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

The many miracles of Aretha Franklin movie Amazing Grace
108368 2019-07-15 00:00:00Z Movies

The many miracles of Aretha Franklin movie Amazing…

by Russell Baillie

A long-lost concert movie capturing Lady Soul in her prime is heading to the New Zealand International Film Festival.

Read more
The untold history of China's one child policy
108182 2019-07-14 00:00:00Z History

The untold history of China's one child policy

by RNZ

Nanfu Wang explains the story behind her film One Child Nation, which screens at the International Film Festival this July.

Read more
Is Vladimir Putin right about the death of liberal democracy?
108314 2019-07-14 00:00:00Z World

Is Vladimir Putin right about the death of liberal…

by Paul Thomas

Vladimir Putin reckons “the liberal idea has become obsolete”. As Mandy Rice-Davies said, “Well, he would, wouldn’t he?”

Read more
The psychology of psychopaths and social media users
108199 2019-07-14 00:00:00Z Psychology

The psychology of psychopaths and social media use…

by Marc Wilson

Psychologists are getting a picture of people who are big on social media. It's not always pretty.

Read more
Acclaimed writer Greg McGee on his family's stolen children
108138 2019-07-13 00:00:00Z History

Acclaimed writer Greg McGee on his family's stolen…

by Clare de Lore

Greg McGee always knew his great-grandfather had kidnapped his father and uncles as infants, but now for the first time he’s revealing that...

Read more
Video-streaming platforms are failing their impaired customers
108303 2019-07-13 00:00:00Z Tech

Video-streaming platforms are failing their impair…

by Peter Griffin

When it comes to video streaming, the hearing- and visually impaired can only dream about the technology that’s passing them by.

Read more
We like big vehicles and we cannot lie
108312 2019-07-12 00:00:00Z Politics

We like big vehicles and we cannot lie

by The Listener

It would take a psychologist to explain Kiwis’ love for utes and SUVs. But it’s not the only reason people are revved up over the attempt to reduce...

Read more
Booker winner Arundhati Roy on democracy in peril
108043 2019-07-12 00:00:00Z Profiles

Booker winner Arundhati Roy on democracy in peril

by Sally Blundell

Soon to speak in New Zealand, Booker Prize winner Arundhati Roy discusses her complex relationship with her native India with Sally Blundell.

Read more