What Our Children Can Teach Us About Ourselves
July 25, 2012As the father of four, I’m often asked about how to teach children about money. I’m sure there are a lot of books and blogs about the subject, but for me, I look at children as just people – only smaller and with less life experience. I guess what I’m trying to say is that each child, like each of us, is unique, and therefore the way we teach them about money should be just as unique as they are.
Before I can begin to teach my children about money, I need to first understand what they think about money. In order to do this, I asked each of my kids the same series of questions. Their responses gave me added insight into how they perceive money and what I can do to shape those perceptions into positive financial behaviors. Over the next several weeks, I’ll share with you their answers along with how I will use their responses to shape the way I teach them about managing finances.
This week, I interviewed my 13 (soon to be 14) year old daughter:
Dad: Where does money come from?
Rachel: The government prints money in a factory.
This is a rather practical answer to a simple question, but it is good that my daughter recognizes the government’s role in the supply of money. From this question, I can help my daughter understand the danger of having the government simply print too much money, namely inflation.
Dad: What do we do with money?
Rachel: We use it to buy things we need and want like clothes, food, houses, cars, and other stuff.
In and of itself, money is not a bad thing. As you can see from my daughter’s response, she recognizes that money is necessary for buying life essentials. I also like the fact that she used the words “need” and “want.” As I teach her the important difference, she will recognize how spending more on things we “want” leaves less to spend on things we “need.”
Dad: If you found $100 on the ground, what would you do with it?
Rachel: I’d save it.
This question serves two purposes. On the one hand, you learn whether your child prefers to save or spend, but there is also a moral aspect as some kids may think to ask whether or not the money they found belongs to someone else. This is a good opportunity to extol not only the virtues of saving but also the virtues of moral character.
Dad: Where or how would you save it?
Rachel: I’d probably keep it in my wallet.
Your child may or may not understand the pros and cons of keeping money in a financial institution such as a bank. In fact, at age 13 (soon to be 14), now may be a good time to open up their first passport savings account.
Dad: Would you rather have $100 today or $200 a year from now?
Rachel: I’d rather have $200 a year from now because I don’t need $100 now and it would probably be put to better use in the future.
Dad: Okay, would you rather have $100 today or $200 five years from now?
Rachel: I guess $200 five years from now.
Dad: Why?
Rachel: Because when I add that to the other $200 you’re going to give me, I end up with $400.
Who can argue with that? First of all, I like her willingness to delay gratification. You don’t see that much these days. Second, I like her recognition that money she doesn’t see is money she doesn’t spend. She acknowledges that she might find a better use for this money in the future. And third, you gotta love her sense of humor.
Dad: If you didn’t have enough money to buy something you wanted, would you rather borrow it from a family member, a friend, the bank, or just save for it?
Rachel: Save up and buy it later because then I wouldn’t owe anybody money, and unless it was a necessity, I could live without it.
Delayed gratification is a sign of maturity, and if your teenager recognizes its importance, then chances are they’ll adopt other important financial principles throughout their lifetime.
Dad: What happens when someone spends more money than they make?
Rachel: They go into debt.
Dad: Is debt good or bad?
Rachel: It can go both ways. If you owe someone else that’s bad, but if someone owes you that’s good.
It seems obvious, but even a teenager realizes the ramifications of overspending. Her answer to my follow-up question should not surprise me. When my daughter plays the game of LIFE®, one of her most important objectives is to pay off her loans as quickly as possible. You want your children to have a healthy perspective on debt, recognizing that not all debt is bad. From this question, I can help her understand the difference between high interest debt and low interest debt. Even still, some children may have a higher aversion to debt, and this question can let you know who they are.
Dad: What happens if someone owes money but can’t pay it back?
Rachel: If they owe the bank, they go bankrupt. If they owe me, I can give them more time to pay or sue them.
I think it’s important that my daughter understands the legal elements of debt, specifically that if you owe someone money, they have a legal right to collect it. By the way, remind me never to borrow money from my daughter.
Dad: Do you think you’ll ever borrow money? If so, for what?
Rachel: Yes. I’d be willing to borrow money for a house or a car.
There is a distinct difference between borrowing money on an appreciating asset like real estate and on a depreciating asset like a car. By asking my daughter these questions, I am able to shape her opinions about cash flow and borrowing.
There are certainly other financial questions we can ask our children, but one thing I noticed is how the apple didn’t fall far from the tree. In each of Rachel’s responses I could see a bit of myself, and in a way that makes me feel good. For one thing, it lets me know that Susan and I are sending the right messages, but it can also give me insight into my own financial behavior. You see, our kids are a reflection of ourselves. Much of what our children learn about financial behavior comes from what they observe in us. What are you teaching your kids about money? Ask them some of these same questions; you may be surprised by what you hear.