Preparing Children: Values, Money & the Future
Why Financial Education?
Many parents express a wish for their kids to enjoy a normal, happy childhood and for some families, introducing the issue of wealth risks undermining that goal. But raising children in denial of a family’s real capital and social assets may have negative consequences; leaving children less prepared than they need to be for the responsibilities and opportunities awaiting them. Raising children in the context of wealth gives them grounding and preparation that will serve them well throughout their lives.
"One cannot train a child haphazardly to shepherd financial and human capital and expect they’ll become proficient adults, any more than the weekend athlete will make it to national trials for Olympic competition."
- Joline Godfrey, author, Raising Financially Fit Kids
Consider, we give children financial education, not because they cannot afford to hire others to handle the smallest aspect of their financial lives, but because we fail them if we don’t give them tools for independence and economic self-defense. They must, over the course of their lives, feel confident to make financial decisions and be well enough informed to audit the auditor. There are four key drivers of financial education for kids:
1. To help children achieve a purposeful life. Young people who are not required to make choices and experience consequences related to financial decisions will not have the benefit of those dreary but imperative "character building" experiences that help them develop into the confident adults. Children raised in a world in which almost "anything is possible," often have a tough time deciding which possibilities are more important than others. In Just Enough, authors Howard Stevenson and Laura Nash, maintain that, "…a sense of right purpose is one of the most powerful sources of energy and commitment to be found."
A purposeful life comes from reflection and conscious choices. Helping kids uncover purpose and meaning is part of the process of a thoughtful financial education. Charles Collier, author of Wealth in Families, urged his clients to, "...focus on each family member's discovery and fulfillment of his or her life calling by dedicating your family's human, intellectual, social and financial capital to that higher purpose." He further reminded us that, "The desire for meaning and genuine connection will always transcend wealth."
2. To give them tools for self-protection. Children raised to be financially literate recognize fiduciaries, read the small print, and think critically about financial matters. They are less vulnerable to manipulative acquaintances, potential partners with unworthy intent, and fraudulent business or charitable opportunities. Children who have the benefit of explicit, consistent conversations with family and advisors regarding financial responsibility are more likely to be engaged in their own financial self-development than the child encouraged to ignore the "boring" realities of money. Learning to select, trust, and manage your advisors is an essential part of becoming a financially responsible adult.
3. To steward family capital and legacy. Thought leader families approach the development of their human capital in the same way great companies invest in their best employees. In his classic book, Family Wealth: Keeping it in the Family, Jay Hughes, made this point: “...a family without educated human capital can receive the most timely financial information but be unable to do anything with it." Such is the fate of young people who have not received guidance to become responsible caretakers of family capital.
4. To nurture resilience, adaptability and readiness for 4IR. Change is a permanent family dynamic—developmentally the family is constantly evolving. Now layered on top of this, the digital world that consumes family life is morphing into 5G and the internet of things (smart homes, smart appliances, smart TVs, etc.), which in turn is merging with artificial intelligence (Alexa, Hey Google, etc.), algorithms (Safari, Google search, etc.), block chain, robotics (Amazon warehouses and iRoomba); and biotech (23andme.com, artificial limbs and organs). Almost every aspect of home and family is being disrupted--at warp speed.
Sometimes referred to as the Fourth Industrial Revolution (4IR), Tom Friedman describes it as the acceleration of “the market, mother nature, and Moore's law.” Whatever we call it, by the time today’s toddlers can say, “Alexa, give me my allowance” banks will be fully equipped with artificial intelligence; many medical services managed by digital doctors. You may already own a Samsung refrigerator. Once ‘just’ a computer company, Samsung now supplies anything that uses a computer. That refrigerator knows how many times you or your teenager grabs a can of Zero Cola or Chobani yogurt. Your smart mattress will communicate your baby’s sleep habits to the manufacturer. Kids are now tracked from womb to tomb. Alexa will report to large pharmaceutical companies when there are sniffles in your neighborhood. And this isn’t even the future. Its capability in place today.
Families can be paralyzed or prepared; ready or reactive to the future. Those who embrace change—and prepare their kids for it are prepared for the unexpected; those who do not are in danger of ignoring signs of change--weak signals from the future-- until it is too late. Financial fluency is one aspect of that preparation.
Managing Abundance. An FAQ parents ask is, "how much?" How much of an allowance? How much to spend on clothes? How much to pay for a teen's first car? How much to subsidize lifestyle? How to manage in the midst of abundance? Managing financial abundance is like managing any other kind of abundance. No responsible parent would let their child eat candy without restriction, whether they could afford it or not. Parents put limits on when and how many chocolate bars a child can have because that’s the task of being the grown up: to set boundaries for children not yet able to do it for themselves.
This is true also for families intent on helping children grow up with sound financial values and skills. Doubtless, there are plenty of families that can take care of the most minor aspect of a child's financial life and satisfy their most outrageous whim. But children unaccustomed to the discipline of making thoughtful choices; kids who’ve not found meaning in something other than "what I have, how much I’m worth, or what I wear," are prone to depression, low self-esteem, and cynicism. Managing abundance is as much about helping children learn who they are as it is about what they have. One of the most important outcomes of a comprehensive financial education plan is the development of young people with confidence and a healthy regard for something bigger than themselves.
