Rich Dad, Poor Dad: How the level of financial literacy is related to children's upbringing

YEREVAN, 15 August. /ARKA/. Family customs strongly influence our thinking and choices in important life situations. This applies, among other things, to financial matters. Even after achieving independence, we are sometimes unconsciously guided by the behavioural patterns of our parents.

In this article, we look at the main attitudes that shape children's way of thinking about money and look into steps how to help them develop financial literacy from an early age.

Discipline

Keep the house clean, observe the regime, be diligent in their studies - this is what most parents teach their child. However, not everyone's attention to order extends to handling money. Why is it necessary to keep track of the school schedule, but not necessarily to know the amount of monthly expenses? Do ignorance and slovenliness lose their negative character in the financial sphere?

From an early age, children should be taught patience and the habit of clearly defining a goal, assessing its achievability and the cost. For example, find out what the child would like to get (a toy, a candy) and together count how many coins are needed to buy it.

Understanding the role of money

Discussing financial matters can be done even with very young children. From the age of three, they are able to understand that toys, food and supplies cost money.

When explaining that material things do not arise "by themselves", it is important to draw the child's attention to truly valuable and "free" phenomena. For example, time spent playing with a friend is a lot of fun and costs nothing.

At the same time, if parents argue that "happiness is not in money", justifying their own inefficiency, it forms a negative or indifferent attitude to finances in the child's subconscious. There is no denying the great importance of income in our lives. Money allows us to realise ideas and desires, help our loved ones and bring something new into the world.

 

Attitudes towards earning money

From an early age, you can explain to your child how you earn money and talk about your profession. Children like to learn new things and they will also be interested in hearing about the different forms of money (coins, notes, cards).

A child who sees how parents watch the budget and thanks to this money is enough for necessary things, large purchases and entertainment, will understand that it is possible to manage funds effectively, and maintaining stability requires habit and discipline, not miracles.

If financial problems lead to quarrels in the family, and the day of salary is perceived as a holiday, children can distort the essence of money: consider it an end in itself, the embodiment of happiness, and not a tool.

Independence

Children should be shown that spending varies in priority, as some things are necessary to have and others are just nice to have. Offer children different tasks, for example, to choose which of the baskets of goods to spend the sum N on: in the first one - a week's supply of groceries and household items, in the second - sneakers and sweets. It is important not to "programme" the child for an answer, but to ask and discuss different options.

It is useful to compare prices, track discounts and look for the best options. Explain to children that some items can be substituted, borrowed or rented. If you constantly use credit cards, describe the mechanism of its work, explain to them that these are the bank's funds and the expenses must be replenished in time.

It is good practice to assign your child a task that requires regular calculations and spending. For example, let his/hers "area of responsibility" be the choice and purchase of a certain category of goods for a fixed amount or payment of utilities. So the child will understand how much money and effort is spent on household organisation, will begin to pay attention to price tags.

Allow children to act, the experience of independent, even irrational, purchases helps to determine the value of money. Try not to scold them for inefficient spending, but celebrate successful ones.

 

Attention to savings

When children start using pocket money more actively (11-13 years old), develop the habit of saving.

It is important to realise the importance of a financial cushion before the age of 18, when many people start to live independently. It is useful to discuss with your child examples from your own experience, talk about unexpected situations and how savings have helped them overcome difficulties.

If you have opened a savings account for your children, make them understand that it is not a "bag" of money to be spent, but a "springboard" that allows them to take the first steps towards their goals and increase their capital in the future. If you have investment experience, be sure to share your observations with your children without hiding mistakes.

Fears and illusions

We can both copy patterns seen in childhood and reject them. For example, one person, brought up in a family with little wealth, gets used to being limited, does not think about changes and does not set big goals for himself, while another person chases luxury, lacks self-control and wastes money.  

Often in the minds of people there is a "fixation" on financial issues in which their parents were illiterate. For example, if there were problems in the family because of unpaid debts, a person rejects everything related to credit, including cards.

When a child hears that parents condemn acquaintances for being poor or, on the contrary, "too big", a wrong idea of the role of finances is also formed. The idea arises that "how much money a person has determines whether he or she is good or bad".

Overcoming financial difficulties

Be honest with your children, don't be afraid to discuss financial matters, talk about income and spending. Avoid the categorical phrase "There's no money for that" if the budget does not allow you to make a purchase for your child. This will cause additional anxiety. The child will associate the lack of money with hopelessness.

"No money" is a consequence of something, such as a reduced workload or the need to cut back because of a large purchase. Depending on the age of the children, you should describe the situation to them in more or less detail, explain how you can save or earn money.

Attitudes towards sources of income

Often a child's first money for personal expenses comes from his or her parents. It is important that pocket money should not be a payment for standard chores or a reward for success. Otherwise, the level of discipline and motivation decreases. Obtaining new knowledge and skills, responsibility to loved ones lose meaning and value for the child.

It is not worth giving pocket money in an impulse to please children in some way. This approach is haphazard. After all, the child should understand that in real life, funds, as a rule, do not appear by chance. Parents should determine in advance with their children when they receive pocket money, to create an objective and understandable to both sides of the system.

Summary

Patterns learnt in childhood from parents influence a person's attitude to money. It is important to think about what behavioural patterns you are transmitting to your loved ones and honestly ask yourself whether they are disorderly and imbalanced. Perhaps the desire to become a positive example will motivate you to change your own habits.

This article was prepared within the framework of the joint project ‘The Year of Investing in Oneself by ARKA and AMI Novosti-Armenia news agencies and Freedom Broker Armenia. 

Read the news first and discuss them in our Telegram

10:00 08/15/2024