How to teach your kids about money – Money Habitudes®
I know that Parents are often looking for opportunities to pass on lessons in life and point out morals to every story in an effort to inculcate good values and behavioural patterns for their children. We hope that a strong moral foundation will stand them in good stead as young adults.
The same applies to instilling the importance of financial discipline in children, irrespective of the financial background of the family. Teaching children about money is no easy task; the best you can do as parents, is try to lead by example.
I personally want to see more people getting a glimpse into money matters at a younger age so that they never end up in scary financial situations later on in life. I hope to make a positive impact by sharing my views with parents or future parents in our community so that they can give their kids a head start that we never really received.
Everyone has different relationships and experiences with money
I’ve been working in the financial advice industry for 10 years, and I’ve been in this very privileged position where I get a glimpse into the lives of others – particularly their relationship and experience with money.
I’ve worked with clients who are extremely wealthy and who have family money, those who are wealthy because they’ve worked extremely hard and those who’ve come into sudden money, like an inheritance.
On the other end of the scale, I’ve met those who have been wealthy at one stage in their lives, but due to curve balls that life has thrown at them such as a relationship breakdown, ill health or the sudden passing of a partner, have found themselves in a highly stressful money situation.
Then there are those who’ve managed to get themselves into a huge amount of debt and just can’t seem to find a way to get back on top of things. Too often, I’ve met people who’ve managed to get themselves into these scary financial situations because they’ve never really been taught the basics of managing their money. Which is why I feel that inculcating good money values in children will shape a healthy relationship and experience with money later on in life.
Children get their views and ideas about money primarily from their parents
Kids tend to learn about money from their family, friends, school, TV and social media. A lot of parents rely on the schools to cover the basics, but it would be foolhardy to rely on schools to teach your kids enough about the ‘life skill’ that is ‘money management’.
As parents, you have the highest level of influence, and you’re in the position to empower your children with the basic understanding and support that leads to a healthy relationship with money.
There are 5 key areas to focus on when we talk to kids about money
‘Money Habitudes®’ and how to have a healthy relationship with money
Spending V Saving
Understanding credit cards and personal debt
Investing in the future & understanding basic investment concepts
Importance of goal setting with money
Understanding the term ‘Money Habitudes’®
It’s a combination of words, definitely not something I made up, that was coined to express your ‘habit’ and your ‘attitude’. An attitude is your first thought or feeling about something and a habit is an automatic behaviour.
For instance, what is your first memory of money? As a child, did you feel that there was unlimited amounts of money or was there never enough? When you asked for something did you get it or did you go without? Was money something that was respected or feared? Did money bring happiness or anxiety?
Your early money memories can play a huge part in what your habits are. So, when you think about money what is your automatic behaviour? Is money something that you spend, you save or you invest? Do you pay much attention to your money or do you just ignore it? Is it something that keeps you awake at night or is it something that you keep under the mattress?
You’ll be surprised how answers to these questions will reveal most of your ‘Money Habitudes®’!
How my first money memory shaped my ‘attitude’ and ‘habit’
When I was first introduced to ‘Money Habitudes®’, I took the time to think about all these questions. I traced my first memory of money to the age of 5 or 6. I remember sitting about the fireplace looking into the kitchen where my mum was sitting at the dining table. Her head was in her hands, she had a notepad in which she kept our family budget and she was arguing with my father about the spontaneous and unnecessary purchase he’d made on speakers for the TV. That purchase my father made, didn’t leave her with enough money for the groceries that we needed for that week.
It may be a rather dark childhood memory to share, but it’s a powerful example of the impact a ‘habitude’ can have. It’s kind of instilled in me that there’s never enough money or if it’s not a necessary purchase, then it shouldn’t be made. As a result, my automatic behaviour towards money is that it should be saved and not spent unnecessarily. For me personally, money provides security and it should only be spent if it’s planned for.
How a ‘habitude’ could manifest differently in other people
Let’s look at the opposite end of the spectrum. If your earliest memory was going to Wonderland, buying fairy floss, going on every ride, winning prizes, then your attitudes and habits are going to be opposite to mine. Your attitude might be that money brings great experiences, happiness and enjoyment. As a result, your habit might be to spend everything you earn and have a good time. Money to you might bring a feeling of status, spontaneity and carefreeness!
How opposite ‘habitudes’ can manifest in couples
Talking about opposite ends of the spectrum, there are lots of relationships where one partner is at one end, and the other, is at the opposite end. For instance, one person in the relationship just wants to spend the money, go on holidays and have an awesome time, while the other person just wants to save it away because they’re worried about money. Alternately, if someone is taking far too much risk with the money, that can also cause relationship issues.
So, without actually knowing that it’s your habitude that’s playing a part in defining your attitude towards money, minor issues can escalate.
I think it is important for both partners to go through the process of working out how each feels about money, and as a couple work out how you can make compromises to ensure you are both happy in the relationship.
These are issues that need to be addressed and handled maturely by the couple because their attitude plays a big role in influencing children.
Gain some awareness yourself and pass that onto your kids
First ask yourself what your earliest memory of money is and try to answer the questions I mentioned earlier. At first you may draw a blank, which is completely normal. But, if you actually go back in time, it will prompt you to think about when you first realised what money was. You will recall how your parents managed their money and probably think about how it may have influenced your thinking.
This is an important exercise to highlight a particular feeling, bias or habit towards money that you have, and you won’t realise it till you’ve asked yourself these questions.
If you do have an extreme lean towards either the frugal or the spendthrift habitude, then you can use your awareness to change your own habits and set a more balanced example for your kids.
How to actually talk to your kids about money
Once you’ve gained awareness about your ‘Money Habitude®’, you will know what ‘habitude’ you want your children to imbibe. You must always monitor the tone of conversation when talking to or responding to children regarding money matters.
If you always talk about money in a negative light, that there’s never enough money, or we have too much debt or we can’t afford something, it could make children view money with anxiety. That does not mean ignoring these issues and pretending that the opposite is the case – just try to make the conversation less negative where possible.
For instance, if the kids are asking to buy a new toy, don’t shoot that down annoyingly. You can explain to them that they can have that toy, but that you need to be able to save that money first. So it’s not always about saying ‘no you can’t have it’, ‘we can’t afford it’, but ‘we will save for it’ and ‘if it works out, you can have that toy’.
Importance of joint responsibility over finances for a couple
Another important consideration within managing money & relationships is to have a joint responsibility over the finances. Usually in a couple, one person tends to be more involved in the finances. Kids tend to learn their money habits from the parent who spends more time at home as this is the parent who normally spends the most money in front of the kids. And typically, this parent tends to be the one who is least involved in the finances.
What’s important is that you should be able to demonstrate to your kids that managing money is a joint responsibility when you’re a couple. One of the other advantages of sharing the responsibility is that should something happen like a relationship breakdown or the sudden passing of one member, then the person who wasn’t really involved isn’t completely left in the dark about what was going on. Unfortunately, too often, we meet with clients where the opposite is the case. This is why awareness about finances and the importance of it being a shared responsibility is important for couples. As a result, kids will understand that it is a shared responsibility.
It’s clear that parents’ attitude towards money plays a role in their ability to make smart decisions. It can also have a significant impact on the way children view money and shape their relationship with it later on in life.
While talking to your kids, focus on the five key areas I mentioned earlier and if you’d like more input do get in touch with me firstname.lastname@example.org
You can also find out more about Money Habitudes®here