Soon after starting facilitating money management workshops for migrant workers in Hong Kong, parents approached us for workshops for their children. So we designed and ran workshops as after-school activities for several years, until one day, I was asked to run a series of private workshops for a small group of 10 year old children in the flat of one of them. There we were, practising prioritising expenses, discussing which spending was important, how to save for future expenses… in a play room packed from floor to ceiling with toys. When I went out, I seriously wondered what the children had really internalised (not just understood with their brain) from what they had just done.
Children learn from watching people around them, especially us, parents; they mimic us, internalise our behaviours and act them through their games and interactions with others. But do we (parents) send the right message? What do children understand when we don’t say “no” when they want something, when we always buy a little thing for them when we go shopping, or when going to the mall is a family outing? Do we want them to understand that money is unlimited, shopping is a hobby and life purpose is spending? What do they understand when we promise them money to clean up their room or get good grades? As parents, being role-models is more powerful than preaching. In an experiment [1]about generosity, the psychologist J. Philippe Rushton observed that children who observed adults donating money were more generous in the short and long terms than children who were preached by an adult to donate. So if your organisation runs financial literacy programmes, consider reaching parents instead. Besides, by the age of 6 years old, a child may have already spent around 26,000 hours with her/his parents (12 hours/day (awake) x 6 x 365) – how does that compare to a 3, 12 or 20 hours financial literacy programme? If you still want to teach children directly, embed it in a family programme so that parents are involved and whatever is introduced in the training room is practised at home. Else you are just wasting time and money.
What do we want our children to learn about money? Learning basic skills like budgeting or reading a bank statement, or acquiring technical knowledge about bank or insurance are important. But is it the only thing we want our children to understand about money? Why do we want them to learn about money? Imagine: you give your child a weekly allowance, (s)he writes a budget and plans all his/her expenses, including savings for university. You are quite amazed at her/his ability to manage expenses and save, with such a small allowance. So one day, you ask your child for her/his money notebook: everything is neatly recorded – ins and outs, and your child is happy to walk you through the details: the stationery looks really cheap. “Oh yes, the shop lady is not good at maths, and most of the times, she gives me the wrong change.” And what about these other incomes? “I lend money to my friends – they are always running out – so that’s the interest.” How do you want your children to handle money? Is it possible to teach money matters without ethics?
Raising children is more than acquiring skills. Aren’t corruption, tax evasion and oppressive deals much bigger financial issues than lack of budgeting? To raise financially responsible children, we need to lay solid value foundations: money is about trust, honesty and accountability. As parents, we must embody these values if we expect our children to internalise them. Why could we require more from our children than from ourselves? The wonderful challenge of parenting is, because they have a knack to point out our hypocrisy (we don’t fully do what we say… and find tons of excuses to hide ourselves behind), children help us become better people: they help us continue growing as adults. Trust is especially important: Keep your word: if you promise something, hold to what you have committed to. Another key value to instil is clarity. Money very easily destroys relationships – between family members, or business partners, or friends – whenever the expected outcome was not clear. Another key understanding is that money is a flow: someone’s income is someone’s expense. Money is a relationship tool. Besides watching yourself and aiming to be a role-model, you can also use “money mantras”: do you still remember phrases or proverbs that your grandparents kept repeating at specific occasions? I still remember my mother’s saying “doing and undoing is still working, said my grandmother” whenever I had to redo a house chore or homework from scratch: a wisdom word passing through four generations or more. Build your own money mantras and use them often: you (and your children later in life) may be grateful to use their memory cells for money wise words rather than for advertising slogans (sad enough… I also remember some 40 year old ad slogans – this shows how powerful words can be): here are a few ideas: “Big toys don’t mean best friends.” “Money is a tool not a goal”, “More “I have” doesn’t mean more “I am”. “Someone’s expense is someone’s income.”
Team work: when spouses have different spending styles or money management habits, this sends contradictory messages to children and impacts how they learn about money. Children are clever and use our inconsistencies; they know who to ask to buy something they want for instance. Work on managing money with your spouse. This will also set an example to your children, later when they get married.
Talk to your children: sometimes what we convey through our behaviour may need further explanations. Help your children decipher the world around them: they are surrounded by lots of things to buy and mostly virtual money (plastic cards for instance) – it is a tough environment! Our ancestors would pass knowledge about dangerous plants and animals to their children… how much do we warn them about the dangers of debt, overconsumption, the deception of “bargains” and the consequences of cheap goods on those who produce them and the environment? Build their critical thinking so that they understand the difference between advertising and information, for instance, or always find out the two sides of any transaction (where does it come from/where does it go) instead of “what’s in for me?”
Involve them: imagine telling your 18 year old child who has never ridden a bike before: here is a bike: you have 100 kilometres to ride to university. This is what we do if we never give the opportunities to our children to practise managing money. We can nurture honesty and accountability by entrusting our children with errands: give them clearinstructions on what to buy, ask them to track what they have spent, and give you the change back. Count the cash to see if this adds up. When they are used to buying groceries for instance, you can ask them to estimate how much they need for this errand: you give them an opportunity to practise planningand getting a sense of prices around them. Involve them in family spending decisions – whether it is back to school purchases, your next holiday, or buying a computer. Research and compare various options together, discuss what criteria you should consider to take your decision, while staying clear on who has the final word if you can’t agree. Give them part of the family budget to manage: for example, weekend meals. As they get older, teach them skills like reading and checking a bank statement, comparing phone options, etc.
Allowance or not allowance? Pocket money is a way for your children to learn to manage money; let them experiment and make mistakes while this is still of little consequences. Just keeping money safe… is something to learn, and sorting out banknotes, giving change, waiting to get enough to buy something they want, noting down expenses, planning future incomes and expenses. Don’t only give cash. Let them learn virtual moneywith either a bank account or a “parents’ account” (you can keep the detail in your family money software for instance and give a monthly statement). Don’t interfere in their choices: they will learn from their mistakes. However, allowances can be distorted and an incentive to spend: allowances in many families are usually given as an extra while all the other expenses are still paid by the parents. So allowances don’t teach kids about “needs” and “wants” at all… they just cover wants and can even be an incentive for wants. Be clear with your child on what you expect them to cover with the allowance and as they grow older, shift more and more responsibility to them: phone expenses, lunches, clothes, school books and stationery, leisure… and don’t change the rules because they run out of money. Yet, involving them in family spending decisions is probably more powerful than allowances (see above).
Be also cautious about financial rewards. If you link expected house chores to a financial incentive, what happens if you stop paying them? Do you get paid for house chores? But you can consider paying your child for specific exceptional tasks that you could otherwise pay a third party to perform (car wash, gardening, IT help…) and up to them to be creative and come up with ideas of jobs they could do for you. Be especially careful in linking school performance to financial incentives. Will they only study hard for exams for the money?
Turn as many daily life situations as possible into learning opportunities: from taking the bus (calculate the cost of two way tickets, compare with other transportation means…), choosing food (look at cupboard first, write grocery list, read labels, estimate total cost…), to yearly family holidays (budget, reflect on the meaning of the holiday for your family…), giving to charity (which one, how much….), school expenses, clothes, equipment…. Take them to the bank with you. Explain to them how confidentiality and trust complement each other. Say “no” – this is the most powerful tool to set limits, especially to consumption, and learn to manage frustration. Each child is different- so if you feel one of your children tends to be stingy, you may involve them more in giving to charity for example.
Money is not all: Involving children in specific decisions doesn’t mean monetising your relationship. Draw a clear line – your time together cannot be traded with consumption: a present will never replace you. When your child requires time with you, address her/his request with your full attention and presence… not with a thing –even if it is two minutes now and a promise of one half-day next weekend. Then write and keep your promise. Helping friends and neighbours… cannot be systematically turned into paid services. Whenever you involve your children in a decision, or help them when they ask for advice, discuss all the possible sides of it: its financial implications but also its impacts onothers, on our lives, on the environment. Gradually, through parents’ examples and guidance, children can learn to navigate in our society and on the Earth –including (not exclusively) its financial sides, and nurture both mind andheart.