Kids are pretty observant, and they learn by what they see. Sooner or later, they’re bound to make comparisons about money and see that financial situations vary a lot from family to family. You’ll need to go over the basic reasons why people have different amounts of money. Don’t be afraid of this—it not only expands their financial education, but also gives them a greater understanding of society as a whole.
Education and Jobs
Companies who look for employees have specific objectives in mind for the business. They hire individuals who have the skills and qualifications necessary to meet those objectives. The education people get shapes what they know and can do, thereby drastically influencing which employers find them attractive. Some people do not have access to the education necessary to increase their skills and knowledge, so they aren’t able to apply for better-paying jobs and have limited income. This is a major reason older individuals go back to school—they want to be able to get the jobs that pay more.
Educational differences also play a role in financial management. If a person doesn’t know how the stock market works, for example, he likely won’t invest his money and let it work for him. Even though schools and other organizations such as banks can provide excellent information, ultimately, it is up to you as a parent to provide the information your child needs to make his funds produce larger yields, because you are your child’s most consistent and influential role model.
Spending Habits and Priorities
In a perfect world, every child and his family would keep spending under control, but the reality is that not everyone has the greatest impulse control. Many people spend based on how they feel, not based on a logical plan. The result is that some people end up spending more than others. In addition, people have different priorities. For instance, some people think that it’s important to keep up appearances, have a nice home and car, etc. Others believe that material things distract people from what really matters, such as relationships, so they reign in what they buy and are able to save, donate or invest more. Some individuals with this belief, such as members of the church, even take vows of poverty. Parents play an enormous role in shaping the habits and priorities their kids develop when it comes to money.
One of the biggest controversies in economics is how to eliminate financial class gaps. These gaps mean that the financial starting point kids have is not the same. A child raised in poverty, for example, might have to take out more loans to go to school than someone who starts out with a hefty inheritance, resulting in different debt loads and spending power. Stress to your child that not having a lot of money is not necessarily the result of laziness. At the same time, point out that advantaged children don’t ask to be born wealthy any more than a poor child asks to be born without funds. Tolerance and understanding needs to happen on both ends. Take the time to break down financial stereotypes with your child.
Just as people start out on different economic levels, they also can be on different physical levels. Some people, for example, have disabilities such as a bad back or severe diabetes that prevent them from holding down a job. Similarly, younger individuals typically are stronger and have better endurance than those approaching retirement. People who are unable to work often have to rely on family, friends, or governmental support in order to make ends meet. The financial help provided usually isn’t enough to allow much saving or extra spending, covering only the basic necessities.