All our decisions are governed by emotions. Food is a classic example, when we see that sandwich or the chocolate cake or the donuts, we can taste it. Our emotions have told us.
Money is another classic example. If we are happy, sad, stressed or angry, it is very easy to take the credit card for an outing to make ourselves feel better. If you use money in this way, that is what your children will also learn.
Seth Godin said, “we have a conflicted emotional connection to money.”
Children learn by watching people’s behaviour and listening to what is going around them. So as parents, if you are anxious or worried about money, you will pass that emotion onto your children.
If they hear you arguing about money, they may start to fear money, or associate it with negative emotions. Conversely, if you are confident with money and a good money manager, your children will pick-up that on that behaviour as well.
Money emotions can also be associated with events that happened earlier in life. One of our colleagues worked with a woman whose father had a major heart attack and died when out at a celebratory family dinner. This woman was a child when this happened and has since associated celebration and spending money at restaurants, with sadness and negativity. As a result, she would never allow herself to enjoy money as an adult.
Keeping secrets about money in the family, can cause more anxiety than telling the truth. Children will make up their own stories to fill in the gaps which can be quite different from the reality.
There are numerous examples of children being brought up thinking the family is not wealthy only to find out later in life that the family was very wealthy. Their parents just didn’t like to spend money.
Some children will make assumptions about where they fit in the social ranks with friends, based on how you spend money and how they see their friends. For example, they may assume the family is poor because you buy school uniforms at the school second hand shop, while friends get brand new uniforms. This decision may have nothing to do with how much money you do or don’t have, it may be about being practical to spend less on a uniform they are going to grow out of in six months time.
There is a concept called the Abstraction of Money which has crept up on us over the last generation or two. Think back to your parents or perhaps your grandparent’s time. There were no credit cards, eftpos machines or paying with smartphones, everything they bought was paid for with cash.
What this did was clearly link the pleasure of buying something with the pain of having to pay for it.
So quite a bit of thought was put into the buying decisions. This Abstraction of Money has widened the gap between the pleasure of acquiring something with the pain of paying for it. You don’t feel pain, as you whip out the credit card, or tap and go the eftpos machine, so it is much easier to spend without thinking about which also makes it much easier to overspend.
Children don’t understand the concept of credit. They don’t realise that everything you put on the credit card, debit card or withdraw from the eftpos machine comes from what you’ve earned. This is a very important lesson for them to learn. They do need to understand that when they want something, even though it is easy to put on a card, the ‘piper has to be paid’ from somewhere. As parents, you need to link the pleasure and the pain together.
That is one of the reasons it is important to make sure your children understand maths. If they can work out how much money they have to spend and what they will have left after they purchase item A or B, they can be a little less emotive about the decision. In other words, their rational brain can kick in, not just their emotions.
Whether we are talking about children and money or adults and money, the issue is the same; money is emotional. You want to teach your children good money habits, so they have an enjoyable and productive relationship with money.
To teach your children these good money habits, firstly you have to have them.
Would you like to discover strategies to become financially healthy? If you are serious about money, have a chat with us.