by Judy M McCutcheon
Let us not wait until the financial horse has bolted before we look to close the barn door. Just like the issue of talking to our kids about healthy sexual habits, we put off the money talk with them until it’s too late. Or so you think.
You got this, there is no need to wait until your kids have picked up bad money habits, you can begin the process when they are still in nappies. Kids are techno-savvy, they know how to create avatars and how to use cash cards to buy in-app purchases or to purchase gadgets in the virtual world. In this technological age where money is digitised and spent with a click, the time to teach your kids about the concept of wealth is when they start learning to count. Now is a good time as any to teach them to be financially responsible, of course, the lesson must be age specific. The money values we learnt as kids stay with us for the rest of our lives, therefore, it is important that you start to talk about your money values from early, ensuring that they get a good start. Talk about spending, saving, and sharing and show them that there is no relationship between money and love and money and happiness. As parents, we should be careful about materialism and consequences – be cautious about attaching behaviours to material items. The key to teaching them good money habits is consistency, you must walk your talk, don’t tell them one thing, and show them something else.
Giving your kids a good foundation in money management and wealth creation is a critical part of their development, it helps them to deal positively with financial matters in adulthood. One of the very first lessons that kids must learn is the value of money, they must also understand that when money is spent it is gone. Teaching them the basics such as how to budget, spend, save, and invest will help them to create good money habits. In this internet age of online banking, internet shopping and credit cards, your kids may not see you paying for items with actual cash and they might think about money as invisible and see it as an unlimited resource, rather than actual money coming from a bank account. If you have young kids, it is a good idea for you to use cash when they are with you rather than credit. Cash is visual, they can see it, credit and debit cards can send confusing messages. It might become difficult for them to understand the concept of spending and think of the card as a genie – it’s magical and can get them anything they want.
We have a habit in the Caribbean of saying to our kids “we can’t afford that”, while this may be true in many instances, this sends an incorrect message to the child – the child translates this to mean “we are poor.” Use different words to convey the message to them. One way of teaching your kids about the value of money is to explain to them the difference between wants and needs and the concept of saving to get the things they need. I am aware that the issue of giving kids an allowance might be a sore point for some parents but giving them an allowance is a fantastic teaching moment for you as a parent. In giving them an allowance, you are teaching them to learn to handle money on their own; but you must apply some rules. Just as when they were little, and you gave them time-out based on their age, you can use the same rules for giving them an allowance. You must explain to them that while an allowance is their personal money, it is also a privilege. You must let them know about your expectations of how this money should be managed. Your expectations should be along the lines of spending, saving, (long and short-term) and giving. The concept of giving back is a critical aspect of wealth creation, therefore it must be an integral part of the lesson.
Also, it is imperative that you let them know about choices and the consequences of those choices. When I was growing up if my mother bought milk that was supposed to last for a week and we used all in the first day or two, then we had to wait until the week was finished before we got more. It is the same thing you must do with your kids and their allowance, if they want to use all their allowance in a day, that’s fine, but they must understand that they do not get any more until it’s time for their next allowance. As they get older, you should start teaching them new and more complicated money concepts, such as banking, credit, and debt, paying taxes, as well as the consequences of defaulting on a loan. The issue of using credit cards is of vital importance so you must teach them what happens when a payment is delayed, the consequences of carrying a balance as well as how and when interest is applied. These are important money concepts if not taught early, could put them in financial difficulties later in life. Ultimately it is your job as parents to help set them on the right path.
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Judy McCutcheon is a partner in the firm Go Blue Inc, a Human Development Company. www.goblueinc.net
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