How you live your life is fundamental to what you will teach your children about money and it will create their “blueprint” or programming for life.
Nothing demonstrates a point more clearly than a personal story and this one gives a clear picture of a “wealthy” man’s feelings of emptiness and confusion. This thirty-something gentleman explained, “I know I can’t ask people to feel sorry for me because I grew up in a wealthy family, but I have no idea how to hold onto money. I spend what I make and the stuff I buy doesn’t mean anything, it’s just what I’m used to doing. I have no idea how to change where I’m at.” The expression in his eyes was not only one of unhappiness but that of a person who is feeling “lost.”
Unhappiness is often due to a lack of self-discipline, especially when it comes to money. Learning to be personally responsible for our actions and thus our lives is critical for everyone, and it’s much easier when the lessons start in childhood.
The Effects of Overindulgence
Don’t feel guilty about saying “no,” in many ways, you may be doing your child a big favor. You’ll be surprised how resourceful they can be when they know it’s up to them to come up with the moolah. Plus, it has been shown that delayed gratification is a very important part of a person’s emotional development and long-term happiness.
When a person desires something and knows they have to figure out how to come by it on their own, it kicks off a series of questions and ultimately leads to setting a goal and taking action to achieve that goal. If the person is simply given the item, none of these problem solving or actions steps take place. Neither does the self-esteem which comes with achieving a personal goal. Dr. Bredehoft at Concordia University has done a great deal of research on this. His conclusion is simply: if you want your children to be self centered greedy adults, overindulge them. If you want them to grow up to be caring, thoughtful and happy adults, don’t overindulge them.
Spoiling and overindulgence can prevent your children from learning numerous vital lessons including:
Understanding family values – your child’s behaviour and ultimately their purpose will be consistent with their values. This will shape their life goals. Are you clearly communicating your values through your daily actions?
The increase in self-esteem and confidence that comes with setting and achieving goals. Learning how to figure out solutions, be resourceful and truly “think through” a challenging situation is critical for creating this capability in the brain.
Learning the self-discipline and self control necessary for saving and making wise spending decisions early on. Once a bad habit is “learned” by the brain, it is difficult to change.
Taking responsibility for their own actions and understanding the long-term consequences of their choices.
These lessons are the beginning steps of “life management.”
How to help your child create good money habits
Like I discussed with the young man above, learning to manage your money wisely can bring relief, hope and excitement because you are able to physically see how your dreams and plans can become a reality. He also agreed it would be helpful for him to spend less time shopping and more time outdoors and with friends and family.
The Give *Invest*Save*Spend (GISS) Method of Money Management
This system is powerful in its effectiveness and a wonderful place to start, especially with children. Why? Because it’s simple and fun. It incorporates counting, goal setting, visualizing, and most importantly for learning, experience and repetition. When your child receives "income," sit down with them and help them divide their coins and dollars into these four categories:
Philanthropy is known to increase inner happiness and self-esteem. Giving is one of the greatest joys in life and a powerful lesson for children. Helping others not only teaches your children empathy and how to be kind to others, it also helps them learn to appreciate their own lifestyle and develop a sense of gratitude.This is a chance for you to talk about how they can make a difference in the world, and I can almost guarantee you will be inspired by their words!
Investing is essential for people to ensure they will have a secure income and good lifestyle as they get older. Many people make the mistake of just having “savings” and then spend the funds on expensive material items leaving nothing for them to live on in retirement. Investing is an abstract concept for really young children but can be learned about gradually. Initially this segment can be explained as the money they grow and use when they are older.
It is critical that children and adults learn to set and achieve goals and that goes for the financial part of their lives as well. As a child works toward their goal, whether it’s saving for a bike or a toy of some kind, they learn the steps to achieving their goals. When they do achieve the goal, they are proud and feel confident and excited to set a new goal. Parents need to give their children the opportunity to set and achieve small goals so they are inspired and feel confident to pursue their life goals.
This is the money for expenses if you’re an adult and basic spending money for treats and so on for children. Once a child uses their own money for purchases they begin to consider the cost and value of things. They will learn more about needs and wants, buyer’s remorse and the feeling of "running out." These lessons are far better learned at a young age with small amounts of money than in college when it may lead to thousands of dollars of credit card debt.
The Benefit for You
The “GISS System” of managing money is a wonderful way to get your children started on the path of learning to handle their money wisely. It will give you the opportunity to discuss values, why they are saving for something special, what charity they would like to help and many more meaningful discussions. By having their own money to spend, it will not only cut down on their requests to you for more money, they will begin to learn age-appropriate responsibility and self-discipline, both of which are critical for long-term financial well being in adulthood. The parents benefit from their children's lessons as well! See this mom's story on how the GISS system helped her daughter.
All the best as you travel this path of financial education with your children.
The first story book in the Zela Wela Kids Build a Bank series teaches children more about the “GISS System” and how to build their own “GISS” bank at home which they can then use. If you like, go ahead and send me a picture of your child’s bank so we can all see their great work!