and asked his wife: are we rich? (Of course, the insinuating question that never got asked was: are we poor?). His wife responded wisely that we are not rich or poor but we are comfortable and you need not worry about that.

On hindsight that was a nice segue for him to teach about value of money and how they should be handling it etc. Perhaps, an opportunity lost.

Just like a lot of people in their twenties or thirties today, we were then so busy making a living, maintaining a household and keeping everyone comfortable and happy that we didn't really have much time for contemplating these long term issues.

From what I have seen in my meetings with clients and friends and many others, it almost seems like we do not take enough time and make serious efforts to get our children involved in learning the value of money and teaching them that “money does not grow on trees and that it has to be earned by doing hard honest work" (yes, old cliché but still true).

When our kids raise the subject of money, my guess would be that most of us would go into a panic mode. Suddenly we lie, procrastinate, find excuses or even tell them not to worry about it. In short, we just lost the first chance to teach out kids the financial facts of life: whether it is budgeting, or saving or something else. Anyone who has watched a 3-year-old navigate an iPad knows instantly that our kids interact with the world differently than we did.

When was the last time your child went to the bank with you? They may not go to the bank with you necessarily because actually we don't go to the bank that often any longer (maybe occasionally) but I am using that as an anecdote to make a point of teaching about money.

It is undeniable that for young children, parents are the number one source of influence about financial matters (and of course about many other things, too). A study out of University of Cambridge suggests that by age seven many of the habits that will help kids manage their money are already set.

So why don't we, the parents, take the bull by the horn and make our kids smart about money matters too (there are plenty of spelling bee champs and science fair winners)? Every set of parents has its own unique characteristics between them and then with their children too.

All parents have to find, create, invent their own ways to put the message of financial planning somehow across somehow to their children.

Here are some ideas we can use for setting the right examples to our children about money. I am sure you can think of more under your circumstances.

Researchers at the University of Wisconsin-Madison report that many children at the age of three can grasp the concept of value and exchange, albeit in a very rudimentary way (I will let you play with my robot if I get to play with you favorite cars or dolls).

Toddlers are generally eager and able to understand a lot. Even if they may not be able to show much, be assured that they are absorbing and it shows up in most unusual ways later.

Work your message to your toddler's level. Most of us lose jobs sometimes, but kids need not hear the whole sobbing story; “I am going to find a new job, in the meanwhile we may have to eat out less" will do. However, with a child in High School you may be able to discuss how you may not be able to put as much savings towards the college expense.

I believe that it is always better to put out the realistic picture; children understand. My 15-year-old son came with me one time to the car dealership to buy a car. We went back and forth with the price but couldn't agree on it and I decided to walk out without buying a car. He was listening to everything but was surprised that we didn't buy it at the time; but he understood.

Generally if we get into a lecture mode, children tune out. Anecdotes work the best and they could be about a person they know. How a friend saved bit at a time to buy the car she wanted two years later, or how Aunt Margie worked a second job for five years to create enough funds for her daughter to go to college works better than just a boring lecture.

We all get tempted to boast a little about our wealth or in the heat of the parenting moment do/buy things for children that are not right. Straight talk is always a good example to set and if there are real reasons behind your decisions, it is actually helpful to share them with your child.

It is best to keep the money fights between spouses behind closed doors.

Enough said about that; you know what I am talking about.

With money, as with most other aspects of parenting, it is important to introduce expectations gradually rather than make abrupt changes in your behavior. Children need to be taught and create this understanding that there is a price for every thing and sooner or later they will have to pay for it.

We all have bad money habits; some we admit, some we don't want to. But still it is easy to say to children “do as I say and not what I do." It is best to avoid that. If you are talking about the hazards of credit card debt then perhaps, don't flaunt three or four credit cards while shopping.

There is nothing like exemplary behavior by keeping your financial life in good order to convey a powerful and consistent message to children.

Children are like sponges; they absorb and retain everything they see and hear. Matters of money and finances are no different.