Money is typically a taboo subject between parents and kids. While the majority of parents feel the need to teach children about money, only 56 percent of them actually have the conversation, according to the Chase Slate’s 2018 Credit Outlook survey. Did you know that 34 percent of people say their positive habits are influenced by their parents’ financial behavior? The home and parent-child dynamic are one of the most influential relationships in a child’s life, yet, there is hardly any monetary lessons being taught.
The result? Young adults are starting off in the world sadly uneducated about the world of personal finance and unarmed with the right knowledge to gain control of their lives and finances as they venture into adulthood. Black families remain under-performers in the world of personal finance, earning just $5.04 for every $100 earned by a white family; making the need to become money smart even greater. So why is money such as a forbidden topic in the parent-child relationship?
The Fear Of Instilling Entitlement And Not Responsibility
Particularly applicable to wealthier households, parents seem to be afraid of helping children to feel entitled if they do include them in the conversation about money and in particular savings. Parents think if they do have the talk about what they are saving or how much they earn, it can seem to give them a false sense of security and assumption about always having access to their parent’s money. This may act counteractively to parents trying to teach children the value of hard work and especially as they head into adolescence, take responsibility.
Yet this could not be further from the truth. In fact, there aren’t many other better vessels to teach kids responsibility than using finance. Being an adult comes to the standard tasks of employment and taking responsibility for keeping on top of your bills. Accounting for your money and making wise decisions with your money are great examples of being responsible and it is better that children learn these lessons sooner rather than later. These days, teenagers head into college already armed with their first credit card and have to deal with budgeting and accessing financial aid in their four years of college. Even before they head off to college, teenagers as young as 15 now have part-time jobs and if they had the right help in being responsible with their earnings, their reliance on debt may reduce. In fact, reliance on student loans and parents funding their college education will decline, thanks to them having savings of their own.
Parents’ Confidence in Their Own Financial Knowledge Is Wavering
Perhaps the reason money continues to be such an avoided subject by parents is that they themselves are not secure in their own financial knowledge. Recent research has shown that even as adults, our financial education levels are poor and possibly stems from a culture preceding them. Only 4 in 5 adults today were given the chance to learn about personal finance. One glance at the African American community’s growing debt problem and we can identify that there are adults earning six figures yet finding themselves with thousands in credit card debt. Two-thirds of adults fail a financial literacy test according to the 2016 National Capability Study and 50 percent of African Americans have less than 3 months of emergency expenses saved. It seems this trend is also continuing with our children.
However, what better way to be a good role model for your child than to demonstrate great financial habits, and allow them to witness it. Financial literacy and education are not limited by age or color and there is no reason why parents cannot improve their knowledge about money thanks to the magnitude of online and local resources available to everyone. For your child, you can both educate and entertain them at the same time by providing them with automated, child-friendly tools encouraging monetary skills such as shopping and budgeting games and apps. In the end, it benefits everyone in the household; your child gains a solid financial foundation and you are better prepared to make decisions about your financial future including retirement, a key concern of African Americans today.
The ‘Let Kids Be Kids’ Excuse
Dealing with your finance and talking about money can be a tough pill to swallow. In fact, money is one of the top stressors across America, even for adults. It is understandable that we want to give our children the best childhood they can have including no worry about things such as paying bills. However, protecting them from the realities of the world is not doing them any favors, and managing your money well is one of those realities that they will have to face.
One good example is the use of credit cards. Kids see their parents swiping their cards in grocery stores and other places but often do not know the mechanics behind the use of those cards. The purchases still need to be repaid every month and there is an interest rate attached to it i.e. a cost attached to it. It is easy for a young child to get the idea that simply swiping a credit card automatically pays for something they want. However, adults know that simply isn’t the end of it. Then there is the potential impact on your credit scores, and what a credit score exactly consists of. Only 32 percent of parents have spoken to their child about credit scores. However, this is a very real part of their life that they will face in adulthood and will impact many of their life decisions including employment and buying a home.
If we don’t prepare our children with the right tools, then how can we expect to see a change in patterns of African American families? We must be willing to open up the conversation with our children and teach the tough lessons. If you want to change the financial dynamic in African American households, start with the children.
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