How can we teach children to adopt some of the same behaviors and decision-making skills that millionaires next door have when it comes to managing finances? Is there a book, checklist, or blog that will ensure that children will magically adopt saving, spending, and other related behaviors that will set them along the path to riches? Many resources provide financial literacy education to our children. Still, only a few of these financial education-type resources help children build the behavioral or psychological wherewithal to transform literacy into actual saving, spending, and investing decisions that are beneficial long term.
Likewise, while literacy resources are helpful, most of us acquire knowledge and behaviors through the modeling and teaching of those around us. And, for children, that’s often their parents. For example, hyper spending parents may end up with hyper spending children. If you want your children to adopt the behaviors of economically successful individuals, then you’ll have to start modeling the habits of self-made millionaires yourself. Consider what researchers found related to how children learn money behaviors:
Researchers found that parents provide three general themes of financial management to children…saving, how money is managed, and how financial matters are discussed. The vast majority of children in these studies learned about a family’s propensity for saving and financial management through direct observation versus through conversations regarding these behaviors. In other words, parental behaviors tend to stick with children more so than [a] discussion of what ought to be done related to money.
Are you passing down habits to your children that may lead them to need economic outpatient care in the future? Or are you instead demonstrating behaviors that lead to amassing wealth overt time? Here’s a list of questions to consider as you think about the types of wealth-building or wealth-prevention habits you may be sharing with the next generation. Use them to gauge your teaching and parenting skills when it comes to millionaire-next-door-type behaviors:
- Do your children ever observe you paying bills, researching how to save money, reading financially-focused books/newspapers, or visiting personal finance sites? Modeling the management of finances demonstrates the importance of these types of activities to your children. Prodigious accumulators of wealth spend more time studying investments and planning for future investments than under accumulators of wealth. By modeling financial management activities to your children, you will prepare them for taking on these kinds of tasks in the future.
- Do your children have unfettered access to spending money? Do they have a clear understanding of who pays for what in your household? Providing clear delineations between your money and their money from an early age can prevent the dreaded need for economic outpatient care in the future. Depending on the social influences around you and your household, this recommendation can be challenging to implement. As an example, having teenagers pay for their own “wants” can be particularly challenging when their peers have unlimited access to their parents’ credit cards. Communication is critical to establish these boundaries early.
- How often do your children see you come home with a new purchase? How often are packages showing up at your door? If the answer is “daily” or thereabouts, you may be setting in stone a pattern of spending and consumption behaviors that they will want to emulate once they are out on their own.
- How do you refer to those around you (neighbors, friends, family members) in terms of what they drive, buy, and wear? Are you focusing too much on the Joneses? If your family conversations tend to center on possessions, you may be teaching your children to focus on the consumption behaviors of others. In turn, they may begin to judge their success or failure by the artifacts of wealth instead of relationships, achievements, or other goals.
The rewards of providing your children with a model of effective financial management will take time to appear. Consider them a deposit in the future account of your children’s well-being, instead of gratifying requests today or providing an easy “yes.”
5 thoughts on “What Sticks With Kids? Your Money Behaviors”
Your work adding value to your father’s legacy is sincerely appreciated. Thanks a ton.
This is such a wonderful subject to explore thank you! Particularly in these times. What a gift to give our children.
I would definitely buy the book on this subject.
How to teach your child to be the Next Millionaire Next Door???
This is a great reminder.
I was the original “Jerry Method” blog post back in 2012. Both my sons have now graduated college. Both earned Masters degrees and both managed to get them for free by getting graduate research positions which provided for free tuition and a stipend. Both graduated with more money saved then when they started college. Yes I paid their tuition, but I had been investing for that even before they were born. I gave them each a used car for graduate school and that was their gift upon graduation. They were blessed to get Bachelor and Master degrees with no student debt and no car loans. My only request was that they start investing in their 401k’s immediately and at least the amount needed to get the company match. The older son has now had 2 raises and each raise he increases his 401k contribution. The younger son has been working for 6 months now, and because of a generous company match, has 14% going into his 401k. No credit card debt, no crazy luxury purchases. They have used family furniture to furnish their apartments and are both saving for home/condo down payments. So far so good!
I read your father’s book when I was starting out in my career and am pleased to say that at age 56, after following the advice in The Millionaire Next Door, my wife and I are now financially independent and would fall into the category of families that is studied in the The Next Millionaire Next Door book. However, we have a 13 year old son who we are teaching the values of saving, working hard and investing but it would be great if you considered publishing a book specifically aimed at explaining the key concepts of your books to children. My son and I are reading together The Millionaire Next Door and then will read the Next Millionaire Next Door but some of the subject matter, examples and concepts are things that he does not yet comprehend because he is still a child. Please let me know if you aware of a good book that would explain the concepts of The Millionaire Next Door for a young teenager. Thank you