Raising Financially Competent Children

Raising Financially Competent Children

How different is your children’s upbringing from your own? I’ve been thinking about this a lot lately as I have two boys, ages 18 and 15, that are experiencing a much different financial-oriented childhood than I did.

Most notably, they are growing up with much more affluence around them, both within our family and in our community. I don’t think this is necessarily good or bad – but what I’m finding is that it’s really challenging to instill certain values around money when there’s more of it around.

Growing up, it was easy for me to develop a work ethic, learn the value of a dollar, and create my own identity, as my parents were both school teachers and money was scarce. I quickly learned that if I wanted anything beyond the basics, I was on my own.

This led me to get a paper route, mow lawns, and do other odd jobs to earn money in my early teens. I worked as a dishwasher 20 hours a week throughout high school, and still managed to be very engaged with sports, family, and friends.

In college, I was employed by the college’s grounds crew during the school year, and worked as a bank teller during the summer months. Along the way, my parents expected me to be a good student, be involved, and earn part of my keep. They gave me space as long as I was doing these things, plus the autonomy gave me freedom to pursue my real interests. As a byproduct, I learned how to juggle multiple demands, manage my resources, and build competence.

Affluent Families Face Unique Challenges

I’ve come to realize that while children from affluent families have tremendous advantages, they face considerable obstacles when it comes to building financial competence. When money is abundant, kids can have difficulty understanding that it’s a limited resource and may have no idea about the effort it takes to earn it. It’s also easy for parents to fix problems or overly indulge when there isn’t a financial constraint.

I made this mistake when my son broke his iPod and was distraught. I replaced it, he didn’t experience any pain, and I lost a powerful teaching moment. If he had to earn the money to replace it, I’m sure he would have quickly learned to take better care of his things.

Similarly, there really isn’t that much left for them to want when we have so much stuff. I also worry that while my standard of living continued to increase after I left the nest, they may experience a marked decline, which may lead them to live outside their means. I’ve seen this happen over the years with many of my client’s children.

Changes I’m Making

I’ve started making some changes that I think will make a difference.

  • Consequences. I’ve stopped fixing things. It’s amazing how resourceful my kids can get when they have to be. If something breaks, they find a way to repair it or ask for jobs that they can do to earn money to replace it. Of course, this comes after a long and hard-fought debate and being told I’m ruining their lives.
  • Stuff. I’m erring on the side of less. Normally, I’d probably buy something like the new Xbox One X as a Christmas present. I’m not doing that this year, and I’ve made it clear that if they want it, they can save for it.
  • Jobs. I’m listing out jobs around the house and what they pay. I’ve told my oldest son that I’ll pay him what we pay the house-cleaners if he cleans the house. He hasn’t taken me up on this yet, but I think he’ll come around if I hold my ground.
  • Awareness. I know my kids learn more from my actions than my words alone. I’m more aware of the money messages I’m sending, which has caused me to be more thoughtful about how I act with money decisions. I’ve also started bringing them into the family budget discussions, explaining the choices and tradeoffs we are making.

Financial competence takes time to build and behaviors don’t change overnight, so my wife and I are taking baby steps. By outlining expectations, sharing our values, exercising some tough love, and creating a less cushy environment, I’m hopeful our kids will be more prepared for the real world.

What are you doing to build a legacy of financial competence with your children?


Ben Johnson
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