What your children learn from your money behaviours

There are many different modes of operation when it comes to money, and what may seem reasonable to one person may seem odd to another. What does your money behaviour reveal about you and, more importantly, how does it influence any children you may have?

This article considers various money personalities, and how these, and other factors, shape children’s financial behaviour.

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What is your money personality?

While the idea of money personalities is not rooted in science, there is consensus on a few broad trends, says Adam Gottlich, head of Behavioural Science and Wealth at Standard Bank. Some behavioural “archetypes” are as follows.

• The big spender. You’re focused on the present and are driven by immediate gratification. “Retail therapy helps you to regulate your emotions by buying things that make you feel better,” Gottlich explains. “You tend to spend impulsively on items that fall outside your budget. This can lead to remorse and potentially taking on debt, especially if you gamble or shop compulsively.”
• The big saver. You’re driven to put money away with no specific goal other than to feel secure. Your frugality may lead to hoarding. “You may control anxiety in this way and forfeit some of the enjoyment spending can potentially bring you,” Gottlich says.
• The giver. You derive a sense of meaning from spending on others. You can be generous and empathic but can potentially control other people’s decisions due to your desire to help them.
• The indifferent spender. You are not highly motivated by money, don’t plan much, and don’t believe money should influence important decisions.
• The balanced or practical spender. You are prepared for the future but don’t let this get in the way of present enjoyment. “You’ve found a healthy balance between spending and saving,” says Gottlich. “Even if you have impulsive moments, they don’t compromise your practical decision-making.”

How your behaviour affects your children

Gottlich says there are two types of financial socialisation. The first is explicit, which occurs, for example, when parents speak to their children about finances, teach them to draw up a budget, explain how a bank account works, or explain principles like saving.

The second is implicit, and this happens when your children are influenced by your actions. “Children listen and observe, so parents must be mindful of the pitfalls of their money personalities,” Gottlich explains. “Children will notice what purchases you make, and what you can and can’t afford.”

Rita Cool, head: Individual Consulting Strategy at AlexForbes, notes that children develop money personalities as early as five years of age, which is why it’s important to be mindful of your financial habits.

“Habits serve as examples,” Cool asserts. “Children will either emulate your behaviour or react against it.”

Gottlich adds that if you don’t teach your children good financial habits, they will either learn from someone else, which means you can’t control what they’re learning, or they will not learn at all, which means you will have constrained them. “They may learn from their friends or social media, and there is a lot of questionable financial advice on Instagram and TikTok,” he says.

Tips for parents

• If you’re not good with money or are weak at mathematics, educate yourself. This will make it easier for you to provide your children with the knowledge, tools and resources to understand how to engage with money, says Cool.
• Have conversations about choices and consequences. “For example, explain to your children why switching off lights can save electricity and how this can benefit the family budget,” Cool asserts.
• Provide your children with a sense of agency so they can learn from their mistakes, says Gottlich. “This means dealing with the consequences if they splurge on something and there’s no pocket money for the next few months.”
• Avoid communicating scarcity as this can cause fear and anxiety. “Don’t tell a child there’s no money to go on holiday,” Cool says. Rather explain that if the family wants to go away for an end-of-year holiday, you’ll need to make small savings during the year, like buying fewer takeaways. If you can’t afford to go away, discuss what you value as a family, like end-of-year togetherness at home.”
• Teach the principle of balance. “If your child is a big spender, you can temper their behaviour by letting them save for something specific they want,” recommends Cool. “If your child is a saver who never wants to spend, suggest spending money on an experience. If they have a specific passion, help them to donate to a charity, teaching them you don’t have to keep your money all to yourself.”
• Don’t spoil your child if you grew up with very little, as you’re potentially compromising third-generation wealth. “If you leave your children a lot of money but they don’t know how to manage it, they can’t continue your legacy,” Cool concludes.

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