Imagine if there were a way to increase your chances of living your life in a way that makes you feel more fulfilled, more aligned with who you are and what your values are, and more at ease about your future. Imagine you had the ability to teach this way of life to your children so they grow up with these same principles that they can pass on to their children and their children's children. Sounds great, right?
For me, talking about money at home goes beyond the desire to teach financial concepts to my children. There is a disconnect in our society between money and values and this stems from the way we are taught about money. I want my children to connect with money. I want to leave them an inheritance that is worth more than money in the bank.
Research shows that adults are failing with money because of the money habits they learned as children. We historically have not been taught basic money management skills at a young age and therefore become parents who feel ill-equipped to teach these concepts to our children and thus the cycle continues.
Why are we not learning about money, a topic that spans so many other areas of our lives? First, the federal government cannot dictate education standards in the U.S because education is controlled at the state level. Schools are not required to teach young people about personal finance in most states. There are a few states that have incorporated money topics into their main curriculum but most have not. Organizations have recognized this and many have developed a range of programs aimed at improving the financial knowledge and capability of young people:
Teaching financial education in K-12 schools;
Providing “bank-at-school” programs;
Providing matching incentives in specialized savings accounts;
Providing non-school-based learning opportunities; and
Using online learning tools and resources.
Although most agree on the importance of teaching financial education, there is little agreement about what makes up an effective financial education program. There is currently nothing in place to evaluate and extensively research these programs to see which ones are effective at promoting behavioral change and positive outcomes later in life. This makes it challenging for policy makers to choose a plan to implement.
Why is this a problem for our society?
Many young people are ill-equipped to make major financial decisions as they get older while at the same time financial services are becoming more complex. Young adults are forced to learn by trial and error in the real world which had led us to being a country crippled by debt.
I agree with personal finance guru Dave Ramsey who claims personal finance is 80% behavior and only 20% knowledge. Kids need to be experiencing money lessons first hand long before they are launched into the work force and have to learn by making financial mistakes.
All of this has played into kids attitude toward money too. In a recent survey by T. Rowe Price, more kids believe they'll make a million bucks by becoming famous than by investing in stocks and bonds. I don't know about you, but this does not make me feel too optimistic about the future.
What can we do about it?
Programs continue to be researched and evaluated. As of 2014, 46 states have agreed to follow the Common Core Standards for education which establish minimum knowledge guidelines by grade so that students moving from one state to another get a consistent education. The Treasury Department has developed a website called moneyasyoulearn.org as a resource for teachers. The site offers ready made personal finance lessons that teachers can easily fit into their existing math and English lessons. The website will be expanding to include personal finance lessons for social studies, history, and science classes too.
In the meantime, there are ways in which we parents can go about teaching good money behaviors. It's just like teaching good manners but with money.
#1 - Include kids in an ongoing conversation about your family's financial decisions. Things like whether you should continue putting money into your older car or if its time to purchase a new one. You all want to go to Disneyworld but how are you going to save for that? A great website to help you with the conversations can be found here. Like talking about drugs, you're hopefully not going to have one long conversation about money when your child is 12 and expect a decent outcome from that. You want to be discussing these topics over and over again. We all learn better by experience than we do just hearing about something so show your children how to save money. Take them to the bank. Help them to understand your deposits funding your debit card and how this differs from a credit card.
#2 - Give them tasks at home they can do to earn money. You can use simple envelopes to help them to divide up money into 3 different categories: Spend, Save, and Give depending on the values of your family. There are also board games and online games that enforce money skills.
#3 - Request for your children to open bills. Have them circle the due date and amount that is due. This will allow you to open a dialogue about your household expenses and what you are required to pay each month for services. It couldn't be a bad thing for a child to know exactly what you pay for data service on your cell phones each month, right?
#4 - Comparison shop. Ask your kids which one is the most expensive and which is the least expensive. Talk about why you think one is more expensive than the other?
This is an amazing time to be a parent who wants to be more intentional about showing children how to better connect with money and use it to better themselves and the world. The purpose is not to change our children or turn everyone into savers. The ongoing dialog and activities allows children to learn money concepts and what their natural tendencies are. We are meeting them where they are and hoping they make mistakes now rather than when the stakes are high.
By teaching our children the value of money, why it is so important to buy items you can afford and not go into debt, how to work and earn money, and how to help others by giving, we are setting them up for a life that is about more than just having money in the bank. It's not about teaching them how to end up with a millions dollars, maybe that will happen maybe it won't, but there is a much better chance of that happening if they are not strapped with credit card debt. This is an opportunity to leave your children and grandchildren an inheritance of character and a deeper sense of fulfillment.
(photo by Lon Martin on flickr)