What impact is our financial education having on our children?
Educating our children on the importance of money and the role it plays in the world can be a challenging and time consuming task. However, the long-term benefits of this education can far exceed the amount of time spent teaching it.
Good money management skills and attitudes to smart saving and spending are worthy characteristics when taken into adulthood, but are we teaching our children the right things? Our current system teaches kids to work for their money, but should we be teaching them to make their money work for them?
FINANCIAL EDUCATION STARTS IN CHILDHOOD
The customary model that shapes our children’s education surrounding financial literacy is something that is rarely addressed, let alone challenged. It could be argued that this is one of the reasons we are seeing such a large gap between the spread of wealth within society between. Sometimes it’s as if certain people have been born into a secret club with all the tools, knowledge and skills to seamlessly generate mass amounts of income.
The fact is, wealthy minds create wealthy mind, and these people are merely conditioned in such a way that allows them to look at the concept of business and wealth from a completely different angle to most of us who grew up accepting the systems we have been taught.
With financial conditions constantly being moulded by ongoing technological developments and systematic revisions, the need for individuals to have financial literacy and respect for money has become far greater.
How many people who grew up in the 70’s would have thought that by 2017, they would be able to earn their living from the comfort of their own home by swiping their finger across the glass screen of an electronic device?
The development of technology has created so many alternate ways to make money that doesn’t require the physical labour and action demanded by many traditional trades. Yet, there is still a gaping hole between the wealth brackets and most of the hardest workers aren’t finding themselves in the highest brackets of wealth. But from a young age, aren’t we taught that the harder you work, the more money you will get? Could this advice be wrong? What if our children are growing up in a system that is teaching them all the wrong things about business, wealth and money management?
FINANCIAL EDUCATION AND OUR EDUCATIONAL SYSTEM
The wealthiest people in society aren’t always the ones who wake up at dawn and arrive home after dusk. They’re not always the ones who spent years at University. They’re quite frequently the people who established smart businesses that earn passive income which, over time, grew to replace their regular income.
We don’t read about these ideas in our school textbooks, nor do we learn about it in year 12 business and economics. We learn about the corporate hierarchy, and the same old business system. But look deeper into the structure and you may find some fundamental flaws in this message we’re sending our children. These flaws may warrant a social paradigm shift in our attitude towards kids and money; a shift that will put the ball back in the hands of the individual rather than the big corporations.
But it’s more complex than that. Why should we teach it to our children if they may not even understand the concept of money to begin with? The early lessons that we can teach to the younger generation should merely stepping stones to what we believe to be the bigger picture in business and finance.
Teaching children the basic concepts involved in managing money is the earliest chance you’ll get to impact their financial future. Parents’ approach to this aspect of their children’s lives varies from highly accommodating to virtually non-existent.
KIDS AND FINANCIAL INDEPENDENCE
I’m sure you’ve met at least one family that spoils their children; starting with toys in their youth, and moving onto cars and fancy clothes when they grow a bit older. Then there is the family who takes the opposite approach. As soon as that kid is old enough to work, the luxuries stop. They may even charge ‘board’ and begin to encourage financial independence.
While specific financial circumstances can play a role in how much disposable income parents can spare for their children, there’s still always going to be a level playing field in terms of the lessons you can teach them during this time. Deciphering the right balance of gifting, as well as other learning mechanisms is the ideal way to develop positive money management skills.
It is never too early to start teaching kids about the concept of saving – even if they have no concept for the value of money itself. ‘Piggy banks’ and ‘Vision Boards’ are two simple ways to create structure in a child’s life and develop habits that involve saving money and reaching small goals.
THE FUNCTION OF THE PIGGY BANK
Piggy banks are popular because of their simplicity. They can be introduced as a vehicle that can take a child from ‘wanting’ something to ‘owning’ something through the power of saving.
The process is straight-forward yet teaches various lessons, including the work ethic aspect of earning a weekly allowance, money management skills, and money value. It is important to teach consciously teach kids the importance of saving early on but as they grow up, there are various other strategies that need to be learned that can contribute to a financially unrestricted career in business.
While saving money and spending wisely is a great habit to encourage early on in a child’s life, it’s a notion that can be altered as they grow up and begin their transition into the business arena. A money-saving mentality is linked to a safe and secure mentality – but you hear words like that and think of e ‘survivor’, rather than ‘thriver.
The people who are comfortable with playing it safe and were taught early to not take any risks are possibly the ones who are not reaching their financial potential. Opportunities will come and go in life and it’s the wealthy that will recognise opportunities quickly and know what action to take. If this mentality is rubbing off on our kids, they may grow up limiting themselves to a career of minimalistic potential but a higher level of security just for the sake of ‘getting by’.
THE FUNCTION OF COMMUNICATION
Clear communication about the role money plays in society plays a key role in assisting our kids to learn about the importance of positive money management strategies. Parents should feel comfortable discussing their financial situation with their children, as well as what they spend their money on. This type of briefing can accumulate over time and cement the overall message into their minds. Even the simple act of looking through magazines for sales will demonstrate a careful approach to managing money in the household.
THE FUNCTION OF BUDGETING
Budgeting is another way to teach kids how they can make the money they have work for them, regardless of how much it is. Stuart Zadel refers to the concept surrounding accumulation of wealth and draws on a hypothetical: If a person is spending more than their weekly income, could giving them more money help them? No, they would spend the extra money. Would giving extra money to someone who spends 100% of their weekly income help them? No, they would spend all of that money too.
It is only those who know how to spend less than they earn that an extra income would serve them purpose. From this, we can see that people who learn to make the most of their money will have a greater shot at being financially independent, regardless of how much you earn. Take your children shopping and let them to all the buying. Tell them that their pocket money for the week is whatever money is left over in the change. Don’t you think this will encourage smart spending, and a detachment from brands and images?
A CHANGE IN MENTALITY
Irrefutably, there are some flaws that exist in the lessons we teach our children about money. While the simple and obvious practices are, for the most-part, in place, the more meaningful principles that constitute successful businesses are being overlooked and avoided. The poor let the big machinery (corporations) manipulate them whereas the rich know how to use big machinery. This means that the rich possess the knowledge and savoir-faire to use the power of the corporation to protect and enhance their assets.
Individuals earn money, pay taxes on that money, and live with what’s left. The corporation, on the other hand, earns money, spends everything it can, and is taxed on anything that’s left. We don’t need to tell our kids that the perpetual ‘Rat Race’ is all there is to life. We don’t need to tell our kids that a high school education translates to wealth. We need to change our children’s mentality from “Can I afford it?” to “How can I afford it?”