Kids learn about a lot of subjects in school, but personal money management isn’t on the agenda. By the time they finish high school, they won’t have been taught basic financial survival skills such as budgeting, paying bills on time, saving for retirement or even balancing a check book.
They won’t learn any of that on TV either. Despite the fact that kids spend an average of up to 32 hours per week watching TV - almost as much time as the average adult spends at work—they will view very little programming aimed at teaching them how to manage their finances in adult life.
It’s equally likely that they won’t gain any financial insight from friends, video games, online social media sites, or nearly anything else they spend time on. In fact, virtually nothing kids spend time on, either learning or being entertained, will prepare them for the financial realities they’ll face as adults.
If your children will learn anything about money management, they will have to learn it from YOU! And the job of teaching them will be even more formidable than you might think. If you’re serious about teaching your children about personal finance, you’ll not only have to teach them what they need to know, but you’ll also have to help them undo the damage that’s been done by various influences.
Here are just some of the obstacles and influences working against kids learning about good money management:
TV and money. The negative financial impact of TV is twofold. First, commercials encouraging us to buy. The affect on kids is even more pronounced since commercials selling to kids are tailored specifically for kids. The second is what we might call the “TV Lifestyle”, and this may be even more damaging. People on TV go where they want, do what they want and have what they want, but the how—as in how they afford it—is conspicuously absent. The subliminal message is that money doesn’t matter, and it’s powerful.
Easy credit. In an age of low down payment mortgages, car leases and credit cards, people buy all sorts of goods and services and no money changes hands. By money of course, I mean cash—the stuff you can see, feel and even smell. As adults, we can appreciate that real money has to be paid in order to make those credit arrangements happen. But kids are visual, and the absence of the exchange of physical currency can reinforce the TV notion that money doesn’t matter.
Student loans. The major career preparation for many kids will be college, and though student loans may be a necessary part of the financing, it can also reinforce the notion that the future can be paid for with borrowed money. For many kids, the first serious experience with money will be when they graduate from college and have to begin repayment. In the meantime, it will be more of a life where money doesn’t matter.
Living in the “now”. The whole concept of the future—and especially the need to prepare for it—seems to require some sort of life history. Adults have that history, children don’t. Children live in the present; but without a concept of the future, there’s no need to prepare for it. Though this condition is a natural part of youth, it gains tremendous credibility with all of the other influences above.
Saving doesn’t sizzle. Living in the now and being visual, buying stuff is a natural attraction. New things are always exciting, but savings…let’s just say that isn’t something you can show off to your friends. In the kid world, that drops it way down on the concern meter.
The natural optimism of children. One of the qualities we most admire about youth is its incredible optimism about the future. But from a financial standpoint, too much optimism undermines that future. We want to feed their hope for the future, while teaching them to prepare for its uncertainties.
Our natural desire to protect children from harsh realities. There’s a tendency of parents and even of society at large to shield children from unpleasantness in life, but taken too far this can also prevent the development of survival strategies to deal with it. We might try to protect our children from our money struggles but in the process we lose an opportunity to teach them about money.
Mom and Dad to the rescue
There’s an onslaught of influences in modern culture that work to teach kids to be free spending adults with little concern for their financial futures. As parents, we’re hardly helpless in the face of it, but we do need a plan.
- Cut TV viewing to a minimum.
- Transact as much or your business as possible in cash, at least when your children are around, that way they’ll see that money is going out to pay for what’s needed or wanted.
- Give them an allowance in the smallest denominations, and set up a physical budgeting system that includes allocations for spending, savings and giving; putting money into little boxes or envelopes is a powerful visualization.
- Take every opportunity to help your kids make spending decisions when they shop—even though they learn about math, the connection with money may need some help.
- Set up a savings account and go over it with your child each month so they can see the increase that results from their adding money each month.
- If there’s something major that they want to buy, add an incentive by offering to match what ever they save; that will help create an image of saving money as a positive activity.
- As soon as you think they’re old enough, set your children up with a checking account and teach them how to use it.
- Involve your kids in the preparation for college early in high school. This can include discussions of the costs, encouraging them to save to pay for part of it, and even to plan to work to help pay for it.
- As they get older, share more details of the household finances with your kids. If you’re going through some rough times, share as much with as you think they can handle.
There’s no substitute for active training when it comes to kids and money. And as their parents, we’ll probably be their last and only hope of ever knowing. Use this time well!
What are you doing to teach your kids about how to successfully manage money? If your kids are grown, what did you do when they were young? What worked, what didn’t?
(photo credit: GoodNCrazy)
This post is from FiscalGeek staff writer: Kevin Mercadante. I’m very excited to have him contributing to the site. You can find out more about him at his own blog OutOfYourRut.com.