Children face a multitude of external and internal influences that impact their beliefs and habits with regard to money. Each has a different level of influence, but they are all important to recognize:
- Parents
- Friends
- Culture
- Media
- Personality
- Educations
- Online and Social Media
Parents
Keep this in mind: You are the most powerful influence in your child’s financial life. Even more than work experience and financial education in school; even more than their friends and the media; your children look to you to help shape their financial behaviors.
“Parents play a key role in children’s financial well-being, through their own behavior, direct teaching, and role modeling… The effect of a parent’s direct teaching regarding financial matters was twice that produced by high-school direct teaching and twice the effect produced by high-school work experience! Parents influence not only their children’s financial behaviors, but their financial attitudes and perception of their ability to manage their finances.” - Arizona Pathways to Life Success for University Students
Friends
Kids actively want to emulate their peers. They see what possessions their friends have, observe how they spend money, and learn their habits, sometimes without even realizing it.
During adolescence especially – approximately from age 13 to 14 – they are prone to mimic their friends’ behaviors, whether good or bad. Consider how important it can be for an adolescent to “fit in” with her peer group. What better way to do that than to buy the same toys and gadgets her friends have, wear the same things her friends wear, and use the same products her friends use?
The best route for parents to take when they fear that their adolescent’s friends are a bad influence may be to set boundaries. Also, by teaching children early in life the difference between wants and needs, you can help them think more rationally when it comes to the influences they may face as adolescents.
Marketing and Celebrities
Although teens may not learn money skills directly from celebrities or the media, they are nonetheless influenced by them when it comes to making financial decisions.
Celebrities use their fame to market specific products to all ages. Marketers spend a great deal of time and money to learn how best to target specific groups of consumers. They try to appeal to consumers’ desire for inclusion, acceptance, and prestige. This is especially true for children, adolescents and teens.
Personality
Some people are more impulsive than others. Some people are more inclined to save than others. Personality impacts decisions.
You know your kids better than anybody, so you've probably observed their individual tendencies and know what decisions they may need coaching on and what decisions they can confidently make on their own.
Educators
Educators have some influence over money habits and things kids learn. However, this influence is minimal. Most schools do not teach financial education, and, if they do, it is a small component of the economics curriculum in the 12th grade, which is probably too late to fully develop long-term money habits.
In the 12th grade, many of our money habits have already formed, and information isn't going to alter our behavior significantly. Talk to your child’s teachers about the curriculum they use to teach financial education. Find out how hands on it is, if they bring in guest speakers and provide real life examples, and how you can extend the learning at home.
Online and Social Media
With the rise of the internet and social media, marketers have found new avenues to reach young consumers.
According to Kathryn Montgomery, a professor of communications at American University, "There is a great deal of research that shows children don't distinguish between content and advertising. Now on digital, there is an opportunity of more blurring of those lines, and the industry is pushing to keep definitions of online advertising broad and unclear."
When your children are online, make sure the sites they are visiting are commercial free or use it as an opportunity to discuss advertising and how these sites want you to buy something or spend money.