Our youngest son is starting high school tomorrow and this quite clearly means that he will have to take new financial responsibilities. Gone are the days when he could just walk down the road to his school or we could pop around to pay his dinner money. From tomorrow on he is (supposed) to be a grown up and get his money for the bus, for lunch and his pocket money and do…what most of us do: manage it.
The problem is that if he spends it all during the first week of the month (or the first two days of the week, if he gets it weekly) there are serious parental choices to be made. Do we: a) leave him to walk and take lunch from home for the rest of the period; or b) be indulgent parents and, after a bit of a strop from me, provide more? How do we ensure that he learns and that he learns the right things?
But what is the most important and useful skill that shapes the relationship between our children and money? Is it to save?
Well, we have one grown up son who has learned to save and we do find it ever so slightly annoying: he likes to save but he has no awareness of how to spend. More importantly, he has none of the graciousness that conscious spending brings with it – the graciousness to spend on other people.
This made me think about what is important to teach children about money? What is the one skill that will serve them well and that is the foundation of all good personal finance practice? Therefore the question, are we teaching our children the wrong thing(s).
In many areas of education and life, by tuition or example, we teach our children entirely the wrong thing. For instance, in school they learn about learning and not knowledge; about passing exams not the usefulness of even the most abstract knowledge; about being part of a group, always being part of a choir but not developing distinctive voice; about being average in everything but not being exceptional in one big thing; and about working on what they find hard not what their unique gift is.
We teach our children to drive to the corner shop, to search for the closest parking space at the gym and to eat way too much so than they have to ‘work’ the excess out.
We generally set a double trap for our children: the trap of mediocrity and the trap of contradictions.
But do how does this manifest in personal finance?
I believe that by tutoring – like providing incentives – and by example most of us teach our children to save money. Let’s face it – this is a part of personal finance that has come to dominate strongly our notions of money management; particularly in the UK but this is probably a topic for another article. Frugality, saving and storing has become a new cult – and understandably so after 2008.
It doesn’t really matter how I feel about frugality (or extreme frugality): for most people, most of the time, it is easier to reduce their spending rather than to increase their income. So, we send messages about not spending; about saving.
Whilst we emphasise learning how to save – both as spending less and building a buffer of resources – this is not the fundamental part of our relationship with money and its purpose.
It seems to me that this needs a bit of clarification. Let’s think what is the worst thing that will happen if we fail to save? We may get in a bit of financial pickle. But if we manage to earn enough we are likely to be fine despite the fact that we will have to continue earning. There are many people who manage to live their lives without learning to save – and these people are not necessarily in debt or desperate financial situation either. In fact, some of them have found other ways to store their labour and thus ensure their future.
Saving is a good practice but to a degree it is optional.
But can we get away without spending? I believe that in contemporary societies this is impossible – even if we can limit our spending it is impossible to avoid it completely. After all, money is the universal mediator.
Spending is universal and unavoidable.
Therefore, in terms of our financial health, it is much more important to learn how to spend than how to save!
I have come to realise that raising our son to be a man who has healthy and responsible relationship with money we ought to teach him how to:
- Control his wants;
- Prioritise his desires;
- Distinguish between the things he wants now and the ones that he can wait for; and
- Get the best that will last.
I suspect that these skills of conscious and smart spending are learned by example, subtle messages and firm but flexible guidance.
What do you think and what is your experience with teaching your children personal finance skills?