John Lowe the Money Doctor and father of three children, in the first of a three-part series, gives invaluable advice on what you should be teaching your children, financially speaking.
Crosby Stills Nash & Young’s Teach Your Children – a favourite early 70s tune of mine – only dealt with the emotional issues but not the financial aspects of teaching children. Therefore, in presenting things you may like to teach your children about money, I am not so hypocritical as to pretend that I managed to impart all this wisdom to my own angels.
Frankly, I can’t see how any normal parent could manage to teach their children the whole list but managing even half the list, I am certain, would be an enormous help to your little darlings.
If your children learn good money habits while they are young, they will grow up to be happier. Can I prove this? Yes. Few with good money habits are likely to get into debt or find themselves in financial trouble - although the recent recession did hit so many of us, so very hard.
It is a lot to do with attitude
Think about how your parents’ approach to money influenced you. Now consider how your attitude will influence your own children. Everything you say or do in relation to money will have an effect:
- If you don’t discuss money in front of them, they won’t learn anything about it.
- Whatever emotions you display, such as fear, worry or indifference, will colour their own relationship with money.
- If you are mean with money or overly generous, if you never waste a penny, or if you spend like there’s no tomorrow ... your children will be watching and learning.
Given that they are unlikely to learn much about money from any other quarter, and given the way debt is spreading through society like some sort of super virus, it is obviously important that you educate your children about personal finance. You need to teach them the key principles, including how to:
- Save for a specific purpose
- Stick to a budget
- Choose competitive products
- Spend money wisely.
Obviously, you also need to teach them all about the risks associated with debt and to introduce them to the basic financial products they are likely to encounter - explaining the advantages and disadvantages of each.
Clearly, what you don’t want to do is worry your children about money. Still, I believe there is a lot to be said for showing them where your income comes from, and what you then do with it.
Preparing the ground
Here are some tips on how to teach your children about money:
- Be consistent. Your children will respond better if what you teach them is consistent. It won’t be so helpful if you say one thing one day and something else the next.
- Before you start, it would be a good idea to work out what your own values regarding money are. In particular, think through subjects such as responsibility, family values, and attitudes, decision-making, comparison shopping, setting goals and priorities, and managing money outside the home.
- Have a clear idea of what you think is important. If you want some suggestions, you may find it useful to have a brainstorming session with your partner.
- Guide and advise rather than direct and dictate (good tip this, nicked from an American website). Encourage and praise rather than criticise or rebuke (from the same website). Allow children to learn by mistakes and by successes (yep, you guessed it…).
- Explain to children what they can and can’t do ... and the consequences of breaking the rules you have set.
- Include children, as they get older, in discussions about money. Let them know that there are things you deny yourself because you can’t afford them. Children need to know that parents say ‘no’ to themselves, too.
J. Paul Getty summed it up when he said “Money isn't everything but it sure keeps you in touch with your children” – was he right! (How many times have you got a phonecall to lend a €10 here and a €20 there!)
Every time money is earned, moved, spent, donated, borrowed or saved presents an opportunity for you to teach your children something new. Better, by far, for them to learn by observation.
Next week in Part 2 will include the first three teaching basics of finance – earning, saving and spending.
John Lowe is a Personal Insolvency Practitioner & managing director of Providence Finance Services Ltd trading as Money Doctor, regulated by the Central Bank and based in Stillorgan Co Dublin. He is the author of Money Doctor 2017 (Gill Books).