At what time in your life did your parents teach you about money? Did you ever know about how well off you family was? How much money your dad earned? How much money your mom earned? How much money raising you cost? And should these be things that kids need to know? Let’s dive into it.
It has been no secret that financial literacy is one of the best skills to have when it comes to combatting proneness to “bad” debt. The more you understand about finance, investing and financial products, the less likely you are to be taken advantage of, or fall into many other traps such as quick cash and loan sharks.
Another not-at-all kept secret is the fact that we learn fastest and best when we are young. Children have an immense capacity of storing things in their still developing brains. It’s why it’s best to teach children multiple languages, and why there are so many advantages to being raised bilingual. Should we add finance to the list of things to teach in primary education? Can you imagine finance 101 with 6 year olds?
As idiotic as the idea of a CFO teaching kids who’d rather want to play with hot wheels and marbles sounds, there are other ways of teaching kids about finance. Maybe finance isn’t the right word. It invokes too many images of Wallstreet, Stock broking, investing and cracked-up man-children that want to rip you off. But how about teaching your kids about the value of money?
Maybe I should have started with answering the questions I posed in the beginning myself. Do I/Did I ever know what amount of money my parents made? Honest answer: never. Not a damn clue. I knew the possessions we had, because they were right in front of me. But what I didn’t see I did not know existed. Sure, we moved a couple of times during childhood and the houses always got bigger, but what does that mean to a 10 year old? We went on vacation multiple times per year, but we always stayed on European grounds, hanging out mostly in the Austrian mountains or the Black Forest in Germany. As lovely as those areas are, they aren’t exactly known as the jet-set-scene of Europe. My parents drove regular cars, we ate normal food, didn’t go out abundantly often, and they wore regular clothes (well, mom dresses quite eccentric, but that’s a story for another time, maybe). I grew up feeling very ordinary, in the financial sense.
Maybe more telling was the fact that as soon I went to high school, or at least thereabout, I started getting serious pocket money. Not the €2,- a week variety from primary, but €50 a month, pretty decent I’d say! Here was the irony: if I wanted to access my “earnings,” I’d have to ask permission from my parents with a reason why I wanted to purchase something, and what good it would do me. They told me that if I didn’t like this, I could always get a job and earn my own. So I did. I have worked since the age of 12, and have hardly every stopped, only ever allowing for breaks when moving country, or when studying got way intense.
I think that is what taught me about money. I’m not going to lie. I knew my parents had my back financially. As soon as I went to do my undergrad, my parents paid for both my education and my housing. Because we talk about the family’s finance so little, there wasn’t much of a discussion going into these decisions. Both sides assumed. My parents assumed they were paying for it, and I assumed the same. And that is what happened. I once asked my dad if he was sure. The MSc was expensive and the rent of the place I’d be living at for a year was another absurd amount of money. He said it was an investment. That was the end of that conversation.
As such, it’s not very surprising that the money I earned in the jobs I had next to studying went into food, partying and shoes. I had an absolutely abundant amount of heels during undergraduate. Now it’s not like I didn’t save any of the money I made. I did. But I definitely could have saved more. It wasn’t until I went to the UK for my MSc that I had a right switch in mindset. Why? Because everything around me was expensive, and I wasn’t making any money.
My parents told me they’d prefer it if I only studied and did well in the MSc. It seemed fair play. They would now also pay for my upkeep, on top of education and housing. It felt odd. No more independence, which sucked. But what sucked even more is that my parents and I, by this stage, had very different ideas about what constitutes “necessary upkeep.” I am cringing as I am writing this, because I can taste the privilege in the back of my throat, but they made me cut my spending. And it was an ugly process. They gave me about 50% of my normal spending habits. It broke my heart and my wallet.
It is by this point that I realized I had absolutely no clue how most people make ends meet. How’s that for an admission from someone who blogs about behavioural economics and managing your money? I was being fully supported, and was struggling to keep within budget. That’s pretty sad. I didn’t want to ask my parents for more money. I have my pride. Moreover, they could track my bank account and all its in- and outgoings, they knew when I was failing anyway.
Was it a good year financially? No. Was it a good year for some real personal development? Yes. Was I relieved when I got into a PhD which has a grant, which effectively functions as a wage? Oh hell yes. I now have a much better understanding of budgeting. I’m currently living of something that calculates to less than minimum wage (PhD wages are BAD), but I pay for my own housing, education and upkeep. So I’m feeling fly as hell.
Now the lucky thing here is that obviously, I was never at any real risk growing up. I’ve got a financial safety net. Even if I were to get into real bad credit card debt, or have at it with a loan shark (?) I would be able to go to my dad and we’d figure it out. He’d probably put me on an interpersonal loan so I’d pay him back, rather than the person trying to rip me off. Because debt doesn’t just stay there, it compiles people, it GROWS. Teach your kids about compound interest!
Moreover, my dad used to be an accountant, and he is really financially savvy. So I did actually know about lots of bad financial decision-making, in theory. And my education, which has always had a focus on economics, taught me much of the rest. But I can imagine that if you take out these two factors, you can be an incredibly vulnerable person when it comes to finances taking control of you, rather than you controlling them.
There are great sites out there that teach you how to teach your kids (of all ages) about money; what things cost, what things are worth, and maybe most importantly: how to be content and live within a budget.
I look back at how I used to think about and spend my money when younger, and it doesn’t exactly fill me with pride, but I learned about money and I am managing now. The best thing to keep in mind is that not everyone is so lucky, and that we need to focus on educating those that can learn the best and most, especially as the financial sector keeps changing very rapidly.