Tuesday, January 25, 2011

Are Todays Kids Smarter About Money

Cover of "Money Doesn't Grow On Trees: A ...Cover via Amazon
Kids growing up today are surrounded by every kind of electronic gadget. If I want to know how to search for something on Google or hook up a Blue-ray player all I have to do is call one of my kids and it's done in a flash. While I'm left in the dust scratching my head, they're already gone with their Ipod on their head.

Kids today can pick up on technology quickly, but are they also savvy with their money? Our children are smart, they know money doesn't grow on trees, it comes from a ATM. They know right away when Mom says they can't afford a toy, to urge Mom to charge it. The children are watching us use our debit and credit cards, they see us order goods and pay bills online. They know those little cards of plastic are able turn thin air into money at anytime, only later observing mom and dad blaming each other for the purchase.

What is it with these kids, they're supposed to be so smart. When we were kids our only financial tool was cash, there were no credit cards. How did we manage? The answer is fine. We managed very well because we spent when we had money and not when we didn't. If we want to make a large purchase in the future we used the ancient practice of saving up for it. 

So what does it take to teach your kids the skills and discipline they need to make the American dream come true for them? The same four simple strategies that have been deployed by parents since Ozzie and Harriet.

1. Give youngsters an allowance, to prove to them that there are limits to spending.

2. Pay them for out-of-the-ordinary chores, to show them that effort produces rewards.

3. Encourage them to save, so they become accustomed to delaying gratification.

4. Teach them the basics of investing, so they have the opportunity to make their savings grow.

But I found the most powerful tool when teaching kids about money is your own example. If you give money to your kid grudgingly, that conveys something to your off spring. Also if your always frazzled about your maxed out credit cards, they will see that. Whether you donate to charity, return the difference when the cashier hands you to much change, or brag about how cleverly you cheated on your taxes all send teaching messages to your kids on a regular basis. Junior will pay more attention to what you practice than what you preach.

Next bring your kids into some of the family financial business. Not how much you make or how big your 401k is. Decisions like your not getting a new car now because you saving for college expenses next year. Over time junior will get a sense on the limits to what the family can and cannot spend.

Your teaching them the difference between wants and needs, a lesson our youth desperately needs to learn. 86H386N4P4HJ


  1. In general, I'd say they are less smart, less disciplined, more conditioned to instant gratification and less likely to sacrifice to achieve a goal. But thank goodness, there are exceptions.

  2. I'm going out on a limb here but I think the financial blogging world is going to make a difference. I think with all the great blogs talking about financial issues the general population will learn that the answers they seek financially are at their finger tips.
    Just a hunch.

  3. I agree that kids learn the most from parents' habits. I subconsciously followed what my parents did and never carried a balance and was pretty debt-averse.

  4. You do lean from your parents habits about money. I did. Yet I know many who did the exact opposite as their parents.


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