As a parent, you face six key dangers if you don’t have a system for teaching your kids healthy habits and attitudes about money.
Danger 1: Financial Dependency
Your children could become financially irresponsible adults. If you don’t teach your children properly about money, they could grow up with poor money skills. They may end up spending every cent they earn, living pay cheque to pay cheque. They could become mired in debt or, even worse, they could remain financially dependent on you when you should be saving for, or enjoying your retirement. In fact, how you teach your kids about money now could affect your own personal wealth in the future.
Danger 2: Destructive Values
Your children could adopt destructive values about money. In today’s complex, consumer-oriented, media-saturated world, your kids may adopt values about money which completely contradict the values you hold. For example, they may come to equate money with self worth. They may become hooked on possessions, on keeping up with the crowd, on always staying in fashion. They may adopt the attitude that you are always available to bail them out when they need money; that if they want something, all they need to do is ask for it. They may develop unrealistic expectations, believing that they are entitled to all the latest trends and their happiness depends on having them.
Danger 3: The Debt Trap
Your children may grow up to have bad money habits and possibly end up in paralyzing debt. If you don’t teach your kids about money when they’re young, they could grow up to be victims of our credit and consumer culture. It’s possible they could enter their 20s and 30s not knowing how to set financial goals, how to save money for the future, how to make a budget, how to plan buying decisions and how to be a smart consumer. Newspapers often carry stories of young adults on the financial brink of disaster.
Danger 4: Loss of Confidence
Without positive money habits and good life skills, your children could become adults lacking the confidence to make the right financial decisions. This lack of financial confidence could affect your children’s confidence in other areas of their lives.
Danger 5: The Apple Doesn’t Fall Far from the Tree
Although you want to take an active role in teaching your kids about money, you could teach them the wrong things. For example, you might use money to motivate your kids to score goals or get better report cards. These bribes (which are discussed in Chapter 2: Tricks or Treats) can teach your kids to equate money with success; that money is the only real reward for an achievement. In this way, you might teach your kids the wrong values even when you have all the best intentions. That’s why this book stresses the importance of “principles.” You and your children need to think about your money principles before you take action. By observing the principles, you’ll be less likely to do the wrong thing.
Danger 6: Family Conflict
You could wreck your family relationships because of conflicts related to money. In my opinion this danger is the most serious. It is not uncommon for families to be torn apart by disputes over business and inheritances. Even when the sums are modest, money-related tensions can arise. This tension between spouses and parents and their children can destroy the love and joy that should be a part of marriage and family life. If you don’t have strong principles, and a plan of action, your relationship with your kids could be consumed with arguments over allowance and other financial issues.
Since I started developing The Making Allowances System, I’ve noticed that most parents feel threatened by these dangers – either because they did nothing to teach their kids about money, or because they thought their own good financial habits would somehow rub off on their kids. For the most part, we parents lack the knowledge, structure and tools to teach our kids helpful money management skills. This book was written to help you avoid these dangers.