You taught them how to read and how to ride a bike, but have you taught your children how to manage money?
Since they probably don’t have much of it, I suggest the conversation include a strong focus on credit. You know, those offers that come in the mail for your cat, dog, and underage kids–credit card companies are trolling for the next victim. They make a lot of money, and they are hungry for fresh meat.
Money and The Present Moment
As I wrote about in my column, ‘The Spiritual Cost of Debt,’ credit debt comes with a high price tag and it doesn’t stop at double-digit interest rates. It can, and will, take you out of the present moment making you fearful of the next due date. Since you are reading this article you are probably pretty in tune with the notion that the present moment is a place we live in when we are awake and in spiritual harmony.
Why Does this Matter?
As Deepak Chopra put it, “We are our attention. When our attention is in the past, we are in the past. When our attention is in the future, we are in the future. When our attention is in the present moment, we are in the presence of God… and God is present in us.”
How often are you really present? Think about it. Debt is an enemy of the person who strives to be alive and spiritually awake. The good news is the younger generation may be more in tune with this spiritual concept. And they will quickly understand that the real lesson here is about the power of money in our lives and how we can use money to further our health and wealth–or not.
Credit and Debt
So one of the first practical steps in teaching your children about money is to let them know debt can be their worst enemy or best friend. A little jig with the devil can raise your credit score…but beware. A healthy credit score is a blessing, but it can become an addiction. Those temptations to take advantage of offers in the mail pushing ‘easy money’ can look extra tasty to the kids.
Yes, it is all about balance. Teach them that their first credit card is like a right of passage. Instead of sending them off into the woods to spend a week alone with only a knife in hand, the modern way of initiation into the ‘real world’ can be receiving a piece of plastic in their hands. For young people in our culture, credit cards have become the gateway into adulthood and responsibility. Although they won’t get gobbled up in the woods by a tiger, your kids may feel like that is a lesser fate than finding themselves at the mercy of debt collectors, and unable to buy their first car, or to rent or own their first home.
One study of undergraduates found that 60% of college credit card holders experienced surprise when told how high their balance was, while 40% admitted to charging items they knew they couldn’t pay for.
For some college kids, it may be too late to avoid learning the hard way. But if you still have children at home, save them (and yourself) from the tiger and some heartache by teaching them the basics of smart money management.
Have the Conversation
Many everyday transactions can lead to discussions about money. At the grocery store, talk with your kids about comparing prices and staying within a budget. At the bank, teach them that the automated teller machine doesn’t just give you money for the asking. Show your kids a credit card statement to help them understand how ‘swiping the card’ actually takes money out of your pocket.
Fast Fact: Hidden College Cost. College seniors typically graduate with about $4,100 in credit-card debt. (Salliemae.com, 2012.)
Give Kids a Look
Find a credit card calculator on the web to give kids a real-life look at what it actually costs to “buy now, pay later.”
Let them Live it
An allowance program, where payments are tied to chores or household responsibilities, can teach children the relationship between work and money. Your program might even include incentives or bonuses for exceptional work. Aside from allowances, you could create a budget for clothing or other items you provide.
Let your kids decide how and when to spend the allotted money. This may help them learn to balance wants and needs at a young age, when the stakes are not too high. And yes, I know, it’s one more thing to add to an already crazy schedule; just do your best and know that a little upfront work can prevent hours of rescuing and sleepless nights when they get out on their own.
Teach kids about Saving, Investing, even Retirement Planning
Just as the interest rate of debt on credit cards can gobble you up and put you deeper and deeper into debt and misery, teach your kids that the same principal of compound interest (money increasing in and of itself) can be their best ally. One of the greatest gifts you can give them is to have them start saving NOW for retirement. Discipline and consistency is the key. It is really that simple, but not always easy.
How to Encourage them to get Started
Offer a match program; say 25 cents for every dollar they put in a savings account. Once they have saved $1,000, consider helping them open a custodial investment account, then teach them to research performance and ratings online. You might even think about opening an individual retirement account (IRA), or better yet (depending on their current circumstances) a Roth account. With the future of Social Security in question, dwindling help from employer-sponsored plans, and the increase in self-employed work, it is important to let your kids know they have to take care of themselves. Just as the kid in the woods relies on his knife and skill for security, young adults today can’t count on anyone but themselves for retirement. Nonetheless, some parents offer to fund an IRA for their children as long as they are earning a paycheck.
As you teach your children about money, don’t become discouraged if they don’t take your advice. Mistakes made at this stage in life can leave a lasting impression. Also, resist the temptation to bail them out. We all learn better when we reap the natural consequences of our actions. Your children probably won’t be stellar money managers at first, but what they learn now could pay them back later in life—when it really matters.
Can Kids Handle Credit?
Approximately 71% of parents do not support giving credit cards to children under 18—even if the card has a restricted balance and is linked to a parent’s account.
Money is not separate from our spiritual, mental, and physical well-being. An awareness of this reality can begin a lifetime of growth. But for more and more of us money is tight. Growing up in middleclass America is very different now than it was when we were kids–there never seems to be enough. (This makes me mad as hell and I don’t see it stopping anytime soon–but that’s for another column.)
As an Evolved Being, be Conscious of your Actions
Money-related stress in the home is a reality for most of us. Your actions speak so loud your kids can’t hear what you say. The energy of a home is infused with the adult’s relationship with money. Arguing, fighting, and stressing over money has a huge effect on our spiritual, physical, and mental family health. Watch how you handle your stress and joy around the abundance, or lack of abundance, of money in your home. Your kids feel that energy. Don’t try to hide it. If you think you are concealing your relationship with money from your kids, you are kidding yourself.
I met with a new client last week to review her finances. We discussed her dreams and visions for her future. She shared some of her anger and frustrations about money. We spoke about her emotions, and where these feelings may have been coming from. We talked about ways in which she might be able to manage and invest her money in healthier ways in order to achieve her goals and dreams. Suddenly, in the middle of our deep conversation, she said something to me in a distressed voice, sat back in the chair with a concerned look in her eyes, took a few deep breaths and said, “Holy s*** I sound like my mother talking.”
Our lessons about money start young and become deeply ingrained in our psyche. As a parent, you don’t need to be perfect…whatever that is. Just be real when you talk to your kids about money. Let your kids see you, all of you, the good, bad, and ugly. Be an awakened role model. Remember they see it and feel it anyway, so you might as well talk about it.
You Don’t have to be an Expert to Teach
You taught them how to ride a bike, now teach them how to navigate the financial roads that lay ahead. A great spiritual teacher once told me, “you don’t have to be an expert to teach, you only have to be a few steps ahead of your students.” Too many of us think we have to be perfect in order to teach. I have come to embrace this as a teacher and leader in the spiritual and financial realms. If you are too far removed from what your students are going through then it is difficult for you to connect in order to communicate your lessons. Let your kids invest in your losses and gains. Then learn together how to use the power of money to make your world a better place.
Connecticut resident Lawrence Ford was dubbed the “Shaman of Wall Street” by the Washington Post – he lives in “both worlds”, the modern world of business and the ancient world of wisdom. Conscious Capital Wealth Management (formerly Ford Financial Group) has helped over 5,000 people with their investment and insurance needs since 1989.
Lawrence Ford is a Registered Representative of INVEST Financial Corporation (INVEST), member FINRA/SIPC. Lawrence can be reached at: [email protected] or 860-659-8299.