by Bhaj Townsend
“How do we talk about our money in a way that builds financial competence in the family?” is a question I have been asked several times this year.
Because the age and financial maturity of family members varies, I want to introduce you to a few parameters that will shed some clarity on this vexing topic.
Generally speaking, there are financial viewpoints that are specific to each age group:
- Preteens: They see the lifestyle in which they are being raised. Because this is their reference, this is their norm. For them, to be told one thing while experiencing another is difficult to comprehend. For example, to be told to save while the family is spending makes no sense to a young child. Having conversations about limits to spending which you model and have them mirror while grocery shopping, for instance, is a valuable tool for them. Next time you are out grocery shopping ask them to make choices with a limit so they can begin to see and experience the effects of setting limits and making choices.
- Teens: They feel the pressure of peer groups so this sense of belonging can tug at their financial behaviors. Impressing others or showing off can be a deterrent to setting financial limits and boundaries. “But, you don’t understand, I need this…now!” is a common plea. Introduce a sense of responsibility by having teens build a sense of “why” to their money, a “why” with consequences. For example, if they want an item that they can’t afford with their money and you don’t want to pay for, talk to them and together build a framework for how to procure the money for this and what the responsibilities are to maintain this new purchase.
- Young Adults: Spreading their wings and testing their independent lives, young adults are often thrown into a world of a financial tightrope on which they have feel wobbly and unprepared to walk on. They want this, they need that. How do they decide between the two? Because some young adults may have feelings of guilt, shame or inability to add to their family’s financial success, they may go to extremes by binge spending, helping to pay for their friends’ lifestyles; others may hide from their family’s money and pretend it doesn’t exist. This is a time for a young adult, if they haven’t already, to learn what money means to them and set up a system they can follow to save, invest, donate, earn, and spend.
- Parents and Career Adults: Busy with careers and raising children, these family members can find they are too busy to teach more than the rudiments of finances to their own kids, especially if this is all they know. Often, financial literacy is delayed in pursuit of their own children’s academic and hobby pursuits. Only 17 schools out of all of the public schools in the U.S. offer a financial class. Financial conversations need to be part of the family culture to make sure healthy money habits take hold in the next generation.
- Grandparents: Because they have the wisdom inherent in hindsight, grandparents can feel frustrated at the lack of financial acumen in their family or conversely, feel they can help when there is a need. On one side, they can feel frustrated at the feeling of entitlement growing in their grandchildren’s lives, who have “so much more than we ever had.” On the other side, grandparents can feel like it is up to them to rescue their grandchild who wants an upgrade to their Xbox but whose parents have said no to. It is important to have conversations between parents and grandparents to understand the role of money in the child/grandchild’s life. When these parameters are in place the young family member won’t find a place to potentially manipulate or take advantage of.
Because money can be such a volatile subject to talk about, it is important to know how different age groups in the family tend to deal with money. Without a foundation of financial competence, families run the eventual risk of squandering, spending, or squabbling over money.