Updated: Dec 03, 2018 23:57 IST
Washington D.C. [USA], Dec 03 (ANI): According to a recent study, children learn more about finances from their parents than any other source, and hence, it is important for parents to give their children real-world experience with money to prepare them financially for adulthood.
The process through which parents impart this knowledge onto their children is known as “financial socialisation.” Much of the existing literature on financial socialisation focuses on two things: the example parents set for their children, and what moms and dads directly teach their kids about money. However, research often overlooks a third important piece: giving kids hands-on practice managing money.
According to a study, which was published in the Journal of Family Issues, parents can give their kids practice with money in a variety of ways. They might give them a regular allowance, pay them for tasks that go above and beyond their normal chores, reward good grades with cash, or encourage them to save for special purchases or charitable donations. The specifics don’t really matter, nor does the amount of money, which may vary based on a family’s financial situation.
The important thing is that parents give children hands-on experience with money early when the stakes are still low.
“If the first time kids use a credit card or have to work or have to save up for something or have a bank account is when they’re on their own, that’s not a good time to be practicing,” said the lead author of the study, Ashley LeBaron.
“It’s important for parents to give kids age-appropriate financial experiences when they’re monitoring them. Let them make mistakes so you can help them learn from them, and help them develop habits before they’re on their own when the consequences are a lot bigger and they’re dealing with larger amounts of money,” she added.
LeBaron and her collaborators interviewed 115 study participants, including 90 college students ages 18-30, as well as some of those students’ parents and grandparents. They asked the students what and how their parents taught them about money, and in the case of parents and grandparents, also asked what and how they taught their own children about money.
Most participants said they had been given some sort of experience with money in their youth, and they considered that experience to be extremely valuable in preparing them to manage money on their own. Those who didn’t get those kinds of experiences wished that they had.
Based on the interviews, the researchers identified three main themes around what participants learned from the financial experiences they were given as children: how to work hard, how to manage money and how to spend wisely. They also identified three primary reasons why parents said they provided their children with hands-on experience with money: to help them learn financial skills, acquire financial values and become independent.
“I think it’s hard for parents, sometimes, to let their kids make mistakes. It’s tempting to just shield kids from everything related to money, but it’s really important for parents to get money into kids‘ hands early on so they can practice working for it, managing it and learning how to spend it wisely,” LeBaron said.
Ideally, LeBaron said parents will teach their kids about money through modeling, explanation and hands-on experience. (ANI)