I'm starting to geek out on this whole financial education thing. Okay, I'm not starting to geek out but have actually been getting into financial education for a while. But I'm starting to geek out on a new level, which is saying something. I know that I'm reaching a new level because I've been reading surveys.
There are not many things more boring than breaking down the results of a survey. I'd almost sooner slowly peal my fingernails off than decipher these things. Almost.
There's no plot point or even main character. I'd say that there are no pictures, but there are tables and charts. Even those can be mind-numbing in the sense that they are filled with numbers and not action heroes.
But my outlook is starting to change. I really want to master what's going on in financial education for children, and there's just no way around digging into the stats. So here I go.
Capital Group released an interesting survey this last month, and it has some insights that parents might benefit from mulling. Here are just a few:
"Most Americans who are investing for retirement today wish that someone had shared advice on saving and investing with them when they were teenagers or young adults" (page 2).
"Mothers talk more about money and financial topics with their children than fathers, and that includes everything from having good credit to starting to save early in life for retirement" (page 2).
"Overall, 30% of parents wish they had started teaching their children about financial matters earlier in their lives" (page 3).
There's much more than that short list. One table on page 3 lays out numerous financial topics and the age at which those topics are likely to receive attention by parents in discussions with their children. Estate planning is the stepchild of the bunch and receives nearly no attention.
Capital Group ends the document by giving "[f]ive conversation-starters for teaching children about saving and investing":
Live within your means.
Start saving early and regularly.
Take advantage of your employer's 401(k) match.
Don't carry a credit card balance and manage credit effectively.
Create a budget based on percentage of income.
Great advice, all of it. But I think it needs an addition. So I'm going to list five conversation non-starters.
1. You're so materialistic.
Dolls, toy cars, games, bikes, "an Official Red Ryder Carbine-Action Two-Hundred-Shot Range Model Air Rifle!" You get the picture. Yes, your children are materialistic. They revel in materialism, and some never quite get away from it. We as parents need to be a little more sympathetic to our children's consumeristic impulses. After all, our children are bombarded daily by powerful advertising campaigns. They don't need judgment, they need our love and attention and soft-spoken words that encourage them to seek out the true joys in life.
2. That was a waste of your money.
Kids are terrible decision-makers with money. My daughter just blew half her meager budget on a toy dog the size of her thumb that she subsequently lost. I knew that she was going to lose this cheap-quality product, too. So what? We need to allow our children to fail and not control every single purchase. That's not to say that all their money should be discretionary. Parents and children should agree on a budget. Then parents need to let go of the fact that their kids blew through money that parents could have used a lot more effectively. Also, parents might ask their children to reflect on their purchasing decisions.
3. This is "big people" stuff, and I don't have time to explain it to you.
When children start asking their parents questions about money, parents often turn down this golden opportunity for discussion. Money concepts are really challenging to explain, and parents balk at their children's questions because it might expose their own ignorance. Parents should have confidence that they know more than they give themselves credit for. Where there's a gap in knowledge, parents can use this gap as an opportunity for them and their children to be educated together.
4. We can't afford that.
We say these words all the time and they might very well be true, but this tactic is really just a copout. I prefer Robert Kiyosaki's approach as described in Rich Dad Poor Dad. He uses these types of confrontations to teach the principle of the opportunity cost. It can be a little abstract for children, but eventually children will realize that what cannot be purchased at the moment may later be accessible through time and sacrifice.
5. They should cover this in school.
I'm personally a fan of the idea that schools need to become more effective at teaching principles of finance and economics to children. It would sure make math a lot more interesting. But, ultimately, the moral responsibility of making sure that children understand money rests on the parents. Schools and other courses on money are merely instrumentalities that parents utilize in executing their responsibilities.
So get out there and talk with your kids. It's scary, and you're inadequate (or so you think). But your kids will be grateful that you took the time to teach them about money. Or so the survey says.