“Wash Your Hands, Brush Your Teeth and Stay Within Your Budget”

Why It's Never Too Soon To Begin Teaching Children Essentials of Money Management

By Anthony Rhodes

Like many of you, I grew up in a household where my father made the money but my mother managed it. This arrangement, although difficult at times, provided me with a perspective on money issues, which was unique amongst my childhood friends and associates. You see, my mother was a card-carrying member of what I used to call, the Stretch a Dollar to the Limit Association; an affiliation of cheapskate parents whose sole purpose and intent was to make miserable the lives of their children, by allocating allowances based on disciplined money management directives (Ah, the wisdom of youth). For example, if I didn’t save more than 50% of last months’ allowance, my next months’ would be 50% less; of which, again 50% would have to be saved. One might imagine that this sort of doctrine would limit the amount of fun a capitalistic pubescent would have growing up in the Midwest, but in retrospect, I don’t recall having any less fun than any of my friends did! I still participated in most childhood activities, but along the way I learned some very valuable lessons on the issues of planning and saving, many of which continue to impact my life to this very day.

My point of course, is to address a few of the recurring excuses that many parents often have when it comes to teaching their children about money. Prime examples, like “He’s much too young” or “She shouldn’t have to think about such things at her age” are often times reflections of our own insecurities and fears, and actually have very little to do with our children’s dexterity at all. This week, we’ll address this issue in detail, as I attempt to impart upon you the wisdom that my mother knew all too well: that children are a lot smarter than we give them credit for, and that the sooner we are able to prepare them for life’s financial ups and downs, the better. 

The Makings of a Prodigy

I am often amazed when watching child pianists perform the works of classical composers with such precision, grace and accuracy. Having mastery over such difficult and complex arrangements, at such an early age, leaves one with a sense of awe at what limitless potential we possess, and challenges the basic assumptions regarding when such potential begins to accrue. I am of the opinion that money management basics should be an integral part of a child’s early development; to be included with such traditional norms as good hygiene and good manners. If a six year old can master Mozart’s 17th piano concerto, how difficult is it for one to comprehend the financial impact of improperly assessing their wants and needs? We sell our children short when we assume that these relatively simplistic concepts are beyond their mental capabilities. While the degree of exposure should vary from child to child, depending of course on their level of retention, parents should nonetheless introduce these valuable fundamentals to their children at the earliest ages possible. With so many Americans encumbered by the ever-increasing burdens of debt and poor money management decisions, the prevention process can’t begin soon enough. Early introduction, combined with educational reinforcements over the course of a child’s development, ensures your little one an advantage that will continue to pay melodious dividends, long after their complaints have reverted to thank you’s.

Enchanting Possibilities

A child, who has been taught the fundamentals of investing, stands to greatly benefit by being able to detect trends in the marketplace, long before the rest of us are aware that they even exist. Kids occupy a unique position as trendsetters, and a careful observation into what’s “cool” provides one with a first mover advantage into the direction of particular fashions, industries and products. This is another reason why financial education should begin early. Just imagine the monetary impact, that companies which license products under the Harry Potter franchise, has had on the capital markets. Why, the author alone has become a billionaire as a result of the title’s success, and the companies collectively associated with the brand have added billions more to their bottom line, as well! But prior to his popularity explosion, who knew that the boy wizard even existed? Young children, that’s who. Imagine now, how a financially savvy child, taught to detect and respond to such information, could have benefited from the comprehension of this knowledge! Now I’m certainly not suggesting that teaching investment basics will magically transform your little Warren into Warren Buffet (not even Mr. Potter is capable of such wizardry). But I do believe that any individual; man, woman or child, who understands the power of market forces, is better positioned to benefit economically, than one who does not. And within a capitalistic society such as ours, a lesson as valuable as this can’t be learned soon enough.

Having a child is truly one of the greatest of life’s treasures; a gift, which inspires notions of joy and happiness, but also responsibility. It remains our parental duty to give back to the world an individual not only molded by our communities and circumstances, but more importantly, by us. I believe that teaching our children how to become fiscally responsible is a powerful reflection of that creed. And if becoming members of the Stretch a Dollar to the Limit Association helps you in your pursuit of this objective, then so be it. It seems to have served my mother just fine. Thanks mom.
(Learn how my Stepping Stones investment education program can teach your children about investing at this link https://www.amazon.com/s/ref=nb_sb_ss_i_1_8?url=search-alias%3Ddigital-text&field-keywords=dexter+learns+about+stocks&sprefix=Dexter+L%2Cundefined%2C388&crid=2U4JN8YQHYHJ5)   

(Anthony Rhodes is a Registered Investment Advisor and owner of wealth management firm The Planning Perspective www.theplanningperspective.com)