When we think about the important lessons that parenting needs to encompass, the imparting of financial literacy is not always widely considered, or is often shied away from due to lack of knowledge or confidence. Yet the need for raising financially astute humans is global and timeless.
With Father’s Day fast approaching, many of us will celebrate our fathers and important father-like figures in our lives this month. In doing so, we will give pause to reminisce on the role they played in our childhood, guiding and nurturing us, and teaching us to spread our wings and thrive in adulthood. But did this always include teaching us about money?
Kids who grow up with a good financial education are less likely to get stuck in debt cycles, are better prepared for emergencies and have the surplus to give to charity and support their communities. We need to make sure all children benefit from the same financial awareness, no matter what our own financial situation might look like.
The Important Role Parents Need to Play in Financial Literacy
Parents are impactful in shaping a child’s perception of money and finances, both through direct lessons and by their behavior. My own father taught my brother and me about saving and investing. When I graduated from college, he sent me to a day-long financial literacy seminar with a financial planner to learn about retirement savings, work benefits, and the power of compounding interest.
This course was incredibly helpful in giving me the knowledge to start out on the right foot as I started my first job. In 2019, when I mentioned that I was considering starting a business, he was fully supportive, and he even came up with the name Abeona, which is the Roman goddess of the journey!
Now I know this is generally not the norm, and we were lucky to have such a forward-thinking dad. But we need to help support parents in rewriting this script, and ensuring that everyone has the confidence and know-how to help steer their children on a healthy and positive financial path.
Teach Financial Literacy with Balance and Equality
It’s vital that financial education for children is void of any limiting beliefs. A survey of 1,000 parents in 2018 showed differences in how boys and girls are taught about money, which when considered with the gender pay gap, wealth gap, and investment gap, can be troubling.
The survey found that of the parents who gave an allowance or paid children for doing chores, boys are given more money in allowance and paid more for chores.
Boys are also more likely to be taught about investing and building wealth, whereas girls are more likely to be taught about budgeting, tracking their spending, and saving.
This bias may be totally unintentional, yet sets a continuing standard of socioeconomic inequality we need to work hard to deconstruct. Instead, teach financial literacy broadly and fairly to help children into thriving, fair and competent adults.
8 Simple Steps to Bring Financial Literacy into Your Home
#1. Take Care of Your Own Finances
Take care of your personal finances first! If you’re not sure what you need to be doing, consult a professional. One question I often ask new clients is, “what is your earliest money memory?” We are shaped by our early experiences, so what can you do to create a good money culture in your home?
#2. Talk to Kids About Money
According to a T. Rowe Price study, 36% of parents are “very” or “extremely” reluctant to discuss finances with their children, and another 26% say they are “somewhat” reluctant. As a result, kids today have no concept of money or how it works. Introduce financial literacy early and in a developmentally appropriate way.
- Talk about saving money for big purchases, like a vacation.
- Talk about charitable donations to organizations your family supports and why.
- Discuss how you are saving and investing for retirement.
#3. Start a Bank Account for Your Kids
Set up a bank account for your child and possibly an investment account as they get older. Some families find success in the “save-spend-give” allowance model. Of their allowance or work earnings, they can set aside 30% to savings and investments, 60% to spend, and 10% to give to charity. This formula will stand them in good stead for the rest of their lives.
#4. Encourage an Element of Risk Taking
Encourage both boys and girls to take risks, and not just in investing! Girls can have more of a perfectionist streak and try only things at which they’ll be successful, while boys are often more comfortable trying and failing.
#5. Discuss Student Loans Early
Educate yourself and your children about college debt (and debt in general) and weigh the pros and cons of certain universities and costs with the likely income of a job in the future.
#6. Introduce Realistic Role Models
Financial awareness is not all about chasing the Benjamins or keeping up with the Kardashians. Modern media can set a lot of unrealistic or unhealthy financial standards, so it’s important to introduce your kids to some more measured and positive financial role models.
Maybe you have a friend or relative who started with nothing and is now a millionaire. With 22 million millionaires living in the USA today, the chances are you are a lot closer to one than you may realize. The concept of the millionaire next door can be hugely valuable to teach your children about.
#7. Watch the News
Watch the news and talk about the latest changes with the economy. What is your family doing to protect your lifestyle and financial health? What can you control and not control?
#8. Admit Your Mistakes
This is such an important one. Let your children know that there have been both good and bad decisions that you’ve made (we’ve all been there!) so that they can hopefully avoid making the same ones in the future.
Broaden Your Support Team
Bringing financial awareness into your home and family life is without doubt a huge benefit for everyone involved. But if you lack confidence, or would just like to up your financial game even more, then working with a professional can be a great growth tool. Please do get in touch – we would welcome the chance to chat with you.