Why it is important to teach your kids about money and investing
Children are not usually included in discussions around the household budget or decisions around which stocks to invest in. And, it’s not usually on your ‘To Do’ list to teach your kids about money. More’s the pity. Because, if they were, they would be set up for life.
How do I know that? Because I was one of those kids that was involved in money discussions at home, and I learnt all about investing and saving during my formative years.
I recall being around 6 or 7 and sitting in with the discussions between my Dad and his “financial advisor” from Allied Dunbar. At that time, I didn’t have anything substantial to contribute, but everything they discussed went in and this kind of thinking became the norm with me.
I also remember my parents teaching me about compound interest when I was around 12. I distinctly remember being fascinated that money made money, all by itself! It really intrigued me and I used to sit in my bedroom, drawing up different computations using different interest rates. A strange child, perhaps, but the knowledge was all building.
It wasn’t really like I was sat down and ‘taught’ what to do – it was just part of our lifestyle, that I picked up organically, simply because it was all shared with me, rather than conducted behind closed doors.
So, how did this early education translate into my behaviour as an adult?
Well, pretty substantially, actually. To me, investing is a key part of my life. It is something I attend to every day and it feels just like cleaning my teeth. It is that habitual. It is also something I really enjoy… perhaps because it also reminds me of times spent with my Dad, who is no longer with me.
The impact of this is of course financial. Just like that child that was so intrigued by the phenomenon of money making money by itself, I of course now realise that there is so much more to it than that, but to me, it is still a case of me putting money into something which pays me, without me having to work so hard to get it. Yes, I have to research what I want to invest in and monitor the results and make decisions about what to do next. However, when I worked as a researcher, I had 17-hour days and really felt that I earned every penny. Other than your job or your business, there are very few ways that most people have access to this kind of regular, separate cash injection into their lives.
This is my biggest bugbear as none of what I do is difficult and I was never particularly talented at maths at school. But, I see people struggling all around me, trying to make ends meet. I see personal debt increasing as people try to deal with the day-to-day struggles. And the debt that is most turned to is credit card debt, the most expensive of all and the most insidious because it is present in most people’s lives, but able to completely destroy you. How? Because they too use compound growth, but the compounding is working against you, and you are the one paying the credit card’s ever-increasing fees. The average personal credit card debt is £2700 in the UK, $4200 in Australia and a whopping $8400 in the US, and it is only set to get worse.
The key to getting anything done in life is showing up, making decisions and taking action. Where energy goes, results flow.
But, the first step is involving your children in day-to-day financial decisions. Like deciding how to choose the most cost-effective items in the supermarket. How to delay gratification by waiting for things rather than having everything now. And by grasping the concept of compound growth. If this is something you as an adult need to learn, learn it now, to be able to give that gift to your children. Believe me, money sense is the best gift of all to give a child. If a child learns that, you know that they will never go hungry. What better to allow a parent to sleep well at night and when they are all grown up, to know that it’s been a job well done.
Compounding works best the longer it is working. Starting as a child gives it the best runway to ‘do its thing’, so get them started young – truly, the younger the better.
Heather is a holistic financial wellbeing coach who helps people understand how to maximise their future wealth, by attending to all the ways to earn, save and invest money, helping her clients achieve financial freedom. She is also starting a children’s financial education service, as she is passionate about ‘paying it forward’ for the gifts she was given as a child.
Want to find out more? Click here to book a free 45-min strategy session to find out how we can empower you to live the life that you deserve, or contact her on email@example.com.