Teaching kids some skills like how to drink from a cup or tie shoes comes naturally to parents. While others, like algebra, personal finance, and chemistry, most parents would rather leave to the experts at school. Unfortunately, a study from Harvard, Wellesley College and the Federal Reserve Bank of Chicago found that personal finance courses in school have no effect on savings or investment behavior indicating that most money habits are learned largely from parents.
Less than ideal money habits do not have to be passed from generation to generation. Parents can consider these tips to improve the financial education they are passively providing their children.
1. Authorizing In-App Purchases – You might think it is harmless to let your child buy new outfits for their avatar on their kid-friendly math app, but giving them free reign to spend without earning is a slippery slope. Instead of functioning as your child’s endless ATM assign chores for them to earn the money they want to spend. They will learn to value it more and start to recognize the concept of smart purchasing decisions versus frivolous spending.
2. Acting Like a Financial Hypocrite – Talking to your kids about money, about how saving a portion of a paycheck for the unexpected or retirement each month is important, even if all you can afford is fifty cents, is great. (Unless you are saying one thing and doing another) It can be hard for kids to learn that saving is important if they see their parents making endless purchases and never putting money away for the future.
3. Spending Without a Budget – Some parents always say yes when their kids want to go to a movie or buy a new toy. They let their kids change activities the day after they decide they don’t like basketball or art class anymore. Instead of learning that money is not in limitless supply, and needs must be prioritized over wants, kids never grow out of the “mine” mindset of toddlerhood. They learn to assume that if they want it, they can have it, with the swipe of a card.
4. Learn Something New – Just because you are no longer in school you do not have to stop learning about personal finance. Go online and search for free tools that banks and other financial institutions have created to help people learn about finances. Watch videos or read through these presentations as a family and then discuss what everyone learned about investing, saving, etc.
5. Don’t Quit – Parenting is hard and sometimes it’s easy to say “I quit” or “I can’t do this anymore”. Well when it comes to financial matters and your kids, you need to fight through. Their financial success might depend on it.