“If we want to shift the way our kids manage and think about money in the future, then we must instill these lessons today”
Far too often, financial planning service providers bear witness to the disastrous financial consequences that many adults find themselves in because of poor money decisions. This is largely the outcome of a lack of financial education and basic money management. This ongoing issue is a global concern which must be addressed and formalised if we expect a different outcome for our children.
Many parents are under the impression that financial education falls under the scope of the school system. Whilst some schools may be focusing on certain aspects of financial education, it is not adequate. Another cause for concern would be whether teachers themselves have access to the required level of information to teach this subject in the best possible manner.
On the other hand, if parents are teaching their kids about money, we must determine if sufficient time and knowledge are being allocated to teaching this skill. Parents, themselves having not been taught money management within a formal structure may be potentially causing more harm than they are aware. Parents may not be having meaningful discussions about money in a positive and empowering manner. In addition, many might be passing on their preconditioned ideas about money to their children, which may create self-limiting and negative beliefs that could affect how our children attract and manage their money.
Whilst government together with industry bodies, financial institutions and service providers have done quite a bit as part of their fiduciary responsibility to educate consumers including children and parents. Unfortunately, because this is not formalised or enforced, it is not viewed as critical or given sufficient urgency and the onus is left upon parents to manage this.
The harsh reality is that financial education should be a basic right for all, not only for those whose parents view it as a critical life skill, or those who have access to resources that are able to teach and empower their kids about money. Robert Kiyosaki, author of Rich Dad, Poor Dad, says that we send our kids to school to learn how to earn an income, yet no one is teaching them how to manage that income. This is the reason why so many adults who have not had the privilege of learning critical money skills are forced to learn through error.
If we want to shift the way our kids think and manage money, then we must change the way in which it is taught. Firstly, we need a formal curriculum that identifies the critical money principles and concepts that will equip our children at all stages of development. Children from as young as pre-school can be taught lessons on how to count and save money, primary school can then build on these skills and focus on how money is earned, create a culture that values saving and identify practical ways on how to spend money wisely. Once the basic principles about money have been built, secondary students can then be taught more advanced lessons in investing, financial instruments, concepts such as compound growth, risk vs return and the various types of taxes, fees and inflation that influence net returns.
The point is that as soon as a child can count, money management skills should be taught and built on every single year, just like Maths, English and the Sciences are. As the child develops more advanced concepts and principles of earning, saving, investing, and spending money can be introduced. In this manner, our children will have the best possible chance of succeeding in managing both their personal and business finance.
Every effort must be made to teach children not only the technical aspects of money (IQ) which pertain to budgeting, investing and all other financial jargon, but we also need to teach them how to navigate their emotional relationship with money (EQ). This pertains to their emotions, thoughts and behaviour with money which also influences how they will manage money. When both these approaches are taught, we would have covered all bases to ensure that our children are equipped with the skills they require to overcome any challenges they may be exposed to from their external environments. Challenges stemming from a lack of opportunities based on their varying socio- economic backgrounds, limiting and negative beliefs that may have been imposed by social influences, parents and family members and their own unique personalities and character traits.
Improving the financial outcomes of our children
For as far back as we can observe, the statistics across the globe have not seen any major shifts or improvements in the way money is managed. This was further exacerbated by the pandemic. This serves as sufficient proof that our approach to teaching money management skills and financial education is flawed. If we want to improve the financial outcomes of our children, then something has got to shift. If we wish to break the cycles of poverty, financial inequality and instill positive money mindsets in our children, then we need to create an awareness and an urgency in formalising the teaching of money matters within the school system. Question, is whose responsibility is this and when does this become a matter of priority?
Written by Jean Archery for Sentinel International