Did you know? According to the Institute for Policy Studies, it takes the average black family 228 years to build the same amount of wealth as a white family. This statistic isn’t a complete surprise, given the late start that Black Americans got when it comes to financial education, as well as wealth access and management, all due to the deep-rooted racism that persists and still affects our livelihood and money to this day.
Finally, though, many families are starting to overcome the generational curses that come with all that disparity – beginning with providing their children with financial lessons that they won’t necessarily learn in school.
“According to the Institute for Policy Studies, it takes the average Black family 228 years to build the same amount of wealth as a white family. “
Financial Literacy Is Important
If you haven’t gotten to it yet, NOW is a good time to overcome those generational curses and prepare your children for a lifetime of financial freedom and independence.
Did you know lost or broken eyewear or a low supply of contact lenses could constitute as an ‘essential’ or urgent eye care need? There could also be a very serious underlying emergency if your child has a headache and is having issues reading or seeing properly.
Remember: By the time they finish school, many children learn everything they know about money and finances by observing YOU, their parents. Personal finance is absent in most schools (financial education programs are only required in school curriculums in 37 states), so if you don’t teach your children good financial habits, who will?
It’s so important to teach your children about finances – helping them develop a healthy relationship with money can help them for the rest of their lives.
Not sure how to start the money conversation? Keep reading for tips on how to raise financially savvy children – and what lessons you can impart that they won’t learn in school.
Financial Lessons Your Kids Won’t Learn in School
Negotiate
There’s no shame in haggling or negotiating to get the best deals possible. So, why not teach your kids the art of making a deal?
As a parent, you probably already know this: Kids are natural negotiators. Whether they’re negotiating their bedtime, the amount of food they eat, or the chores they do, chances are you’ve made a deal with your child at one point or another. So, why not teach them to apply those negotiating skills when it comes to their finances?
How to get started: Try giving your child real-life experience. For instance, if you’re eating at a restaurant, try to make them calculate the check with the tip. Or, if your child wants a new toy, offer them the chance to take on more responsibilities at home in exchange for pay, and give them the chance to negotiate the terms.
Teaching your child how to negotiate helps them see the value of a good deal and the basics of business value exchange.
Borrow Wisely
Incurring some debt is unavoidable – and sometimes, even necessary. As much as they try to avoid it, there may come a time when your kids need to take on some debt. To prepare them for such instances, it’s important to teach them how to borrow wisely.
How to get started: Explain the difference between ‘good’ debt and ‘bad’ debt. Good debt refers to investments towards their future (think of student loans or a mortgage). Conversely, bad debt can refer to credit card debt. Remind your child that while they may need to incur debt to go to university, maxing out their credit card is unwise.
Also, teach them the art of shopping around. Let them know that when borrowing, they have numerous options available and that they should shop around for good deals before signing on the dotted line.
Start Investing Early (And often!)
Saving for the future, whether it’s for a home, a car, or retirement, probably seems like the furthest thing from a child’s mind (this may be true for some adults, too!). But, starting early will allow your children to experience the full benefit of their investments later. So, when you teach your child to start investing early (and often), they can fully appreciate- How to choose the right banking institutions are the benefits over the long run.
How to get started: If your child is under 18, open a custodial brokerage account – this is a type of financial account that’s managed by a parent or legal guardian in the name of the minor. When you open a custodial brokerage account, you can use this occasion to teach your child about the value of investing and how they can build their wealth from a young age. You can show them what financial investments are held in the account and explain how investing works. This is an excellent way to educate your child on how to manage money for the long-term starting from a young age.
Another way to teach your child about investing is by showing them your own stocks (if you have any). Brand-name companies might catch their attention and get them interested in how it works. Ask your child what brand they’re interested in and would like to buy. Kids usually have favorites even if they aren’t aware of them – Disney, Netflix, McDonald’s, and Facebook are likely to be popular with most children.
Living Within Your Means
Let your child know that splurging every once in a while, is okay, but that they should always live within their means.
Usually, kids spend money without even realizing it – think overpriced juices, designer clothes, new gadgets, etc. – it all adds up. While kids can occasionally treat themselves, make sure that their spending isn’t controlling them. If they find themselves dipping into their savings to ‘treat’ themselves or if they must borrow money from others just to buy what they want, it means that they are living beyond their means.
How to get started: Encourage your child to take a step back and really think about what matters to them. Before spending, they should ask themselves if they really need it. A great way to teach kids this lesson is to encourage them to take on a part-time job (if they’re old enough). Having their own money will give them an opportunity to make their own spending mistakes and learn from them.
Of course, living within your means doesn’t mean never spending or splurging on yourself. It just means that it should be done responsibly. You can teach this at the same time that you teach your child the value of saving with cool dinosaur piggy banks for your child to help them. That way, when they have a big ticket expense (for a child), they can save towards it, learning the benefits of delayed gratification at the same time.
The Bottom Line
As a parent, one of the best gifts you can give your children is financial education and responsible money habits that they can carry throughout their life. Consider a solid financial education as one of the legacies you are leaving your kids. In doing so, you can help overcome generational curses caused by inequalities and enforce positive change in your family and the world.
Now, educating your children about these financial lessons is really important. In some cases, you might even have to give them some ‘tough love’ or ‘reality checks’ just to make sure that these lessons really sink in.
But, how do you do impart these financial lessons without seemingly ‘lecturing’ your child? And when does tough love become too much? Here’s an article that might give you some insight: https://successfulblackparenting.com/2021/09/13/what-if-tough-love-in-black-families-is-too-tough/.
Why Young Children Need A Financial Education
Schools are designed to teach useful subjects and skills to prepare children for college, and eventually, the working world. Such subjects include science, math, social studies, arts, and more. But, there’s one topic that many schools don’t teach young students: financial literacy.
You might be wondering, “They’re still so young. Why is it important for my children to be financially literate at a young age?”
Well, teaching your kids financial lessons that they won’t learn in school can provide them with many benefits:
- Your children will better understand the value of money – and learn how to handle it better.
- Kids who learn to manage their finances early often grow into adults who are better equipped to live independently.
- By teaching your children to make good financial decisions, they’ll learn how to pay down debt – or avoid it altogether.
- Your children may be more inclined to plan for events in the future, such as making smart investments or even saving early for retirement.
- You can prepare your children for a lifetime of financial freedom.
You might be wondering, “They’re still so young. Why is it important for my children to be financially literate at a young age?”
EXPERT CONTRIBUTOR
Sharita Humphrey
Financial Expert
Sharita is a nationally-recognized, award-winning finance expert and money mentor. In 2020, she was named the National Financial Educator of the Year for her work. Having previously been broke and homeless herself, Sharita knows first-hand that financial freedom has a blueprint and she’s committed to helping women change the financial trajectories of their lives. Today, Sharita is the national partner and media spokesperson for Self Financial, Inc., and has been featured in top-tier media including CNBC, iHeartMedia, Forbes, Yahoo Finance, and BBC World News.
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