Think back to your school days. What subjects did you learn in the classroom? Reading, writing, and math for sure. History, geography, and science as you progressed through the grades. Perhaps even art and music. All of these subjects are important and certainly useful to you at some point in your life (even though you probably swore up and down when you were eleven that you would never have any practical use for algebra!).
The one subject that is not usually taught in the school system is the one that will have a huge impact on your life each and every day: money. How to earn it, spend it, invest it, and pass it on to the next generation.
The inability to manage money:
- Is the number 1 cause of divorce in North America
- Is responsible for the astronomical jump in personal bankruptcies in the past decade
- Perpetuates generational poverty
- Leads to stress, poor health, and poor self-image
If money is so important, why isn’t it being taught in our school systems? There are probably as many answers to that question as there are educators, but one of the major reasons is that money is seen as a commercial rather than an academic subject. Whatever the reasons, the fact that the subject of money is not taught in schools simply means that it must be taught at home. In many families, however, there are reasons why financial savvy is not being passed from generation to generation:
- Parents feel like they have never learned the skills to manage money themselves, much less be able to teach their children.
- They feel that talking about money with their children is crass. “Good” families don’t discuss income or wealth.
- They are afraid that discussing money will scare the children and make them fearful that they are “poor”.
- They are embarrassed about the family’s financial situation and are afraid that their children will see what terrible money managers they have been.
All of these reasons are rooted in the traditions that parents have been raised in. If these fears are not overcome, the end result is that their children in elementary school learn about money the same way they do about sex and drugs; from friends, television, and what they perceive that their parents are doing.
When children have to learn about finances from what they perceive their parents doing, they will be both forming some inaccurate pictures of their parents’ money management, and picking up their parents’ bad money habits, which eventually, they will pass on to their own children. As a small business owner, you have an even more important reason to teach your children about money and wealth. They may take over your business someday or start one of their own.
The Six Bad Money Habits Kids Learn From Their Parents
- I’m too young (too busy, too old, too whatever) to plan for my retirement.
- Let’s buy it now and pay later.
- There will always be more money where that came from.
- I don’t have enough money to bother investing.
- Only poor people prepare and stick to a budget.
- I just don’t have a head for numbers.
Take some time to examine your own teachings and experience with money and make sure that your kids don’t learn the wrong way.
Why rich kids need money skills every bit as much as poor kids
Being able to retain wealth is as important as being able to attract it in the first place. We’ve all read newspaper stories about lottery winners who become instant millionaires overnight and end up broke and on welfare within a year because they were never taught how to care for and manage wealth. More frequent but less reported stories abound on the flip side of the coin where people who started with nothing slowly and carefully amassed a great deal of wealth for themselves and their children.
Affluent parents in particular need to teach their children how to retain wealth or else they risk their children seeing money as something to be taken for granted. Something that will always be around. It’s easier to place a high value on a scarce commodity rather than one that’s laying around in abundance.
One of the most important reasons to teach our children the value of money is to help them learn to hone their value assessments. When we make comparative judgments about something’s monetary worth, we can use that same skill to judge non-monetary worth.
As parents, we always want to make the best decisions for our children. In fact, that is our job: keeping them safe from harm and ensuring that they don’t do anything in the short term that will harm them in the long term.
We know from prior experience, for example, that if our child was to take his $20 birthday money from Grandma and spend it all on Pokemon trading cards, he will get enjoyment out of the purchase for only about two days. Then, he will lose interest in the cards and they will eventually end up under his bed. That makes it easy for us to say “no” when asked. However, in the long run, it’s more important to help our children come to that value judgment on their own. It takes longer and requires more effort for us as parents, but we will be teaching our children lifelong lessons about value that they will apply to various situations even after they have grown up and flown the coop.
The value of a solid financial education to our children is incalculably great. It not only gives them the tools they need to become financially grounded but also to be able to pass your lessons along to their own children. Take time soon to help your children understand not only your company but the money flows in it. Both of you will be stronger for it.
Angie Mohr is a chartered accountant and certified management accountant. She can be heard regularly on radio with Small Business Survival Tips. Mohr is also a business columnist for a large daily newspaper and has written many articles for business magazines.