As parents, we often think that it may be unwarranted to introduce the concept of money into the innocent lives of our children because they are at an age when they should be investing their energy into play and learning. However, we forget that knowing about finance too is essential learning for them. While they learn various subjects at school and are coached for physical development, rarely does anyone teach them the basics of how money works and how is it, in fact, very intricately woven into the very fabric of everyday life.
This is the reason while parents often shield their children from financial woes and dealings, since they somehow feel responsible for handling money matters themselves. However, studies have shown that introducing children to money-related concepts, and helping them participate and understand money transactions is highly beneficial for their future. The Consumer Financial Protection Bureau in a report in 2015 pointed out that parents were critical to the financial literacy of their children.
Let us take a look at some of the common money mistakes parents tend to make --
1. Avoiding money-related discussions with children － It may seem that children are too young or naive to understand money management, however, they will surprise you with how much they learn by watching you. Not talking directly about money will only confuse them, so it is advisable to be upfront about finances. Lecturing about how much every toy costs or what are the damages every time you go to a restaurant may not be ideal, but giving them an overall sense of how transactions are made, will help them understand how money is used.
2. Indiscriminate spending to fulfil all the child’s wants － Many parents often give in to the demands of their children, when out shopping or when they insist on getting what their friends have. Succumbing to your child’s demands will not only increase the pattern of getting what they want, it will send the wrong message that they need to have everything that another child possesses. This will be detrimental in their understanding of the value of things. This could also lay a dangerous precedence for the future, as they grow up thinking they will get what they want.
3. Believing that a little does no harm － Once in a while, we indulge our children by giving them money to buy things. This may not be harmful if done rarely. But small change adds up to big amounts and a regular flow of money to children, without them keeping a tab on the amount spent can lead to accountability. Children will believe that they are not answerable for what they spend. It is fine to give your child pocket money, but at the same time ensure accountability and awareness of judicious spending.
4. Hiding financial woes －There is no harm in giving children a sense of the financial burden and liabilities that you incur, or telling them about a financial crisis that you my be experiencing as a family. Without giving intricate details you can speak about the problem so that children know why certain unnecessary spending has been curtailed at home. They will also learn what it means to be austere, which will help them in the long run. Also, arguing about money in front of children is unhealthy since they do sense something is wrong, yet, are unable to understand it clearly.
5. Not explaining the concept of plastic money － Unabashed use of credit/debit cards and online modes of payments will make your child frankly, clueless of how money is spent. When the child sees no physical transaction for things bought, she will not be able to grasp how money matters work. While you should be careful about not giving your credit cards to children for indiscriminate use, explain to them in simple terms about different ways payments can be made without actual exchange of money and the consequences of their unrestrained use. Take your kid along with you to the bank while depositing money or to an ATM while withdrawing money. This will help them understand that the cards are just a medium to access the actual cash.
6. Refraining from discussing the cost of things －There is no need to give your child a low-down on the cost of everything that you buy for him. However, occasionally it is not a bad idea to let your child know the cost of his toys or favourite candy, in order to make him realise that what you spent on him is hard-earned money and that such things are not for free. Take your child to a supermarket for buying monthly groceries and explain how and why you spend on essential items.
7. Being dishonest about money － Children learn values from their parents, and hence if adults are not transparent with their financial transactions, children will also find fishy ways to deal with money. It is important to raise your children in a honest household that follows clear and correct financial methods which are devoid of suspicion and stealth. Upright and sincere parents are the perfect role models for their children.
Some of the mistakes that parents make in terms of financial lessons for children, determine their outlook towards money and economics in the long term. Also, it is necessary to avoid these mistakes so that our little ones will know that there are some things that money cannot buy.