- Starting too late
- Focusing on the wrong things
- Being too serious
Starting Too Late
“When should I start teaching my child about money?” is the #1 question we get as financial coaches. The answer is simple. You are already teaching your child through your behaviors, habits, words and interactions with money every single day. Their awareness, perception and how to manage money starts the first time they see you choose to buy something (or not buy something).
A recent study out of Brown University concluded that routines and habits in children, including household chores and responsibilities, are unlikely to vary after the age of nine. For most children, these will have taken firm root by the third grade! According to the research, which surveyed nearly 50,000 American families, household chores remained consistent from the age of nine through the end of high school. (Pressman et al., 2014)
If you think it will get easier to wait until they are older to have conversations about money, the opposite is true. If you can train them up right from the start, it will be much easier to provide guidance as they get older. We encourage you to start a Kids & Money program as early as 18-months old by starting simple and slowly, then scale their education over the months and years to come. This not only gets your child into the good habits early on, but also it will also do the same for you - the parent. Money education isn’t an event, it’s a process. Unfortunately, most parents start the process too late if they do anything at all. But, no matter how old your child is, it’s better to start now than later and better to start later than never!
Focusing on the Wrong Things
“So, what do I teach my child about money? What financial topic is my 18-month old going to grasp?” This may sound odd, but the focus shouldn’t be on finances starting off. Instead, your goal should be to create a solid foundation of building good habits and behaviors, then, overtime you can inject financial education. When your child exhibits a behavior you desire, such as brushing his teeth or putting away his toys, praise him with positive and encouraging words, hugs and smiles. I guarantee that behavior will be repeated in hopes the child continues to receive that same reaction from you. As he grows older, you can add in a sticker or other small reward that will continue to motivate him and the behavior just becomes a natural habit.
Your goal should be to instill patience in your child at an early age, teaching them why delayed gratification is a critical component to their future success in both money and life. We live in an instant gratification world where people are willing to go into debt so they can “have it now.” Kids can play video games on their phones while binge watching Netflix on their TVs. They can have many things at the click of a button, which is why instilling patience and self-control is an increasingly important component to future financial success. Kids who learn the value of patience early on will resist clicking the button to get the “next best thing” they see advertised on social media.
As previously mentioned, the Brown University study highlights that habits are strongly formed by age nine. If your child is older than nine, don’t throw up your arms and say “It’s too late!” but instead know you’ll need to be more diligent with the program to make up for missed time. Starting to instill positive behaviors and redirecting bad ones at an early age is going to make your life as a parent much easier.
Not only will your child naturally be better with money, their interactions with you will be more positive. Things like “The Terrible 2’s” and the horror stories of having a conversation with a teenager can be eliminated or at least will go smoother if you are proactive and intentional with your conversations.
Being Too Serious
Many parents can get way too intense about teaching their kids about money and have blocked out three hours on a Saturday to sit down and instruct their child on the importance of money and all kinds of technical things associated with it. They ask me, “What do I teach them about first - investing, saving, debt avoidance, or budgeting?” I encourage them to avoid having intense money discussions and instead simply involve their kids in current money & life situations they are going through. Learning about money is a process, not an event. It is best learned over time and scaled as kids grow older. Many parents will lose their kids almost immediately because the money discussions are in the form of a lecture or hypothetical teaching session. To change this, I encourage you to take your life events and use them as a realistic teaching moment. If it’s time to update your auto and homeowners insurance, take your child to the meeting with you. They will learn so much just by watching and listening to the healthy (and normal) interaction between you and the agent when discussing a financial product or service. It’s likely your child won’t be excited to attend this meeting with you, but on the car ride there explain where you are going and why - and when you leave the meeting simply ask if they have any questions about what they heard. The goal is to educate your child on money topics naturally while also ensuring he won’t fear or avoid interactions with insurance, investment or other financial partners. As your child grows older, you can scale the conversations and equip them to engage in the process. For example, my son and daughter have been vacationing with us for years and we’ve involved them in the spending plan, lodging selection, opportunity cost of doing excursions, car rental vs. taking Uber, etc. This Fall I gave the kids a budget and tasked them with narrowing down the location, flights and lodging options for our family trip. They also researched the activities in the area and rank ordered them, weighing the opportunity cost of taking a bunch of expensive excursions versus staying in a really cool hotel. Instead of having heavy conversations about money, they learned basic life skills of budgeting and how to make opportunity cost decisions in a fun and engaging way – planning a vacation!
We’ve created Money Mavericks to help you avoid these common mistakes and help you lead:
- Positive Behavior Change
- Delayed Gratification
- Money Education
Not only does the Money Mavericks PC/Mac game help to ensure your teen’s financial success, but also included is budget tracking software, a student workbook, and a parent guide that shares guiding principles to enhance your success when talking to kids about money.