Learning About Money the Hard Way

What subject do parents shy away from talking to their kids about? Money. According to a recent survey by T. Rowe Price, almost half of parents don’t take advantage of chances to talk to their children about money and finances, and 25% are “reluctant” or “extremely reluctant” to do so. “Without a working knowledge of money, it is extraordinarily difficult to do well in life,” says Sam X Renick, a financial literacy expert whose work focuses on helping children learn about money.

And kids want to learn: In the same survey, half of the kids said they wished their parents had taught them about money. There’s no shortage of resources. For example, enter “money and children” in Amazon’s book section and there are more than 50,000 results, ranging from Baby’s First Business Book to Curious George Saves His Pennies to The Kid’s Roth IRA Handbook.

So if parents aren’t teaching kids about money, how do children learn? Research from the University of Minnesota confirms that “[t]hrough observation, children learn a great deal more than parents realize. Children learn mainly through indirect teaching by observation and example; participation in discussions and group decision making; direct teaching through planned experiences; and by making their own decisions.” What’s more, children’s attitudes and habits around money are largely formed by age seven.

Given that parents aren’t talking to their children about money, but teaching them by example, what lessons did people learn?

“This Is Capitalism” asked readers to share their early memories about money – how they learned about money, how much access they had to money, and what those lessons mean today. Here are edited answers:

COLLEEN:

I remember getting money for birthdays and from the tooth fairy, and I was encouraged to spend it on myself, not save it. My relatives were also big on savings bonds, so I had some sense that there was money somewhere waiting for me, but I didn’t think about it. I was never taught anything formal about money, which isn’t to my parents’ credit. But I didn’t get any feelings of insecurity about it, either. I didn’t really pay attention to money until I started babysitting at age 12, when the money started to seem more real. As an adult, it took me a long time to learn to control my spending.

RENEE:

The first time I understood the power of money was when I was going off to college. My family’s pattern was to save half of money you got from something like a First Communion, or a birthday, and I got the other half for myself. I didn’t think about the other money until my family gave me that $2,700, which  would be worth about $11,000 now. That meant I didn’t have to work during college, and I didn’t have any loans. That was a huge lesson in realizing how much peace of mind having money can give you. It’s not the same as happiness, but not having stress makes a big difference.

As an adult, I saved as much as I could, and went by the “50% rule” for any bonuses and windfalls. My husband came from a family with a similar mindset, so when we were raising our son, we did the same thing for him as my parents had done for me. He also got a big check when he went off to college. I do remember wishing my parents would buy me a car when I was younger, but I know now getting the saved money was better. The big lessons, though never stated, were “put it away and don’t touch it,” and “live below your means.”

WILLIAM:

I remember going to the bank with my mother, and before I even knew what the bank was for, I knew it was different. It didn’t smell like the grocery store or anyplace else, and it was quiet and hushed. It had this special ambiance. One day when I was with her, I noticed this stack of cardboard cats. They folded out into three sections and had slots to save dimes. When you had filled all the slots, you would have enough money to open a bank account. I told my mother I wanted to do it, and she encouraged me. But I found out about it on my own.

When I was 7, I opened my savings account with $3 worth of dimes. The bank book, which they wrote in in with a pen, went into a cardboard sleeve, which then went into a plastic sleeve. All that reinforced the idea that this was very important business.

For my eighth birthday, I got eight silver dollars. Real silver dollars, from the 1800s, not contemporary ones. I didn’t know they were more valuable than anything else, so I deposited the money in my savings account, because it was exciting to see the balance grow.  I wish someone had told me to save them! Who knows what they would be worth now? But the fact that no one told me to save those silver dollars shows the laissez faire attitude my parents had about teaching us about money, even though they were both careful with their own money.

ALEX:

My parents didn’t teach us about money, but it was definitely something they talked about a lot. I was very aware that we didn’t have a lot of money but I didn’t understand why. I think that’s why I was always playing games with money when I was little: Monopoly, running imaginary stores with my toy cash register, shooting dice and playing cards (for pennies), and trying to sell stuff that I made to relatives.

I got my first lesson in capitalism when I was 5. I made a potholder on a metal loom and offered to sell it to one of my aunts. I told her I wanted 10 cents. She asked me how much it cost to make it. I had no idea so I told her “10 cents.” She kept repeating, “You have to make a profit.” She said I had to sell the potholder for more than it cost to cover my expenses. I’m five – I don’t know what expenses are! And I was confused, because I really liked making the potholders, so it already seemed worthwhile. She ended up paying me a quarter. When I realized I could buy a new bag of fabric for 20 cents and make five more potholders, it finally made sense to me. I guess that’s why I’m an entrepreneur today.

MARIE:

When I was seven, we were going to my grandmother’s for her birthday and my parents had put $50 in the card for her. I asked them to let me carry the card. Somehow I lost the card between our house and my grandmother’s.

My parents were really angry and upset because $50 was a lot of money back then, and it was a lot of money to them. I asked them if the money had died, because that was the only way I understood something being gone and people getting upset about it. They told me it was just gone forever – like it had never been here. That was scarier than death. Whenever I got any money of my own after that, I hid it and would check on it every day to make sure it was safe. To this day, I am terrified of losing things.

JEFF:

I never wanted to accumulate money, I wanted to buy things. I grew up where there were lots of small stores within walking distance and they all had stuff that kids could buy for not very much money: Spaldeens (known as “Spauldings” everywhere but New York City); yo-yos, Silly-Putty, stuff like that. I knew that money meant I could buy all those things I saw at the store.

When I was about five my folks got tired of me asking them for things, so they gave me $2 a week. I would go to the bank with my mother and change the dollars into coins and sort the coins. I knew gum was a nickel; a comic book was a dime – or two nickels. I would look at the change and imagine all the things I could get.  I was always moving the change around on my bed as I thought about what I would buy.

Like many parents, mine were always saying “Money doesn’t grow on trees.” When I was seven, a movie came out called It Grows on Trees, about a family who has trees that grow money. I demanded to go see the movie, and this movie confused me a lot about money.

ALAN:

I was with my mother and a schoolmate when the other kid said of her family, “We’re rich.” I asked my mother later if we were rich. She said, “We can afford everything we need but we have to choose among everything that we want.” That answer was very comforting, because I read so much as a young child and all these books were about kids having to survive without parents – Bambi, Pippi Longstocking, fairy tales. I’ve tried to raise my children with that same sense of security: that they’ll always have everything they need, but they’ll have to make choices about wants.

ELIZABETH:

I was fairly oblivious to money for quite some time and reliably received monetary gifts from one uncle and aunt on every occasion but never from anyone else. I briefly received a pittance of an allowance which did require anything on my part and was probably a feeble attempt to teach me about money. I think my lessons were from things I did not have or get. While I had received new bikes as birthday or Christmas gifts in the past, when I got older and wanted a Schwinn 10 speed I received a used 3 speed. Not sure how well I communicated my wish but I was very disappointed.

I figured this meant my family had less money than some of my friends and I should not ask for or expect certain things. As I got older I realized my parents had different priorities and were less materialistic than I. In retrospect we went on vacation every year and always had a birthday party but I liked “stuff” and that cost money, and my parents put more of an emphasis on experiences.

KEVIN:

I have a pretty clear recollection that starts with a metal Band-Aid box that my mother used to store the amount of cash that we had each week to spend on groceries and anything else essential. The box also held all the coupons she clipped for that week. If there was extra money in a given week (a rare event) we might get a small treat; if there was not enough we’d cut back and do without, like having pancakes for dinner.  Starting when I was 10 my mother was sick often so I had to do a lot of grocery shopping which meant I had walk to the store with the coupons and cash and find everything on my mother’s very detailed list. I learned just how much more the cash she gave me would cover when we had the right coupons or when things we needed were on sale. My mother handled our limited funds without obvious fear or dread (which she may have felt inside) and she was obsessed with staying away from debt,  aside from the mortgage.  Her bravery and resilience made it easier for me to appreciate the importance of managing money.  I have adopted her “no-debt” philosophy but there were times when I was younger that I was more extravagant than I could afford to be because I incorrectly believed that not focusing on price was the definition of wealth and luxury. Luckily I realized that was wrong and my relationship with money is healthier now and my savings have provided long-term financial security.

JEN:

My dad would always make a big deal about wrapping his coins and taking them to the bank to change them over for bills. Message: Even the small stuff matters! He also instilled in us (my brothers and me) to always check our bank accounts/reconcile our accounts because even banks can make mistakes. Lastly, he would remind us, especially when we were buying clothes, if you buy it, make sure you love it. My dad was a finance/accounting guy.

LESLIE:

I never saw my father deal with money in any way. He brought home his paycheck and my mother managed everything. She paid the bills, did all of the shopping, managed the budget. I guess this rubbed off on me, because I was very methodical about money. I never thought about it until my son was in high school, had a job, and was working toward his Eagle Scout award.

One day, I asked him what he was doing and he said he was updating his financial journal for his personal management badge. He showed me his monthly budget, his allocation for dates, entertainment, savings, etc. He always had money to do what he wanted. I asked him where he learned how to do this and he said “from you, of course!” I always talked about money management, but I was surprised that he actually was listening!