If you want your kids to grow up with a healthy attitude to money, the first place to start is to look at your own habits and behaviour with money.
What did you learn about money as a child?
Our beliefs around money - both conscious and unconscious - are mostly informed by what we learn, experience and observe as we grow up. So how you deal with money will undoubtedly influence how your children manage their money as adults.
I’ve recently been working with a client, Sophie, on her money story and looking at how this feeds into her existing relationship with money. We explored her early experiences with money and began to gain insight into previously unconscious beliefs that had been getting in the way of the results she wants to achieve. Through this work, she slowly began to see how she'd been reinforcing old beliefs through some of the decisions and actions she'd taken.
As a child, Sophie's parents had gone from running a successful family business, with trappings of wealth, to being declared bankrupt. The family had to move out of the house they owned into rented accommodation. She was able to stay at the school she’d always attended but became increasingly aware of her different financial status compared to her peers.
She recalled one time the embarrassment of having to tell her teacher she wasn’t able to afford a school excursion. And another being ridiculed by other pupils for wearing her summer shoes for school in winter months.
Sophie's money story was one of scarcity and now, in adulthood, she found herself giving her children, aged six and nine, conflicting messages about money.
Conflicting money messages
Sophie didn’t want her children to experience the feeling of 'there’s never enough’ that she grew up with so she said yes to everything they wanted. But, at the same time, felt out of control with her spending and had significant anxiety about opening bills or dealing with her finances.
She could see that she was sending conflicting messages, acknowledging that her kids were incredibly perceptive, and that they would see the stress and worry she was experiencing with money.
We discussed a middle ground and what this would look like for Sophie. One that didn't create a sense of entitlement for her kids, while equally not reinforcing her old scarcity message. We then discussed ways of reinforcing this with new behaviours.
As well as getting her into some healthy financial habits, she decided to involve her children in spending decisions and savings plans. We also came up with new language for Sophie to use with her children around money.
The language of 'choice'
Sophie is now involving her children in helping to save up for a campervan for family holidays. It’s an exciting goal that the whole family is looking forward to.
She's able to have the money and choice conversation with her children. When they’re at the shops, for example, instead of saying 'no', she's now expressing financial decisions in terms of goals. For instance, saying something like: ‘I can buy you the magazine you’d like but it means it’ll take us longer to get the campervan for our holidays’.
Rather than giving her kids the sense that there's not enough money, she's helping them see that it's about making conscious spending decisions. Spending less in one area so that they can do something more important. In this way, she's showing her children that money can help create freedom and options.
Teaching them also how to reflect on the decisions they make and regulate their emotions.
Avoid making money a taboo subject
Money is a subject we mostly don’t talk about. So we learn by observation. Not the best way to wire our brains with healthy money habits and beliefs.
Isn't it interesting as a society how we're beginning to break down other social stigmas, yet money is still a taboo subject. Let's talk about money. Don't make the mistake of oversharing with your children about money worries, though, as they may feel a sense of responsibility that doesn’t belong to them.
Sophie became conscious about her use of words like ‘too much’ or ‘too little’. She now tries to strike the right balance , speaking about money in the same way she talks to her kids about food and health. None of us want our kids going into adult relationships being unable to talk about money with their partner or friends.
If we can instill good money management skills in children, then they can carry that forward for the rest of their lives. Being good with money provides so many benefits. It's an important life skill we don't usually get taught. Without it, we can easily fall into the trap of getting into debt and not being able to meet our future goals.
What's your why?
I often see adults who've learned poor lessons from their parents and it might take until their forties or fifties before they start addressing it.
If you have children and need a good hook to help motivate you to stick to good habits, I'd suggest asking yourself: ‘what do I want my children to learn about money as they grow up?’.
Doing it for the sake of your children can be a great ‘why’. If building better money habits for yourself isn't enough of a drive, enabling your children to grow up with a healthy attitude towards money may be the incentive you need.
The benefits of pocket money
Pocket money can be a great idea as it helps your children experience managing their own money and making their own choices. You can help them resist the temptation of small instant gratification purchases in favour of a bigger reward later. Various studies show that delayed gratification is one of the most effective personal traits of successful people.
You could create something similar to interest rates by giving them a bonus. For instance, topping up any savings they make with money of your own. This gives children an understanding of what interest means and the benefits of delayed gratification.
Some piggy banks have different compartments that categorise whether the money is to spend, save, gift, or invest. This shows children how to plan ahead and that money isn’t just for spending.
Involve children in responsible spending decisions
You could also talk your children through some of your decisions. For example, if you are choosing a car park which is further away from your destination but will save you £5, explain that to them.
For older children, when they are at the point of earning money for the first time, it can be helpful to work with them on mapping out their expenses. Include ones they need to plan ahead for, such as birthday presents or holidays. Encourage them to save and join their employer's pension scheme. They're never too young to start financial planning.
Important lessons in life
What life lessons do you want to share with your kids?
Helping them navigate their relationship with money may be one of the most important ones you can teach them.
Click here to find out about financial coaching