I was somewhat taken aback the first time someone expressed, “Ah, poor you, your birthday’s on tax day.” I have received those same words of “condolence” more times than I can count over the years. Of course, my instinctive response is that it is not tax day where I come from, and anyway, why should I be the object of pity on what is typically a lovely spring day?
Well, now that tax day is rapidly approaching, it started me thinking about not only taxes but also our attitude towards money in general. I am still amazed at how little emphasis we place on financial literacy in our society in this day and age, when the younger generation no longer devotes years of service to one profession or expects a pension (what’s that, they ask?) at the end of that service.
I am embarrassed to admit that when I arrived as a 21-year-old immigrant to the USA, I did not even know how to write a check. I thought I knew about money; after all, I had worked in some capacity since the tender age of 12. I always managed to have a little spending money of my own, but it was the first time that I was completely responsible for my own financial well-being: renting an apartment, buying a car, opening a bank account, paying bills, establishing credit. No one ever taught me these skills; in fact, I came from a country in a time when individuals did not use credit cards and no self-respecting person would ever use credit for a purchase. Not so in the USA!
Today, I meet young people in their 20s and 30s who don’t know what an IRA is, never mind actually having one. I know young women who still leave all the financial decisions to their husbands. I know couples who stay together primarily for financial security. I also know financially independent and secure men and women, and some of the things they have in common are that they educated themselves financially; they are not afraid to talk about money and financial decisions and they don’t make finances an emotional issue.
Most of us would probably agree that money worries create some of our greatest stress. But it doesn’t have to be that way for our children. It is never too early to start teaching basic concepts and attitudes about money that will serve them well into their advanced years.
I believe if we can talk openly about and teach the following four concepts revolving around money, our children will be better equipped to make wise financial decisions at all stages of their lives:
Earning
We do a disservice to our children and teenagers if we merely give money when asked. Even young children understand the concept of work (after all, isn’t that where mom and dad go every day?). Doing extra chores to earn money is usually well received by most children. Notice, I used the word extra, as I believe all children should routinely have chores as a contributing member of the family.
Saving
Establish the expectation that your child automatically contributes a portion of his or her money (both from allowance and earned money) to some saving vehicle. As children get older and watch their savings grow, they will be motivated to save even more. As the great Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it.”
Giving
Instilling the importance of thinking about and giving to others not only builds character and values, it also sets the stage for philanthropy later in life. Elementary age children also have an innate desire to be altruistic as they broaden their experiences and understanding of the world beyond themselves.
Spending
If the first three concepts are established, then the concept of budgeting and spending wisely comes more easily. Also children and teenagers tend to curtail their spending while weighing wants versus needs if they understand the power of money.
So instead of dreading another April 15th, enjoy it like I do!
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