Money Habits Your Parents Never Taught You

PEOPLE who are always in debt are often painted as materialistic and irresponsible – but their overspending is not necessarily their fault.

The way parents deal with money around their children sets their financial habits for the rest of their lives – so if you’re bad with money you can blame mum and dad.
Personal finance expert Simone Kelly says parents have the biggest influence on people’s money habits.
“Your attitude to money is just like your eating, exercise and cleanliness habits – it’s learnt,” said Dr Kelly, from Bond University.

“People who don’t work and are on the dole, it tends to happen for generations, it’s a generational thing. If it wasn’t a learned behaviour then we would see more people get out of poverty.”
Earlier this year a Cambridge University study found the majority of children’s financial habits – and the concept of delayed gratification – are learned by the age of seven.

It found that by this age they have learned how money works and formed “core behaviours which they will take into adulthood and which will affect financial decisions they make during the rest of their lives”.
By seven most children are aware of complex concepts such as “planning ahead, delaying a decision until later and understanding that some choices are irreversible”.

Dr Kelly says good financial habits – like staying out of debt and investing money for the future – stem from the ability to budget.

“If you just think of cash flow in and cash flow out – if there’s no surplus you have no capacity to then invest for the future. You need some investment to be able to borrow,” she said.

And if you were not taught the concept of delayed gratification (the ability to resist the temptation for an immediate reward and wait for a later reward) from an early age it is much harder to save.
But it’s not just people who grow up in debt-laden households who develop bad habits – rich kids can suffer when they don’t have to worry about money.

Dr Kelly says she often asks her own students how much they talk about money with their parents.
“There are heaps that have no idea. Their parents paid for private schools, they don’t have any idea what money costs. Some [parents] must assume that they’ll just work it out, but you don’t just work it out,” she said.

Child psychologist Sally-Anne McCormack says wealthy parents should not assume their success with money will rub off on their children.

“It is imperative in a wealthy family to be conscious of that because there is no delay in gratification. Your child doesn’t really learn the value of money,” Ms McCormack said.
And simply talking about money isn’t enough.

“Children learn from seeing, from watching. It’s not so much what we teach them it’s what we show them. If we don’t delay our gratification they don’t learn how to delay theirs,” Ms McCormack said.
“If I was shopping and I wanted a new dress I might in a chatty way say ‘Gee I’d really love that dress but its $40. I only really have $20 this week but if I put aside my money I can buy it later.

“Then your child sees you don’t get everything you want straight away. You’ve said not in a lecture kind of way but a chatty way – I can’t afford it now but I can in the future.”
Robert Drake, senior executive of ASIC’s MoneySmart, says it’s getting harder to teach children the value of money because money is becoming invisible.

“That’s why it’s useful to get them thinking about the basics first – needs vs wants, comparing and contrasting products and seeing which is the best value and planning ahead – because things can add up before we know it,” Mr Drake said.

MoneySmart has put together a list of basic concepts children should learn at different stages throughout their childhood

Four To Six

Show your child the value of money by helping them become familiar with coins and notes. Let them pay for items at the supermarket. Talk about how paying on credit is borrowed money that you need to pay back and how it costs more than saving for what you want.

Seven To Eight

Talk to your child about needs and wants, especially when they ask for things. Do they really need it? Or is it something they can live without?

Eight To Nine

Talk about ads you see to help your child become a critical consumer.
Explain how ads use certain techniques to make us want to buy products. Help your child learn to spot common advertising tricks such as celebrity endorsements, emotional appeal and dubious claims.

Nine To Ten

Plan your next family day out together within a set budget per person. Discuss what you’d like to do, how you’ll get there, what you’ll eat and how much money you’ll have left over for a treat at the end. Write a budget and do the calculations along the way.

Eleven To Twelve

Look together at the costs associated with a mobile phone. Look at how much each call, text or download costs.

Ten To Sixteen

Talk about financial goals. What do they want? How much should be saved each week for this target? How long will it take to achieve with a savings plan?

Sixteen Plus

Teenagers can benefit from having a casual job around the age of 16. Parents can assist by discussing how to find and apply for a job, a tax file number and talking through the benefits and responsibilities involved with the job