There are two types of parents in the world: regulators and educators. Some parents will even refuse to say the word “money” around their kids. This parent would fall into the category of regulators aim to protect their children from the realities of money, the economy, and finances in general. They want to protect their children from what they see as “adult” matters. Educators, on the other hand, aim to teach their children about the economy and about saving money in order to equip them with the skills they need to survive in the adult world.
You as a parent typically don’t consciously choose one method over the other. Maybe your own parents never discussed money in front of you, and you saw it natural to do the exact same. On the other hand, if your parents were adamant about teaching you basic financial skills such as saving or earning from early on, you’ll probably want to do the same for your kids.
This conformity to one style of teaching over the other can be dangerous if you don’t consciously choose what you want to teach to your child.
Things are changing, and kids are being exposed especially to electronic money earlier and earlier. In today’s world with one click shopping and constant exposure to new products and services, kids are more aware about the existence of money and its potential to get them what they want. We all know that child that has swiped yes for some extra Candy Crush Gold, charging those extra 99 cents on a parent’s credit card each time they play.
That’s one element that’s changing the status quo. And it’s important to be cognizant of these changes and re-evaluate how you’re exposing your kids about money. There’s several reasons as to why it’s more important than ever to teach your child about money- let’s dive right in.
#1: Teaches self-control and patience
Kids are notoriously impatient and have a difficult concept with having to wait for things in their life. If you’ve ever faced a crying kid in the toy store who just had to have the newest toy, and have it now, you’ll know exactly what I’m talking about. It’s difficult for children to have the patience and stamina to be able to wait for things that they want.
Yet, self control and patience are two of the most critical skills that children need to develop. According to a study from the National Academy of the Science of the United States, self control behavior in the first decade of life “predicts income, savings behavior, financial security, occupational prestige, physical and mental health, substance use, and (lack of) criminal convictions, among other outcomes, in adulthood.” It’s so important that it’s on par with other characteristics such as general intelligence. Self control largely develops in a person during their formative years, which includes late childhood and early adolescence. That’s why this time in particular is an excellent opportunity for parents to create these traits that will be so incredibly useful down the road.
Saving money teaches kids how to budget what they want and when they want it. By making specific savings goal and visualizing the progress on a regular basis, kids are taught that they need to wait before splurging on something. If they have a set saving goal, they will learn to manage their immediate wants to get a reward in the future. This is at the heart of what it means to have self control. Using money to teach this important skill can be incredibly effective.
#2: Initiate goal-setting skills
Goal setting is another one of those skills that will serve a person well for the rest of their lifetime. The ability to set goals and achieve them is an important characteristic of the most successful people in our world. The process of setting a goal, and breaking it down into manageable parts seems simple, but for many people today, is something they are completely uncomfortable with. Yet this is a skill that can be applied in every area of your life- school, a career, relationships.
A 2015 study by the Government Accountability Office found that the average American between age 55–64 has about $104,000 saved for retirement. That is 1/10 of what is recommended by experts. Aon Hewitt suggests retirement savings of 11x your yearly income by age 67. That sounds like a tough goal but doable if you set your goal and start early.
Monetary goals are an excellent, tangible way to teach your child about goal setting. Money is something that is easily countable and trackable, and easy-to-use software makes progress even easier to visualize. Kids can learn how to think about what they would like, and then break down how they’re going to get what they want. For example, say a kid prioritizes choosing a new toy as their goal. Then, as a parent, you can sit down with them and walk them through the steps of what it will take to get that toy. How much does it cost? What chores or job will your child do to earn some extra money to save up quicker? What’s a realistic timeline?
This process with something concrete such as a toy will set them up to develop this type of thinking for less tangible things they want in the future. When they’re older and setting goals about their careers or what they want out of their relationships, they’ll be able to effectively do so. Today, we can see the implications of missing goal settings when we look at statistics for retirement savings.
#3: Set your child up for a lifetime of responsibility and success
Being able to handle money effectively is an incredibly important skill as an adult. So many people come into college or start their first job without any idea as to how to save, why saving money is even important, or how they should be setting themselves up for future success.
Over 40% of Americans are currently living paycheck to paycheck, which is a staggering number. In a study conducted to determine why people aren’t able to save money, over 24% of respondents stated that it was credit card debt that prevented them from saving.
Debt overall is increasing rapidly, with many young people taking on debt without knowing exactly what it entails. These are problems that education early on in life can help prevent.
Teaching young people about how money works and why it’s important to start saving now is of utmost importance to make sure your children have the potential to live a stress-free life in regards to money.
Money, whether we like it or not, is an important part of life. Shielding kids from the reality of it doesn’t mean it doesn’t exist, as much as you might wish for that to be true. It’s important to give children a controlled exposure to money as they begin to mature, to make sure you can gradually teach them about money and how it works. And teaching about saving money can help with the development of particularly important skills that will be influential for your child’s success.
It isn’t always easy to have these types of conversations, but they’re necessary. So take some time to sit down and re-evaluate how you’re talking about money with your child.
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