Your childhood has a huge impact on your relationship with money, for good or bad. Your spending and investing habits have probably been strongly influenced by the way you were raised.
“I talk to all my clients about their view on money and they are usually highly affected by the way they grew up,” says Michael Cave, Director of Cave Financial. “People with parents who were savers either become savers themselves or go the other way and become big spenders. Those whose parents liked to splash out may follow the same path, or rebel and become very frugal.”
So what lessons are you teaching your own children about how to manage their money? Ideally, says Cave, you want to be a great role model by making sensible financial decisions, yet not being punitively tight with your cash. His top tips for teaching your children about money are:
- Help your children understand the media cycle of reporting on house prices and the share markets – the media is reactionary, but you shouldn’t be.
- Talk to them about resisting the push to keep up with the Joneses, or the Instagram influencers. What you see is not always reality and these lifestyles are often fuelled by debt.
- Show them ways to make money that aren’t limited to getting a job. Teach them a good work ethic as well as strategies like investing, side hustles and selling their old possessions.
- Make it clear that money can’t buy you happiness once you have enough to live comfortably. Instead, they need to be content with what they have, rather than constantly comparing themselves to people who appear to be wealthier.
Try to talk openly about money and income so your children understand that it’s not a taboo subject – and let them learn by doing, rather than by being lectured.
“Let your child experiment and take risks with small amounts of money when they’re young and have plenty of time to recover,” Cave recommends. “Trial and error teaches them how to budget and the benefits of saving. When they’re experienced with small amounts of money, those same principles translate to larger amounts, and they have the discipline to manage their finances successfully.”