In 2014 the Bank of Montreal found that Canadian parents would rather talk to their kids about sex than they would about money. There are several reasons for this. The first and the most common reason is that parents don’t feel confident in their own money management skill. Unfortunately, we were not brought up learning about money either at home or at school. Money is a touchy subject in many households. The attitude, ranges from it’s vulgar to discuss money to the ostrich effect, if we avoid talking about it, it will go away! How can we then expect adults to take charge and teach children about money?
Fortunately, this can be remedied. There are many books, courses, and workshop that teach personal finance. It is worth the investment of time and money in this pursuit, as it will serve both you and your children in the long run. There are several great authors on this topic; Gail Vaz Oxlade, David Chilton, Robert Kiyosaki, Dave Ramsey and Susy Orman. I would like to (humbly) add to the list the TKS Financial Caregiver’s Manual. The purpose of the Manual is to provide caregivers with enough information to either reinforce or build their confidence in managing their own finances so that they feel prepared enough to teach their children these skills. The manual also guides parents on how to impart these skills to their children.
Another reason that parents don’t want to talk about money is that they know they have bad habits. They know that they can’t practice what they preach and this prevents them from having the money talk with their children. A less obvious reason is that it makes life all too real. I remember when I was growing up I didn’t care nor did I want to hear about my parents’ finances. I didn’t want to think about the finiteness of it all. I preferred not knowing and I just wanted to believe that my parents had a bottomless pit of money.
It seems that making a child aware of the realities of money robs them of their childhood innocence. Children should not be “burdened” with this issue at such an early age. They should be playing and having fun. As a parent, I totally understand this perspective. Parents want to protect the innocence of their children. We do our best to allow them to be free to dream. The thing is, it is possible to ground them in practical logic and at the same time encourage infinite creativity.
I recently came across a review (I haven’t read the full book) of a book entitled The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money by Ron Lieber. The reviewer noted that the book recommends that parents have a formal discussion about the household finances. The author also recommends telling kids how much you earn and how it compares with your peers. I am not sure about some of these recommendations. I think it’s too much information for young children and even for teenagers. It all depends on the temperament of the child to handle such information. I think there may be some negative fallout in the future from telling your kids how much you earn and how it compares to your peers. Another suggestion from the book was that parents should institute “fun ratios” which requires the family to itemize every toy in their kids’ possession and calculate the hours of fun divided by the cost of the toy. This “fun ratio” will then be used as a yardstick to determine future toy purchases. I love finance and calculating ratios, but I think this task would make me pull my hair out.
Based on the review of this book, a few things stood out. The first is that parents don’t want to talk to their kids about money and now they are being asked to make it official, organized and do a lot of work/calculations. There maybe a few families who may find this method appealing. I think, however, the majority of families would not find this an enjoyable task. Even if they initially employed this method, I am not sure how long it they would continue doing it. Secondly, all these ratios and discussions about earnings, etc. are a topical solution. If a child has not been taught the correct behavioral traits to deal with money, you could talk until you’re blue in the face, it would make little difference in the end.
It is possible for children to learn money management while playing and having fun. I call it teaching in stealth. It doesn’t have to be painful to teach children about money. In fact, teaching children core money skills, is really teaching them life skills. The heart of the matter is that kids need to learn how to make effective choices. This implies that they learn core principles in a natural way. If we make a big fuss about finance then it will be how the child deals with money, as a chore and a pain. If we make it a natural and fun process, then the child will have a better relationship with money. With the proper training we can instil in children the behaviours that would lead them to make good choices, save and spend wisely. Making good choices, saving and spending wisely, are the holy trinity of finance. When a child understand and master these core skills, then you can implement tools, discussion and ratio and the like. Only then will the tools, etc. will have meaning and be of value.
In my own case I started early with my daughters. One of the first things I taught them was the difference between needs and wants. This lesson carries itself over not just with money matters, but also with food, drink, entertainment and even activities. We don’t live life in compartments, it’s all interrelated. The things we learn in one area naturally carry over to other areas of our lives. My goal is to train my girls in a logical manner and simultaneously encourage them to dream and create. Like most parents, I do the best we can for my kids. This is my way of preparing them for the world. Every day is the right time to talk to your kids about money. Every day presents an opportunity to caregivers to teach children important life/money lessons.