Future financial literacy is in the hands of parents
After 12 years of writing, I recently wrote my first article on frugality on whether it is trendy to be frugal. In that article, I made the comment that having kids has made me more frugal. At a recent gathering of friends, this article became a fun topic of discussion.
One of my friends, Betty, does not think her kids made her more frugal. In fact, she think it’s harder to be disciplined when it comes to buying things for her kids. When she goes to the store, her kids have a relentless case of the gimmies and quite often she gives in because it’s too hard and embarrassing to fight. She also admits she likes to spoil them from time to time so she has put herself in a tough spot.
Another one of my friends, Serge, has separated from his wife and he says it’s hard because she buys their kids anything they want and sometimes the kids use that against him. He says it’s really hard to be financially responsible and admits that he sometimes buys the kids gifts for no reason other than just to ‘compete’. He also knows this is wrong but justifies his actions as acts of love.
It’s important to teach your kids about money
There is real concern in Canada that there is a lack of financial literacy and education. In fact, the government set up a task force on financial literacy that provided 30 recommendations as a result of their consultation process with Canadians. It was clear that there were a number of opportunities to incorporate financial education into the school system and the workplace.
However, the report did not directly address another one of the important problems that marketers have made huge efforts to target sales efforts at children and their parents. As you can see in the examples, above, children are significant influences on how parents spend money.
Parents can play a big role is shaping future financial literacy.
As a father of four boys, I acknowledge that raising kids can be tough. One of the toughest parts of being a dad is trying to lead by example. That’s why I think being a dad has made me more frugal.
Here are three key things I do to help educate my kids on money and finances
Lead by example – Children are not just influenced by what you say. In fact, one might argue they are more influenced by what you do. If parents are not using self-discipline by setting a good example for their kids, how can they hold their kids to a higher standard than they hold themselves? Modelling behaviour takes a serious commitment. The fact is, savings rates are decreasing in Canada and personal debt levels are rising. It’s tough to teach our kids if we can’t be models of our own lessons.
An allowance program – An allowance is a great opportunity to talk to and teach kids about money. I’ve written about my journey of developing an allowance program. If you are interested, here are some of the links:
- Developing an allowance program
- Incorporate your money values into your allowance program
- Should allowance be tied to chores?
- Should you give your kids an allowance?
Talk to your kids about money – I’ve started to talk to my kids about money at a very young age. They all got piggy banks at the age of 2 and I taught them about spending, saving and sharing. Some think this is too young but I’d rather have tried than not try at all. Parents are a big influence on money management both as positive and negative role models. If you think about it, there is little formal opportunities for financial education. It’s not happening in the school system or the workplace so where do you think they might learn? So show them some of the financial tasks you do and make sure they understand why it’s important.
This is not an exhaustive list of ways parents can engage in their children’s financial future. What are you teaching your children about money? Are you leading by example? Do you have any suggestions for other parents to teach financial literacy?