I wrote an article in a Melbourne newspaper recently about teaching our kids about money and responsibility. In all the years I have been writing for newspapers, magazines and journals I have never had such an overwhelming response to an article. This response from the public indicates this is one of the key areas the financial planning community needs to be talking to our clients about and helping them deal with the issues. Concern for their children’s financial literacy and the failure of society to support this concern is a major issue for most parents and grandparents today.
In the article, I wrote about how my 11-year-old son had lost his first job. He didn’t lose it because he wasn’t reliable or good at what he did. In fact, his employer praised him for his courtesy and punctuality. He lost the job because someone complained about his age. Somebody decided to appoint themselves as the self-proclaimed watchdog for his rights and the fact she didn’t think he should work at 11 years of age. She didn’t care what the 11-year-old delivery boy thought; she just made sure he was sacked.
I was prompted to write because our son had used his initiative, with our encouragement, to ask around for an after-school job. Our local pharmacist gave him his first job and he started delivering medicines to elderly clients in the local area and at a retirement village nearby. This was something I had done as a child and it taught me the value of money as well as giving me pride in my independence. My brothers ran a paper round to earn their pocket money and they also learnt lessons along the way. It was part of growing up and taught us all invaluable lessons.
I wrote how one person’s prejudice had shattered a young boy’s pride and initiative and how it was indicative of the fearful and insular society we are becoming. Many of us as planners are asked by parents, “how do we teach our children about money”? It is an important question with which many of our clients grapple. They strive to build the basic financial building blocks with their offspring. The lessons can start at a very young age and involve teaching them not only about money but also about responsibility and the relationship between hard work, sacrifice and the subsequent rewards that can be enjoyed.
As early primary school children start asking about money, it is important to introduce concepts such as sharing and philanthropy as well as personal responsibility. Children are never too young to have explained to them how lucky they are and how they can help others by giving some of their pocket money to those less fortunate. The tsunami appeal last year was a great opportunity to introduce some of these ideas. Schools often run fundraisers and these, as well as collections at church, all serve to reinforce that money is’t just for the benefit of the individual.
As children grow older it is important to introduce the concepts of money as a reward for work.
Responsibilities such as household chores and keeping their rooms clean (a tall order for some teenagers) are vital. The concepts of going without and delayed gratification in a savings program is something that benefited many of us when we were growing up, but is often found lacking today. Kids won’t be lectured to but they will pick up the subtle clues parents can give them and the example they set. These are the financial planning skills at the core of what our profession is about.
An understanding of debt and all its dangers is important to children before they are ever given their first credit card. Mobile phones that are ubiquitous with the teeny-bopper set are often a salutary lesson in having to pay the piper and if their parents bail them out from their first unpaid bill they could be setting patterns that will stay with them for life. Sometimes tough love dictates that they will have to learn some hard lessons when the consequences aren’t as damning as in later years.
Money is a powerful tool and the mastery of money, debt and savings learnt at an early age is a skill that can literally set them up for life. An understanding of the power of compounding and percentages can have a profound influence on a young person starting out in life. It is well said that those that understand interest, earn it and those that don’t, pay it. Long before couples are burdened with their first mortgage and a young family to raise they should have been living life to the full and enjoying themselves but also saving concurrently and putting themselves in a position of strength.
I think this situation presents a wonderful opportunity for financial planners to demonstrate support for our clients in teaching their kids these values that the rest of society seems to be forgetting. Hopefully the Financial Literacy Foundation will provide us with the tools to enable us to do this in a systematic way. It will still remain with us as financial planners to lead in this area and we can add tremendous value.
