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Where Kids Learn About Money

If you ask a room full of adults where they learned about money, how to spend it, save it, invest it and manage it, you will get a few different answers ranging from "My parents taught me", to "I learned in school", to I "read books". The overwhelming answer however, will be no one taught them at all. They either learned by trial and error or are still trying to learn. In fact, even for those that gave one of the other less popular answers, "My parents taught me", if you dig a little deeper you will learn that these people actually received little by the way of true lessons or instructions from them. Only some vague concepts like "You should save some of your money" or "Don't borrow money" or "You have to work hard to make money". You may have been the recipient of one of the many sayings like "Money doesn't grow on trees", or "You have to have money to make money" or my favorite "Money is the root of all evil".

So how did we develop our current money habits? Excluding a very small group of people who actually did learn some very detailed and in depth instruction from their parents or took the time to learn from the vast array of literature, most learned by watching their parents, grandparents and their peers money habits or simple by trial and error. We watched our parents spending habits, overheard their conversations and their arguments of whether they could afford this or that. Watched them use their credit cards and heard from them that it is important to save your money and not to go into debt and then watched them do just the opposite.

The fact is, the environment that most of us as parents have grown up in is quite different from that of our parents and grandparents. For starters, most of our parents and grandparents worked for the same company for most of their lives and received a pension to go along with their government pensions. They never worried that much about retirement. Second, banks were a lot more conservative back then with their lending practices. The banks made sure you could afford to repay them before they even considered lending you money. In fact, up until the mid 1970s most women required their husband's permission before a bank would lend them any money.

And then of course came the introduction of credit cards. The first general purpose credit card was launched in 1958 by The Bank of America, but it was not until the latter half of the 1970s that the credit card really took hold. And it wasn't until the early 1980s that credit card companies were permitted to charge the high interest rates we see today, which has allowed them to make greater and greater profits. And with those increasing profits came a greater and greater push to lend money to the public on more and more relaxed terms. When I went to college it was not even conceived of that a bank would give me a credit card, I had no job, little income and no assets. Today credit card companies climb all over themselves to get their card in the hands of college students. A $10,000 credit limit is not unheard of.

Then of course there is the sub-prime mortgage crisis. That last bastion where we could rely on the banks to protect us from ourselves by not lending us money for a house unless we fit into their pre-determined lending formula showing that we had the capacity to repay had finally fallen. With all these financial institutions competing to keep us in debt, this is the highest debt position the world has ever seen.

So as kids, how could we have expected to learn the right money management practices from our parents? Ignoring the fact that money was considered a taboo subject by most families, the playing field was changing so rapidly right before our parent's eyes. Our parents did not know themselves how to deal with the introduction of such easily available credit. They didn't have to worry about job security, they didn't have to worry about retirement, about if the government would have enough money to take care of them when they got older. While we can not predict the future, we can ensure that the subject of money is not taboo in our house. We can take a proactive approach to teaching our children about money.

As parents, one of the greatest gifts we can give our children besides love, support and understanding is an ability to understand how to control their spending impulses and how to manage their money. By helping our children learn how to make skilled money related decisions and develop proper spending habits our children will be eons ahead of their peers. While we may not be able to predict the future of money, our children will almost certainly be better off if they have developed proper spending habits and have been educated on how to manage their money no matter what the future has in store for them.

Child physiologists have long told us that children are capable of absorbing and learning many things at a very early age. So does it not make sense that we start teaching good money habits as soon as they are old enough to ask for toys or candy from the store? The earlier a good habit is formed the harder it will be to break. But if you haven't started don't despair, it is never too late to begin to learn how to spend and manage money.

David Maksymuik C.P.A., C.M.A.