How do I teach my kids and grandkids about money? This question embodies one of the classic challenges that faces any parent or grandparent. A survey of high school students revealed that about 88% of what they know about finances comes from their parents. Interestingly though, these lessons did not arise from formal teaching or conversations, but rather from observing how their parents earned, spent, and talked about money. More than any other way, children learn by example. What do your actions teach your children/grandchildren about valuing, spending, and saving money?
Define Your Values
Money has a distinct ability to highlight values in each family. You may prioritize stability by avoiding debt and paying off expenses, or you may emphasize relationships by investing in important life experiences as a family. You may care about helping others, so you include charitable giving in your living expenses. Children may not realize how money can be used to help themselves and help others, so including them in these conversations can help to pass along those values. Kids and grandkids pick up on these subtle clues about how to handle money and implicitly learn how to express what they care about through it. If you define and become mindful of your own values, you can better match your financial habits to them.
Align Your Spending
Beyond defining your values around money, the next hurdle centers on how your spending aligns with those values. When did you last look at your spending? Do your actions reflect what you care about? Consciously or unconsciously, kids absorb the many spending habits that they witness daily. It is all about controlling your influence. Being aware of these habits can remove the friction between what you say you care about and what you show you care about. How you spend illustrates what you value. Aligning your spending with your values and including your children in that process can help them to be more mindful when spending money and help them to do this better for themselves in the future.
Model Your Saving
Lastly, one of the most important aspects of expressing your values through your finances relies on having discretionary savings to use on the things you care about. Thus, children need to learn how and why to save. As a young child, my grandparents gave each grandkid a group of stocks for Christmas. One year my grandfather included a picture of a bright yellow convertible in the letter. He told us that if we left this money in the stocks, we could get a car just like it in the future. Although I didn’t understand what it meant to own stocks at the time, he taught me an important lesson about saving money to reach a goal in life (along with a nice introduction to investing!) … although that yellow convertible still eludes me. Helping kids to understand the purpose of saving and what it can do for them in the future can give the act of saving the critical power and relevance needed to motivate saving in the first place. Plus, getting them started early can help to develop healthy saving habits as they become adults.
Your actions matter! Whether you want them to or not, your kids and grandkids will pick up on your money habits as they grow up. So, give your actions meaning and purpose by defining your values, aligning your spending with those priorities, and encouraging saving to allow those values to come to life. What you do regularly allows those values and habits to filter through to your children’s and grandchildren’s lives. Show them that money can be a tool to help you to achieve your goals and live out your values.
Written by Katheryn Brehm, 2023 Summer Intern