How to teach your kids to think more critically about money

by Carly Sawatzki / 22 December, 2017
 Simply discussing money can help children build financial independence by practising making decisions. Photo / Getty ImagesAdvice on money often boils down to simplistic messages about budgeting, understanding compound interest and avoiding debt. But research suggests financial decision-making depends as much on our values, expectations, emotions and family experiences as information taught at school.

In short, the way people interact with money is highly complex and so the way we teach our kids needs to catch up.

It’s time for a shift from teaching children rote-learned financial rules of thumb to instilling dispositions and a thinking process that underlies good financial decision-making.

Funnily enough, the debate over “smashed avocadoes” illustrates two concepts that can make all the difference to how we approach financial decisions. The first is a future orientation and the second is self-regulation.

Thinking about the future, or a “future orientation” is incredibly important when it comes to managing money. This is a tendency to consider future consequences and a willingness to delay gratification in favour of longer term goals.

Self-regulation is the process by which we control our thoughts, feelings and behaviours. Being aware of our financial motivations and having the ability to critically analyse our decisions is also important.

These are the kinds of thought processes necessary for good financial decision-making.

Money is a limited resource

Research shows that both parental behaviour (like discussing financial matters with children) and dispositions (such as future orientation) have an impact on their children’s financial behaviour into adulthood.

This means that simply discussing money can help children build financial independence by practising making decisions. For example, parents and children can discuss what they want to do with any money they receive, and maybe encouraging them to bank and save.

Giving children pocket money is another strategy for accomplishing this. Although not everyone has the means or the inclination to pay their children for helping out around the home. And you don’t have to.

Research also shows that financial hardship - living on a limited income and going without – can be just as useful in shaping financial understandings as the experience of growing up rich. In fact, there are things that children observe and experience – like problematic gambling and the financial fallout of marriage separation - that can influence them to think and feel more conservatively about money.

 

As part of my ongoing research, I have spent time working with parents, teachers, and 10-12 year old students. I’ve found that the experience of financial hardship is not lost on children. During interviews some have described the importance of working to earn an income. Others have told me that their parents work multiple jobs to make ends meet and money is stressful.

Some children suggested selling a car to save money, or competently described sophisticated economic concepts (supply, demand and market equilibrium) in relation to buying and selling second-hand goods, particularly electronic games.

These examples show that children for whom money is a limited resource bring valuable insights to their financial literacy education at school. There are ways that parents and teachers can sensitively tap into these insights during lessons.

Promoting critical thinking and financial independence

We live in a world that sells immediacy and makes it easy to tap and go. Figuring out how to balance short term desires with longer term financial goals that may seem out of reach - like funding higher education and purchasing a home - requires focus.

Ultimately, children need practice applying their literacy and numeracy skills to make financial decisions independently. This can take place both at home and in the classroom.

For instance, instead of giving children values-laden advice about what makes a wise financial decision (such as avoiding debt), use questioning techniques to stimulate and guide their thinking.

These could include:

  • Reasons: What are your reasons for making that decision?
  • Evidence: Can you convince me that is the best decision?
  • Argument: What would someone who disagreed with you say?
  • Impact on others: Will your decision affect anybody else?
  • Consequences: What might happen next?

These questions engage children to think about what drives them and what all their available choices might be.

As painful as it can be, it can also be productive to let go and allow children to experience the odd financial misadventure and mistake. Later, you might ask…

  • Reflection: How did that work out? What might you do differently next time?

These questions have the potential to promote critical thinking, a future orientation and self-regulation - without seeming to be too judgemental or interfering.

The Conversation

Carly Sawatzki, Lecturer, Monash University

This article was originally published on The Conversation. Read the original article.

Latest

How to know if you are being sexually harassed at work
89757 2018-04-23 00:00:00Z Social issues

How to know if you are being sexually harassed at …

by The Listener

The Employment Relations Act is very clear about what constitutes sexual harassment in New Zealand.

Read more
Some corner of an English field
89918 2018-04-22 00:00:00Z History

Some corner of an English field

by Pamela Wade

Pamela Wade visits a village in rural England and finds the war-time deaths of her uncle and his two Kiwi-airmen mates have not been forgotten.

Read more
The brain researcher who was diagnosed with a brain tumour
89704 2018-04-22 00:00:00Z Profiles

The brain researcher who was diagnosed with a brai…

by Clare de Lore

Few people could be better suited than Louise Nicholson to deal with a brain tumour diagnosis.

Read more
Discovering the majesty and fragility of New Zealand kauri
88483 2018-04-22 00:00:00Z Environment

Discovering the majesty and fragility of New Zeala…

by Josie Stanford

A twilight tour in Waipoua Forest highlights the majesty, and the fragility, of our mighty kauri.

Read more
Sweet Country – movie review
89842 2018-04-22 00:00:00Z Movies

Sweet Country – movie review

by Peter Calder

An Australian western with Sam Neill is a searing masterpiece.

Read more
The role that diet plays in causing gout is smaller than people think
89404 2018-04-22 00:00:00Z Health

The role that diet plays in causing gout is smalle…

by Nicky Pellegrino

It's often said that diet is the most important cause of gout, but for most people changing it won't lower uric acid levels enough to stop the pain.

Read more
15 and snapping the stars: The new generation of music media
88446 2018-04-21 00:00:00Z Music

15 and snapping the stars: The new generation of m…

by Sharon Stephenson

Wellington teenager McKenzie Jennings-Gruar is part of a new-generation media pack on the music festival circuit.

Read more
Moa Please! Give Anika Moa a prime-time spot on TV right now
89886 2018-04-21 00:00:00Z Television

Moa Please! Give Anika Moa a prime-time spot on TV…

by Diana Wichtel

It’s time the tornado of Seven Sharp and Anika Moa Unleashed was set free on prime time.

Read more