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When I was working an hospitality job, some wealthy customers came one day, and their daughter had just lost her tooth. I asked her if she was expecting a shiny coin from the tooth fairy. The mother replied “money is not very important for us, the tooth fairy brings a nail polish, or a small toy”. Fair enough, I thought. And then it got me thinking. This kid doesn’t know anything about money.
She probably doesn’t have an allowance, because “money is not important in this family”. Everything falls off from the sky, stuff you want, stuff you need. She didn’t seem spoiled and was actually a very sweet kid. But what about learning about money? Her parents were expats, living the high life in Guatemala. They drove a shiny SUV, had bodyguards, maids, baby sitters 24/7. The kid attended a private school where tuition rivals that of US prep schools, and would surely be shipped to an Ivy League college 10 years from now.
With no financial education, how do you suddenly manage a rent, a food budget, your clothes or entertainment spending?
I met another 25 year old boy after that, who was not allowed by daddy to have cash. He had a credit card to swipe, and daddy took care of the balance. But the dad was so controlling he wanted to know exactly where the money went, hence the card only system. How do you know the value of things if you don’t realize their cost? Swiping a card is different from earning the money and making the balance payments, or paying cash for stuff.
Whether you are a trust fund kid who had millions poured over on the day you turned 21, after a financially sheltered life, or a middle class kid who never had an allowance because your parents couldn’t afford one, if you haven’t learned about money in your childhood, chances are your are bound for financial disaster.
Why are parents not in charge of their kids’ financial education?
No money. When you have not enough money, and struggle to pay your bills, it can be hard to talk to your kids about money. You don’t know how to deal with it yourself, and dug a whole so deep you probably would have to step down from your parental pedestal and admit your mistakes to your kids. Shame, guilt, avoidance, it can go on for years.
Too much money. You have a problem we all would love to have. But by pretending money doesn’t exist, you aren’t making your kids a favor either. They will never learn the true cost of things, the value of hard work, the delayed gratification…
School should do it. Parents have a tendency to assume that because kids go to school, they learn about life. Be it financial or sexual education, they don’t. The same way you can’t blame them for coming back home pregnant at 14 if you never told them what a condom was, you can’t expect them to learn about financial literacy at school.
What can you do?
The best you can do for your children, in all areas and not only money, is prepare them for real life. That is the main reason behind unschooling, a form of homeschooling that doesn’t follow a strict academic program and lets the kids learn for themselves by experimenting in real life setting.
Introduce money as soon as possible. From the moment you can count, you can count money. You can play shopkeeper or introduce an allowance and learn to spend and save.
Do tasks according to the kid’s age. Go to the supermarket and study prices, calculate the cost of a recipe or how long Junior will need to save for an action figure.
Encourage entrepreneurship. I saw a Ted talk about a kid who convinced his parents to lend him $100 to create an iPhone app. We all have different personalities, I know I hated selling lottery tickets because I was shy, but I thrived as a piano teacher. Not once did my parents prevent me to do something that went towards entrepreneurship.
Set some rules. If you haven’t noticed, I am quite the independent spirit. It may have helped that from age 12 or so, my parents started talking about ‘’when I would leave home’’ and ‘’when I would live on my own’’. Progressively, they went from providing everything to just food and shelter. I had to pay for fun and clothes (they would sometimes give me the price of a supermarket clothe and I had to put the rest to get the cool stuff). By age 17 I was out living on my own and paying for my 5 years of college. My parents always said that they would pay for tuition if it was expensive and I was a stellar student. If I hadn’t got a full ride through business school I know they would have paid because they valued education and wanted no door closed because of money. But they wanted me to try on my own first. Whatever your rules below your roof, own them. Allowances can be adjusted for good grades, or performing some basic chores for example.
Communicate. Kids feel things. If there isn’t enough money, they will know you are worried. If you buy a $2,000 purse and refuse to let them go on a field trip because of money, they will need answers. Make sure you explain properly what is going on, why you can’t pay for this or that when all the other kids have it, it is better than leaving a kid wondering.
On a related subject, check out Shannon’s post Children and money, don’t turn it into a taboo topic on The Heavy Purse.
This post was featured on Frugal Rules The Carnival of Wealth, The Money Principle and Money Bulldog, thank you!
Such solid advice Pauline… Financial Education is IMPORTANT! As a society we need to include money matters in social education or another GCSE / standard grade.
I guess we would do the whole country a favor, but not sure credit card and loan lobbies would approve!
One thing I’m torn about is allowances! There’s so much debate about allowances for kids. Tie it to chores (obviously on top of the normal pulling your own weight and picking up after yourself) or not?
I think I would go for a very basic one, just for being kids. That allowance would be suspended if you did really bad at school or messed up big time. Then task incentives to clean the car on Sunday or help fold laundry. It helps them figure out they don’t have enough for luxuries and gives them the opportunity to earn more.
I definitely think we need more financial education in school. It’s pretty ridiculous that they don’t focus on teaching kids in elementary, middle, and high school about these topics. THIS is absolutely ridiculous! -> “I met another 25 year old boy after that, who was not allowed by daddy to have cash. He had a credit card to swipe, and daddy took care of the balance.” Wow…..
Welcome to Guatemala! Rich people are rich and don’t understand that all the money they worked so hard to get will disappear in the hands of their incompetent kids.
While I would love to see more financial education in school, really it is the parents’ responsibility to make sure that their kids know how to handle money. Ideally families would have conversations about how to do that. We are already doing that with our 4 year old. However, I still think that the best way to teach kids about money is through being a good example.
Kids will learn from example that is for sure. You can’t say they should do one thing and do the other.
Good advice Pauline! Atleast with sex, kids figure it out eventually thanks to nature, but not so with financial education! I totally agree, start teaching kids about money early on.
We got some basic financial skills while I was in elementary school. Everyone had jobs, got “paid” and had to pay bills while balancing a check ledger. Other than that, I learned from my parents. My wife was taught by her parents. I think we turned out alright, so I’ll just use their examples when it is time to teach my little guy about finance. Right now all he knows if that coins taste funny when he bites them. Either that or he is checking to see if they are gold
So young and already looking for gold! I am pretty happy about my financial education as well, although there were a few things I thought were pretty rough, but when I think about sheltering my maybe kids from them I don’t see how I could prepare them better for life. Oh, the moment when you realize your parents were right…
Really great advice. You don’t have to deprive your kids but making things real is so important. Experience is by far the best teacher. You can’t truly understand the decision to spend on one thing vs. another if you’ve never had the choice. Empowering children to think for themselves at a young age is such a great gift.
For as much as you want to protect them, they will have to learn so better sooner than later, with you as a teacher setting boundaries. If you shelter too much, they will be eaten alive by life once they are on their own.
No kids yet, but when we have them we’ll absolutely teach them about money from the day they are born. You can’t expect them to learn it from school or anyone else. If you want it done right you have to do it yourself, otherwise someone else (or worse the media ;-)) will “teach” them.
Absolutely, you can’t expect people to do the job better than you would yourself!
We know a few smallish trust fund kids and as they’re getting to be 30 years old, they’re finally starting to realize that the life they’ve been living isn’t sustainable, and certainly won’t be able to be passed down to their kids. The sad part, they seem to pass the blame to others.
oh yes, there is that too. BF was raised with a private jet and a vacation home in Miami. When he inherited, his 5 siblings seemed to think cutting the cake in 6 would still give each of them the millionaire life their father had.
I do think schools have a role in financial education. My parents knew how to handle money – not going into debt and all the non-investing basics. But they weren’t the kind of people who would ever talk about money. So while I knew how to be cheap/frugal, there were vast areas of personal finance knowledge that I had to learn on my own. I actually learned how to cash a check by asking the bank teller if she could tell me what to do.
I remember going to the bank wih my mum to fill a deposit form! Sure the financial area is very vast and parents try their best to get you set for life, but they can’t cover everything.
Kids really need to know how to value money and how does it works in real life as early as possible. I really believe that financial education should be taught not only at home but in school too. Unfortunately for some of them, some parents doesn’t know how to do this and most school doesn’t really teach this to their students.
This post about financial education should be read by most parents, it can surely open their eyes on other responsibilities they must fulfill in their children’s lives.
I just like to share something that I wrote in my blog that is somewhat related to this, it tells why students need to learn investing.
Parents are solely responsible for financial education. Schools shouldn’t teach life, they should teach academics. It’s very possible that these people had different ways of teaching their kids about money; my mom always stressed that money wasn’t important but still taught us to save for the things we wanted.
I hope they still taught the kid something. Regarding school, yes it should be primarily about academics, although you do learn about living in society, behaving, sitting in a class for hours… and while not a must teach for schools, you do acquire some life knowledge too.
Wow, Pauline, what sad stories about those kids! Funny to me that the parent said “Money isn’t very important to us” yet she managed to spend a boatload of it. I wonder if she would say that if she could no longer have her SUV, bodyguards and private school for her kid? The one thing that I am grateful for about our currently rotten money situation is that our kids will have learned to survive through the worst of money times. If they can do that, then all other money situations will be easy to navigate through because they’ve got the survival skills of managing a tough money situation.
Of course when you have tons of money you can say you don’t care about money. I like to think she meant money as an object is not important, but as a mean we all need it.
Your kids should be set to weather any storm now!
Wow, those are some sad stories with those kids. I totally think money and basic finances need to be taught in schools. I know the argument is that it should be taught in the home – and I completely agree. However, for many, it is not taught in the home for a variety of reasons. So, should we just let those kids fall through the cracks? I don’t think so. I think I needs, ultimately, to be a two pronged approach. Children can learn a lot of the basics about finance at school and get the discipline and real world living out of it at home. Great post btw. 🙂
Thank you John!
Great post. I have so many friends who are so dependent on their parents. It gets very annoying at times because they lack a lot of common sense.
Wait 10 more years, I still have friends mooching off their parents, now in your mid 30s it looks plain weird!
Great stuff here Pauline! Kids are sponges. They will pick up on what they see happening around them. So what can we do as parents to really impact our kids? We have to preach it over and over AND live it out ourselves. The second part of that equation is probably the most important and the most difficult.
Sure, you can’t tell people to do something and then do the opposite! Your kids would think you are crazy, or lose respect.
My parents taught me to be frugal and manage the money I had well. I didn’t learn investment lessons from them because they have no knowledge in that subject. I’m so glad I’m a PF blogger and have a great community to learn from!
Good thing you got the basics, that will be sufficient for a majority of people, many middle class workers worked hard, paid off their house and retired comfortably without being investment moguls.
I say this a thousand times over in comments…that had I, or especially my brother learned more about the value of a dollar growing up, things would probably be a lot different. I know they would especially for him because of how long he was enabled. You have to plant that seed at young age.
You have to plant and watch it grow quite closely. A bad example can lead to rejection of the pattern too, especially in teen years when you think your parents are the worse, but most kid will generally follow a bad example, it takes more work to go the right way.
Great post, Pauline!! Somehow parents have the belief that giving their child everything they want helps them, whereas in reality, it doesn’t. They are unprepared to make smart financial decisions and have no idea what it means to live within their means. All the things their parents gave them in hopes of giving them a better life, will eventually put them behind.
I agree financial education needs to be a part of the school system. Yes, ideally parents are the best teachers and role models, but right now – a lot of parents aren’t doing it. I’d rather avoid another generation of kids growing up financially illiterate and maybe they can teach their parents a thing or two about money along the way. 🙂
Thanks for mention too! Really appreciate it!
Every little helps but like Krantcents says it is like a foreign language and if you don’t practice out of school you will forget about it. In an ideal world, schools and parents would work together but too many parents rely on school even for manners and behavior!
I know a lot of you will say we need more financial education in school, but that is not the answer. I teach a financial class in high school. If the students do not practice at home or the ensuing years, they will forget the skills similar to a foreign language. Using the skills and seeing our parents use their skills are the key solution. My family was wealthy, but they brought me up very well. I got what I needed and not what I wanted. They taught me to save and invest. I was always interested in money and made it my career.
Of course the family should educate the kid, but if they are making mistakes too there is still hope the kid will learn something more in school.
This is such a good reminder Pauline. Parents need to step it up and stop making excuses for not preparing their kids for their financial future. I find your mention of unschooling very interesting – I’m a huge fan and have followed that paradigm closely in educating Eva.
Well you did a great job, congratulations! I think you learn just as much or more outside of school and that is what really prepares you for adult life.
It should be the parents responsibility to teach their children but a lot of them don’t know what good financial education is themself. You can make and have money and still be dumb when it comes to money. Kids these days are learning less and less about the things they really need to.
True. People seem to think that basic skills are for basic people. Want it or not you will still need to manage the household’s budget and learn to cook and clean, better learn early.
My parents never wanted me to worry about money as a child, but they still taught me how to save and how to manage my money, so there can still be a balance I believe. No child should stay awake at night worrying about money, but they should know how allowances work and how to save money in order to get something they really want.
sure, it has to be balanced, oh gosh, laying up at night thinking about how your parents will pay the bills would have been terrible!
As I am now the parent of an (almost) 2 year old, this is something that is on my mind a lot. I actually grew up in a pretty well-to-do family, and while that does come with a lot of perks, I was left without any appreciation or understanding of money. When I set off on my own I had to learn those lessons the hard way. I believe most parents need to take a larger role in the financial education of their children. It is a huge priority for me going forward in my daughter’s life!
congrats on thinking about it so early!
We had a teen patient whose dad would send her in with an Amex gold card and she would buy whatever she wanted, contacts, glasses, sometimes spending hundreds of dollars. The first time we called the dad who said she could get whatever she wanted. One time the card didn’t work. The girl, who was no prize as far as attitude, dials up Dad on her iPhone complaining about her card not working. As it turns out, the card was maxed out. Did Dad tell her not to buy anymore? Nope, he came in with another card and paid her balance. This was at the eye doctor. I can’t imagine how much she probably spent on clothes and fun stuff. I can’t imagine where this kid will end up in 10 or 20 years.
My guess? mooching off a rich husband or still daddy until he passes and she blows off the whole inheritance in two shopping sprees and a face lift so husband #3 still looks at her.
Wow!. I absolutely loved reading this. It has a wonderful message. I personally feel too that a kid should be given allowance and taught the value of money. Excellent post ♡
thank you Naznin!
My husband and I always say that there are two things we want to instill in our kids 1. Being good people. 2. Being independent.
You and I had a similar go at life as I was gone at age 17 as well. I learned about money young from my parents and had to buy anything I needed with my money that I earned. I’m thankful they taught me those lessons as it gave me knowledge to build from. Although I do believe parents should have that helping hand and push for their kids there are some parents that are not cut out to teach finances to their children. If anything they are learning what NOT to do. It would be great if teachers would have a standardized way of telling it like it is to the kids so they can grasp it from someone they trust. Some kids who see their parents suffering to pay the bills like you said may have to step down and admit they made mistakes or explain what might have went wrong but will the kids listen when they offer up their money saving tips and advice? Talk the Talk, Walk the walk> I don’t know and it would be interesting to hear from someone who went through that and find out how they handled it. Great post.
Thank you! I guess it is easier to judge as we are childless but hopefully we will do what we preach!
Great post! It seems that too many people now want to rely on the schools to teach their children everything. What happened to good old fashioned parenting where you teach your kids about life and be their parents as opposed to their friend?
A great and gutsy post, Pauline. School is for enhancing an education, the one that is supposedly going on at home. As I see it, a parent’s main role is that of educator and money ought to be a core subject;)
I think sadly we are getting lazier than the previous generations, and many parents want the fun part of having a kid, the funny outfits, the cute words… but aren’t really aware of the big task they should perform too.
Showing a distaste for money when you have a lot of it is indeed a very pretentious, arrogant and pompous perspective Pauline. Simply because one doesn’t have to worry about money doesn’t negate the fundamental role it plays in all our lives; and like you say, the significance of money – the fact that it doesn’t grow on trees – is something that every parent has an obligation to drum into their kids.
I hit financial disaster in my early 20’s for that very reason – I didn’t really appreciate the value of money having been a pretty spoilt only child with moderately affluent parents. It sets you up with a sense of entitlement which you bring into your own adult life – in my case leading to tens of thousands in credit card debts in those early adult years. It’s a lesson that has to be learned one way or another. I certainly learned it the hard way; but I think being imbibed with greater appreciation of money as a child is a far less stressful, more proactive root to enlightenment 🙂
I’m currently reading “why A students work for C students” by Robert Kiyosaki, it’s a must book for all parents living under capitalism.
Haha. I was over for dinner at my spouse’s relatives when their eldest child lost her first tooth, a few months ago. They had quite the debate on what the value of a tooth should be these days. It was funny, but also interesting. The comments ran the whole gamut, “how much do her friends get” “how much is it relative to what she usually gets” “do we really want teeth to be worth $5?” etc.
That’s pretty silly to not talk about money when you are clearly swimming in it. Or even if you aren’t.
Kids grow up some day and need to handle it, otherwise they’ll think everyone is free and/or they deserve it.
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