Huge colorful packages look amazing on Instagram, and your toddler is so cute unwrapping one present after another… Few parents realize that first birthday parties will establish your child´s future money values.
While many parents comment on their children´s disconnect from reality and unreasonable spending behavior in their teens, very few seem to know how to solve this problem.
Four mistakes parents make in financial education:
1. Showcase the culture of spontaneous consumption.
Your child will notice if you are prone to planning and budgeting or love to go shopping to treat yourself and your loved ones to something nice. Once shopping and entertainment mean the same thing, it’s hard to take it out of your system.
“Once shopping and entertainment mean the same thing, it’s hard to take it out of your system.“
2. Lack of a family strategy on presents. It is tempting to spoil your tiny firstborn with a lavish birthday party. It is easy to buy a first bike when your child “needs it” instead of keeping it until her birthday. It is hard to “manage” the number of gifts your family members are keen to bring to the Christmas party and maybe impossible to agree on the present policy with your “ex”.
Every single present given to your child contributes to their future understanding of the value of money. It is worth thinking through which values you want to transmit and how they will be reflected in your presents over the years.
3. Avoiding open money discussions
“Are we rich?”
“How much money did you earn today?”
“Why is our house so small?”
I would say that the majority of important money conversations with your kid start with an embarrassing question or may slightly touch your ego. Nevertheless, it is important to embrace these opportunities to explain to your child the numbers of your home economy. Your 11-year-old is fully capable to process the big numbers of your life (how much do you spend on rent or mortgage, how much do you pay for the internet, what was the cost of the last vacation, and how it compares to your monthly salary, etc.)
If you are keeping these conversations “for later”, be more concrete and decide when this “later” will happen and how will you start talking about money to your teen. Keep in mind that once you established the norm of not talking to your child about money it will be only harder to breach this topic in the future.
“Once you established the norm of not talking to your child about money it will be only harder to breach this topic in the future“
4. Miss out on key learning opportunities, such as the purchase of the first technological gadget.
It seems easy and “practical” to give away your old phone to your child and buy yourself a newer model. As a result, your child ends up with a pretty expensive device with a feeling and a belief that “it is not a big deal” and would even claim that they got an “old” phone and complain about it. Far more complex but highly educational would be to plan a purchase of a certain brand and model with a clear budget in mind and give your child an opportunity to earn this money over a longer period of time. Indeed, this requires a year of two of planning, a long-term vision and plenty of patience, but it is your child´s future we are talking about. Easily handing your child a device worth a month’s salary is an important step that will distort their view of money values.
“Instead of presenting your child your old phone plan a purchase of a certain brand and model with a clear budget in mind and give your child an opportunity to earn this money over a longer period of time“
Written by Lena Perepelova, the founder of FunFinance Virtual Business School for Kids.