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What Are You Teaching Your Kids?

How you spend or save money can have a long-lasting effect on your kids’ mindset, say researchers. Brenda Ward discovers it’s what you do, and not what you say, that helps your kids grow up rich or poor.

18 October 2021

Autumn 2021

Did your mum hide her spending from your dad? Was your father dominating or controlling with money? Were your parents spenders or savers?

If they were bad role models, it turns out you might be able to blame them for some of your money woes.

Massey University researcher Dr Pushpa Wood says we underestimate our children’s intelligence – but they’re watching and copying us.

“We underestimate that they observe us all the time. We underestimate that they learn by observing.

“So, observation plays quite an important role that we don’t pay enough attention to, as parents.

“They’re taking note at the back of their minds, without even realising it.”

Parents affect kids’ self-control

Wood’s view is borne out by a University of San Diego study that suggests that parents’ financial behaviour affects their kids, both directly and indirectly.

The study linked the financial behaviour of 2,520 young adults back to their general self-control skills and their parents’ financial behaviour.

Study head Dr Ning Tang says the findings highlight the importance of parents giving their kids ‘financial socialisation’.

Wood says there are many ways to help your kids get better with money.

“There are some things you can teach and some things you can show, and some things you can be a role model for,” says Wood.

“For example, if you’re smoking, you can’t really tell your child not to smoke if you catch them smoking. That’s a contradictory message you’re giving them.

“However, you can sit down and discuss with them why they have taken up smoking, ask if they’re aware of the risks, and tell them why you haven’t given up smoking yet.”

She says you can give the wrong message if your kids see you shopping without a list, not keeping to a budget, buying alcohol or cigarettes, and spending too much on clothes, or treats at a café.

Money is plastic!

Another big problem for kids today is that money has become invisible, says Wood.

“They’re seeing mum and dad using a plastic card to pay for things. I’ve had a conversation with 6, 7, and 8-year-olds, asking them: ‘So where do you think money comes from?’

“They said: ‘Oh, mum just goes to the machine and gets the money out’. So, who do you think puts the money in the machine?

“‘Oh, the bank does’.

“And why do you think the bank does that?

“We keep exploring it further, so after about 20 minutes they realise the bank puts the money in the machine because mummy goes to work every day.

“Finally, they start to form those kinds of links. Unless you link those things, you can’t actually connect the two together.”

The Why Generation

Parents find it hard to explain to kids why they won’t get everything they ask for, says Wood.

“If a child wants to buy a particular thing at the supermarket, you might say, ‘Sorry, darling, we can’t buy it.’ And the immediate response comes back: ‘Why not?’”

Wood says she often hears parents reply: “Because I said so.”

“Because I said so” might have worked when she was growing up, but it doesn’t work now because kids are growing up with more access to information and technology, she says.

“This is ‘The Why Generation’,” she says, “and we as parents need to be able to answer those ‘whys’.”

The ‘why’ could be because the family’s on a budget, she says. “We don’t have money this week for that shopping, within this budget. It’s our responsibility as parents to use those questions, however annoying they might be, as ‘teachable moments’.

“So, if you do not have enough money to buy something your child has asked for, be honest and put the facts in front of them.

“They also need to be made aware that sometimes we have to go without things we want, but our first priority is to make sure that their needs are met first.”

Real-world experience

A paper by University of Arizona doctoral student Ashley LeBaron suggests real-world experience with money will help prepare kids financially for adulthood.

Wood agrees.

“You could ask the child to help you find money for their purchase from next week’s budget, making a list and then choosing the items at the supermarket to a set budget, whether it is a $150 budget or a $250 budget.”

Any money left or saved from the set budget could go into the child’s money box and be used towards their purchase.

“You’ll be pleasantly surprised,” she says. “I’ve heard from many parents that their children didn’t used to like any brand other than Wattie’s baked beans, then all of sudden the home brand is not too bad.”

Finally, try not to give kids contradictory messages about money, says Wood.

“If the child wants to buy a book or a toy which is $5 and you say you don’t have the money, but they see you buying a $5 takeout coffee, it doesn’t compute.

“But don’t make it a heavy thing. Money is part and parcel of your day-to-day living; it doesn’t occupy your whole life.”

NZ study

Research by the Westpac Massey Fin-Ed Centre shows that most young people get their financial information from their parents, so it’s important that parents provide a good foundation for future financial wellbeing, says Wood.

“Make it a ‘learning experience’ from an early age.

“Overseas research also shows parents’ education levels and money skills also play an important role.

“I think money management comes with your attitude to money, how you see money, and what role money plays in your life.”

One activity she uses with students asks: ‘If your wallet could talk right now, what do you think it would be saying about your relationship with money?’

Answers varied from: ‘Where the hell have you been?’, to ‘If you looked after me well when you were young, I’d have been really good to you now’, or ‘We make a good team’.

Delayed gratification

Wood says with very young kids, the most useful skill parents need to teach is ‘delayed gratification’.

“For too many people, little Johnnie wants something now and Johnnie will get it now because mum or dad just can’t be bothered discussing it further, or doesn’t have time and energy or resources to spend five minutes explaining why he can’t have this right now.

“It’s about an investment of time now, for the future.”

JUNO’s content comes from sources that JUNO magazine considers accurate, but we do not guarantee its accuracy. Charts in JUNO are visually indicative, not exact. The content of JUNO is intended as general information only, and you use it at your own risk.

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.

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