Teaching children about money | UBS United States of America
A person’s attitude towards earning, borrowing, saving, spending and sharing money usually varies according to an individual’s values, and most of the time these values are learned to home by observing family members.
Children learn these behaviors and develop a set of values, whether they are deliberately taught. The only question a parent or guardian has to face is whether they will actively and deliberately participate in the teaching process. What is learned about earning, borrowing, saving, spending, and sharing can be left to chance (friends, acquaintances, random experience, TV, and the Internet) or guided by parents in a positive direction. While this is true for all children, those who are destined to inherit significant wealth in particular need knowledge and common sense to make the decisions that inevitably accompany such an inheritance.
Once a parent makes the decision to actively participate in a child’s learning process and try to provide positive guidance, many questions can arise.
- When should I start the learning process of a child?
- When is it too late?
- What are my values?
- What values do I want to teach?
- How to teach these values?
- Should I be the “teacher”?
The large number of questions and the lack of definitive answers could explain the results of a recent survey which indicate that parents find it easier to talk to children about drugs than about money.
While parents are usually the most important role models for a child, a little emotional and technical support helps. It helps build a team of one to five family members and friends who can offer information and experiences that will aid in a child’s financial education.
Actively encourage the child to participate and communicate about money matters.
As the child ages and matures, consider expanding the group to include professional counselors. A financial advisor, tax preparer, attorney, and others can each add to a child’s observations and experiences. Recruit people who will help reinforce the values a parent wants to pass on. Determining what is taught and how it is taught depends much more on age and maturity. Children learn not only by listening but by observing the behaviors of their mentors and through personal experience. “Do as I say, not as I do” won’t always work; especially when they become teenagers!
Successful teaching techniques include:
1. Guide and supervise, do not direct or dictate
2. Compliment good behavior and use mistakes as a teaching opportunity (we learn more from our mistakes than from our successes)
3. Be consistent, fair and ready to listen
4. Be a good example
5. Hold regular family financial meetings
The purpose of this exercise is not only to teach children about money, but also to teach them how to communicate better about their finances to avoid future problems. If a young adult knows they have a variety of resources to ask questions about, they are more likely to seek advice.
Money sense may come naturally to some, but it is a skill learned over time, in many ways, from many sources. Money management values will be learned by each individual, but the sources from which they come and whether the learning experience will be positive or negative can be guided by parents and other mentors. Good money management skills can provide individuals with a foundation for happiness, stability, and independence. Poor money management skills can lead to the stress and anxiety that accompanies excessive financial obligations and the dissipation of wealth.
Start building a team of reliable sources of information for children. Start with like-minded family members. Expand the group to include financial advisors and add other professionals (lawyer, accountant, tax preparer, insurance professionals, etc.) as appropriate. Introducing the process to children at a very young age, both with words and actions, is optimal, but communicating at an age-appropriate level with children of any age can help. Providing the knowledge and framework to deal with future financial problems will empower them to preserve and manage the wealth they earn or inherit.
See the full white paper on advanced planning Teaching Kids About Money.
Casey Verst is Senior Wealth Strategist in the Advanced Planning Group
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