Ways to Stunt a Child’s Financial Growth

Financial knowledge isn’t built into our DNA. It has to be learned. Unlike long division and gymnastics, personal finance is not properly covered in school (if covered at all). So it falls upon parents to impart financial knowledge to their children. Unfortunately it’s easy to slip up and make mistakes. In this article, we’ll look at five ways you may be stunting your child’s financial growth.

The Vow of Silence

A lot of funding has been put into researching why kids fall into particular traps. Teen pregnancy, drug use, underage drinking and many other early problems have been traced back to a lack of communication – hence, the “if you’re not teaching your kids about ____, then who is?” campaigns. A lack of financial education doesn’t seem as serious as a drug addiction, but its long-term consequences are quite severe. Remaining mum on financial matters sends the message that either money is not important, or it’s something to fear and never mention. Neither of these are lessons that help with the financial realities children will face as they grow up.

If you’re not willing to teach good financial habits to your children, the school system and the media are the main information sources by default. If you need motivation to take your child’s financial guidance upon yourself, watch TV with your child and consciously try to spot the image of personal finance they might be getting from both the shows and the commercials they see – it is, quite frankly, terrifying.

Fair-Weather Finance

Ranking second only to remaining silent about financial matters is the tendency for people only to talk about them when things are going well. Personal finance and the financial world as a whole is not a Disney movie where cats and birds break out in spontaneous songs of joy – it is fraught with problems. It’s far better to be honest about problems – late bills, flat stocks, bad decisions, etc. – and engage the family in solving them. Looking at financial matters as a problem-solving exercise for the family will also lessen the stress traditionally felt by people trying to “keep the household budget (or portfolio)” all by themselves. It will also teach your child to approach financial problems as just that – problems. Problems can be challenging, but there are always solutions if you’re creatively searching for them.

One of the greatest investing minds of all time, Benjamin Graham, was introduced to the world of stocks and bonds through a mistake in his family’s finances. Graham’s widowed mother put a significant portion of the family’s savings into U.S. Steel at its overvalued peak. Graham charted the stocks decline, and that of his family’s wealth, from the quotes in the newspaper. The poor performance of the stock compounded the family’s woes and Graham spent many of his formative years in a struggle against poverty. This experience turned him from the common belief in investing in blue chips for the long-term and eventually led to his formulation of value investing summed up in his book “The Intelligent Investor.”