We’ve all heard about the difference between nature and nurture. These two umbrella categories of influences determine who we are and how we behave. Different people have different ideas about which is more important – the role that parents have in raising their children, or in the environment the child grows up in and in their own DNA. It’s clear that there is a complex interplay between these two arenas of influence. But how does this play out in the realm of personal finance?
It is thought that most of our financial behaviors are learned, not innate. Humans have instincts when it comes to being thrifty. How we allocate our resources ties to our basic survival instincts. Yes, this goes all the way down to how we spend our money. Regardless, what we learn from our parents shapes us in many ways. This holds true in many ways, including how we use our money.
Kids observe the way their parents spend, save, and invest money. Some households make a rule that the family’s finances won’t be a topic of discussion around the children. But these kids are still seeing some of the most important financial decisions you ever make – how and when you buy groceries, how much you use your credit cards, how stressed out you get because of financial matters (whether you speak about them directly or not).
These are the kinds of financial behaviors that kids will tend to build their lives upon, simply because they don’t know any different after many years seeing these actions performed in their childhood home. So when parents are in debt or go through bankruptcy, the actions that precipitate these states tend to rub off on their children.
Setting A Good Example With Debt And Money
It’s important for parents to acknowledge this and to start exemplifying good financial behaviors if they have not done so up till this point. If you are nearing bankruptcy, for example, use a trust deed to eliminate your debt without having to file for bankruptcy (and endure the damage to your credit that will result). It’s financial recovery behaviors like these that make the biggest impact on kids, because it’s evidence that you can stop destructive behaviors and make the sacrifices that result in better financial states in the future.
The alternative is passing on behaviors that will result in debt for your children. Most people carry a fair amount of debt. This is common knowledge. Even if your debt isn’t passed onto your children one day, the behaviors that they are predisposed to may result in the same state in their lives later on.
If you have kids, start talking to them about money now. Don’t pass on the habits and mindset that result in lifelong debt. Beyond simply talking about money, make sure you use your money in a way that demonstrates responsibility. Not only will this help keep your kids out of debt in the long term, it could help them greatly increase their wealth, independence, and opportunities for many years to come. Start making these changes and you’ll reap the benefits for life.