'Parenting & finance', 'pocket money', 'treats', 'can I have', all things which crop up frequently once you have children. Many of us think that children only hear and see what we want them to, however, how many times have you listened or watched them playing, and thought 'oh my - that sounds just like me' or even more shuddering sometimes 'wow, they sound just like my parents'. A very good reason for both, is that we may have learned these lessons decades ago from our role models (Mum and Dad), and so the cycle goes on.
I just bet you have said, or will say in the next month 'don't put your hat or coat on yet, you won't feel the benefit when you go outside'. Yep, a few wry smiles there I suspect!
So here are four lessons to give your children a better footing in the world of finance...
Lesson 1 is to realise that we are role models for our children. In his book The Seven Stages of Money Maturity, my great friend and mentor George Kinder outlines the influence of childhood on our relationship to money. We tend to either model our parents, or rebel. This is why two siblings (and I am one of these) may well have completely polar opposite approaches to their finances. One may squirrel and save, the other, may well look for experiences over balances. Maybe that is why I had a Paddington Bear money box many years ago when we opened an account, yet my sister opted for a £5 deposit! (psssst - I still have the money box somewhere - I bet her £5 has gone by now).
Lesson 2 is much harder - the art of saying NO! It's the school holidays, or you have been away on business, isn't it just great to spend time (and money) with the children. By never saying 'NO', a sense of entitlement can be established, leading to unhealthy money habits later in life. So how do we combat this reluctance to appear mean? Maybe by packing a picnic (children love that), bringing an understanding of value and cost of food. There are many fun experiences for free which we can find - woods + river + mud = a memorable day out.
Lesson 3 looks at responsibility - a weekly allowance, building on the understanding of above. There are many great books and strategies around this. A good approach may be to segment money - 20% for short term saving, 20% for long term saving, 50% for spending now, and 10% for donating to charity, giving to buskers or the homeless. With modern technology, we now have pre-paid debit cards, which can build healthy habits, and avoid a continual reliance on the bank of mum and dad every week.
Lesson 4 is all around inclusion. This supports the understanding of greater costs. If you work with a Financial Planner, they will, I am sure, include discussions with your children as part of the ongoing financial coaching relationship - we certainly do at Serenity Financial Planning. By including children (especially when it has a direct impact on them) in a financial discussion, the outcome will appear more just to them - hopefully. Take the holiday of a lifetime for a minute. By including children in the discussion of cost, and how you are going to pay for it, allowing them to come up with some ideas and talk through them will open their eyes, give them ownership, and make it all the more wonderful when the plan comes to fruition.
So, involve your children in financial discussions, teach them good disciplines, be aware you are their role models, and never be afraid to say no - easing that pain for you by offering an alternative.
parents are "the most prominent example that kids of have of how money is managed." And, he added, most parents don't realize how much influence they have in that area.