Editor’s note: This article was first published in August 2012, when it said “we’re in a crisis”. Its claim that schools do not teach financial education reflects Spain at the time and may differ from current curricula.
When the time comes, we can gauge our children’s financial intelligence with a simple example. If our child asks us for €10 to buy sweets (gummies, candy and so on), once we hand over the €10 there are three possible scenarios:
- Our child spends the whole €10 on sweets. This child is… like most children.
- Our child spends €5 on sweets and saves the other €5 for another day. In this case, our child has a sense of saving.
- Our child buys €10 worth of sweets, resells them to friends and comes back for more sweets to sell again. In this case you have a potential financial wizard, perhaps the next Warren Buffett.
One of parents’ main jobs is to teach our children certain values, such as honesty, good manners and respect, and those are precisely the values that, once adolescence arrives, could be lost through influences from outside the family, even if we have done a good job.
Some parents send their children this message: “Money isn’t the most important thing in life.” Planting those words in a child’s mind does them no favours, because the message simply isn’t true. Telling a child that money isn’t important is like telling an athlete that taking part is what matters. The loser hears: “You played well, don’t worry. Taking part is what counts.” The winner gets the congratulations plus whatever reward comes with winning. In other words, whoever thinks taking part is what matters will always be satisfied with just taking part. Whoever plays to win ends up winning through effort and sacrifice, as long as they have the ability and preparation to make it possible.
Before a child can think for themselves, they will be Catholic or Muslim depending on their parents’ religion. By the age of 9, a child already supports Real Madrid, Barcelona or Betis. By 14, they already lean left or right, and all of this is the result of age-old conditioning. The child has been conditioned because at a certain age children are sponges that soak everything up. That is what we should take advantage of, to make sure we don’t repeat the mistake many parents make of not giving financial education the importance it deserves.
Talk to them about money as early as possible
People often say it isn’t healthy to talk about business and money at the table. Against that, Warren Buffett himself says his interest in finance was sparked because his father never stopped talking about business and finance at mealtimes, to the point that the subject caught a child’s attention. Buffett said he made his first investment at the age of 9 (and joked that he had already started too late).
Let your child know that anything they need in life is obtained with money. Of course love is important, but let’s hope your child never has to find out for themselves that when poverty comes in at the door, love flies out of the window (as someone once said).
Change the kind of presents you give (give shares)
At 3 it may not be the moment to replace the usual doll or bicycle, but at 8 or 9, I think it’s time for your child to receive a present that opens up their financial mind. What would happen if, on their birthday, you gave them 100 shares in a listed company?
At first they probably wouldn’t be too pleased, but it’s an ideal moment to explain why you chose that present. Explain what shares are. Tell them that today you’re giving them shares worth €1 each, but that if the company does everything it should, those shares will multiply in value. Introduce them to the world of finance by asking them to research, before their next birthday, which company they would like to receive new shares in.
I know this may sound very cold or materialistic, but at a certain age you come to wish your parents had given you thousands of shares in leading companies instead of other presents that you no longer have or can’t even remember.
Board games that stimulate the financial mind could be another kind of present. Parcheesi is fun, but… perhaps there are other games, like Monopoly or similar ones.
Stimulate their interest
You shouldn’t hand a child everything on a plate, but nor should you flatly say no. Nowadays, when a child asks their parents, “Can you give me money to buy… whatever?”, parents tend to answer that there’s no money, that we’re in a crisis and so on… but very few get their child to think about how to obtain the money for what they want at that moment. If we get the child to rack their brains for a way to get it, they may or may not succeed, but we are already instilling two values they will need in the future: “thinking and effort”. Some will think that it’s too early at that age and that a child couldn’t manage it. In that case, I recommend reading our article “Learning from 12-year-olds”, in which they teach us a great lesson.
In the same way, these days I think about the books I was made to read at school. Given how much practical use The Little Prince or La hoja roja (The Red Leaf, by Miguel Delibes) have in life, I wish I had read much more about financial topics, since it would have saved me having to learn it later on.
I remember the work and effort I put into learning the capitals of every country in the world. Today, without ever setting out to study it, I have more than 200 companies from different stock indices around the world in my head, along with their returns and current share prices.
If we manage to make that interest in finance develop naturally from a very young age (the younger the better), that child will be very clear about what they want to be when they grow up and what they don’t. That doesn’t mean they will necessarily become a business owner or run a multimillion corporation, but whatever they do in life, they will know how to save and invest, two subjects that 90% of people fail. At the same time, we should try to make sure they are happy and choose their own happiness: that they study what they enjoy and devote themselves to what they’re good at, or the best at.
Remember that school won’t teach them about financial matters, so this job falls to parents. Now, I know many will think: “We can’t all like the same things or be drawn to the same subjects.” I completely agree, just as not everyone will be successful in life in the future. In a way we can contribute to that success, although the last word will be the child’s.
Further reading
- 10 tips to encourage your child’s entrepreneurial spirit
- Warren Buffett’s 10 keys to financial success
Featured image: Pattaya Patrol, CC BY-SA 4.0, via Wikimedia Commons.
