This week, Ilke Aerts, a lawyer at Greenille by Laga, discusses the importance of the financial education of children.
Talking about money often makes people feel uncomfortable. We also see this happening when it comes to the financial education of wealthy children and children from wealthy families. Parents are can be reluctant to discuss their wealth with their children.
However, such sensitivity might not always be warranted - most children are not naïve and it does not take them long to notice the differences between their own and their friends' lifestyles.
How children relate to money and to wealth in general is mainly driven by the attitudes and behaviour of the parents themselves. Research has shown that parents with an "uncomfortable" relationship towards money and the use of it can negatively affect their children's emotional growth. Those who understand that money itself is neither good nor bad and that it is their own behaviour, what they do with their wealth and what that they teach their children, will have a more positive impact on their children's development.
When and how can parents inform their children about their wealth?
The sooner the better. Financial education is all about creating "money consciousness" and the responsibilities that go along with it. As it is usually not something children learn at school, parents should reflect on the messages they send their children on money issues.
Financial education is therefore not something that can be seen as a "quick fix" through a dinner table discussion or workshop; it requires a continuous process in which open and transparent communication are essential.
Families that are reluctant to talk explicitly with their children about money or wealth are often concerned about encouraging spoiled behaviour. Although these intentions are understandable (and it is easy to rationalise why their children do not need to be involved in discussions about money), it is not communicating to children that might lead to exact the opposite of what they intend. One day they will find out anyway and this generally happens sooner than expected. For children who have never been informed and educated about the rights and duties that come along with wealth, the risk is much higher that they will not manage it successfully. Therefore, prioritising children's financial education means to not treat money as a taboo topic and to be able to engage in conversations, even when they seem difficult.
Engage in good money conversations
Parents can also model good "money behaviours". But to be most effective, this should be complemented with good conversations. Talk about wealth at all ages. Give information, verbal or intentional, according to the interest and maturity level of the child. Every day offers opportunities to learn, to educate, to talk to your children about financial issues. Keep teaching children new and more complex things about money as they grow older. Couple this with opportunities for learning about responsibility and decision-making in the context of the family's values.
We realise this is a difficult and challenging goal. But being (or becoming) a financially-intelligent parent means starting by taking small steps.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
