Parenting Is Largely Responsible For How Kids Spend Money
Filed under: Spending
When you make an impulse purchase or buy something that you just don’t need, do you ever feel like blaming your parents for your poor decision making?
Surprisingly, when it comes to how you spend your money, the kind of parenting you had is at least partially responsible.
The Chase Blueprint(R) Born to Spend study, authored by behavioral economist Dr. Hersh Shefrin, looks at the difference between nature and nurture when it comes to how we borrow and spend money. It turns out, the way your parents talked to you about money when you were young can have a huge impact on how you handle your finances once you’re on your own.
Growing up, my parents often referred to me as the “expensive” child. I was the one who needed braces, glasses and then contacts, and had an insatiable desire for new books and music.
But we didn’t spend money on frivolous things. I watched my mother mentally manage her cash down to the penny. She always shopped the sales, carpooled, and cooked from scratch. My parents drove an older car.
Their top priority was education: Paying for the best schooling they could afford in the belief that education was the single most important thing they could do for us. Their second priority was creating lifetime memories, through shared experiences. Whatever was left went into savings.
As I grew, those were the lessons that sunk in. Be smart and careful with money. Don’t spend more than you have. Pay cash or, if you use a credit card, pay it off in full at the end of the month.
I learned to love investing from my grandfather, who was retired at 55 and twenty years following that left my mother and uncle a significant chunk of money earned through his investing prowess. Because of his example, I started investing for retirement when I was 22. Even though I only earned $14,500 in my first job out of college, I was able to save $2,000 to put into my IRA.
My husband, Sam, and I have tried to pass these money smart lessons down to our two children. They’re only teenagers, but so far, so good. Here are a few ways to help teach your children to manage their money well throughout their lifetime:
- Start when they’re young. Money lessons abound in everyday tasks. When you go to the grocery store, show the kids how different brands of milk are different prices. Explain the concept of a sale and what delayed gratification means. For example, when our children said they wanted a toy, I responded, “Let’s wait a week. And, if you still have to have it, we’ll figure it out.” Mostly, they forgot about it and the subject never came up again.
- You’re being watched. So lead by example. The New York Times personal finance writer Ron Lieber says you have to walk the talk. “Kids pick up plenty by osmosis, but you have to practice what you preach,” he tweeted.
- Show them the value of experience over things. Do things with your kids rather than buy them things. Take them to the bank, the store, the post office. Let them watch you pay the bills. Go to the zoo or bike riding or just take a walk together. What you’ll teach them is to value family time.
- Set expectations and then give your kids the tools to get there. The Born to Spend study found that kids will learn if motivated correctly. But, you have to be clear about what choices they’ll have to make and the potential results of their actions. It’s called “choice architecture.” You create the landscape of choices for your children so they can make good choices and limit their exposure to bad ones.
- Keep the conversation going. If you want your children to really “get it” when it comes to money, you’ll have to talk to them often about how to make good decisions. The best way to do that is to encourage them to ask questions, and then answer them honestly.
Chase Blueprint is a free set of features on Chase credit cards that helps customers avoid interest and pay down balances faster.
is an award-winning author, columnist, radio talk show host, and blogger who specializes in real estate and personal finance. Find her online at .
Sources
- The Bureau of Labor Statistics Consumer Expenditure survey
- Chase Blueprint Born to Spend survey from April 2013 https://www.chase.com/online/chase_blueprint/document/JPMC_Chase_BornToSpend_FINAL.pdf
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