Nav: Home

Parents: To prepare kids financially, give them practice with money

November 26, 2018

Children learn more about finances from their parents than any other source, previous research has shown. The process through which parents impart this knowledge onto their children is known as "financial socialization."

Much of the existing literature on financial socialization focuses on two things: the example parents set for their children, and what moms and dads directly teach their kids about money. However, research often overlooks a third important piece: giving kids hands-on practice managing money, says a new paper authored by University of Arizona doctoral student Ashley LeBaron.

The paper "Practice Makes Perfect: Experiential Learning as a Method of Financial Socialization," published in the Journal of Family Issues, explores the importance of parents giving children real-world experience with money to help prepare them financially for adulthood. The study suggests that future research should consider this sort of experiential learning a third key method of financial socialization.

Parents can give their kids practice with money in a variety of ways. They might give them a regular allowance, pay them for tasks that go above and beyond their normal chores, reward good grades with cash, or encourage them to save for special purchases or charitable donations. The specifics don't really matter, nor does the amount of money, which may vary based on a family's financial situation, LeBaron said.

The important thing is that parents give children hands-on experience with money early, when the stakes are still low.

"If the first time kids use a credit card or have to work or have to save up for something or have a bank account is when they're on their own, that's not a good time to be practicing," said LeBaron, a doctoral student in the Norton School of Family and Consumer Sciences in the UA College of Agriculture and Life Sciences.

"It's important for parents to give kids age-appropriate financial experiences when they're monitoring them," LeBaron said. "Let them make mistakes so you can help them learn from them, and help them develop habits before they're on their own, when the consequences are a lot bigger and they're dealing with larger amounts of money."

LeBaron and her collaborators at Brigham Young University interviewed 115 study participants, including 90 college students ages 18-30, as well as some of those students' parents and grandparents. They asked the students what and how their parents taught them about money, and in the case of parents and grandparents, also asked what and how they taught their own children about money.

Most participants said they had been given some sort of experience with money in their youth, and they considered that experience to be extremely valuable in preparing them to manage money on their own. Those who didn't get those kinds of experiences wished that they had.

Based on the interviews, LeBaron and her collaborators identified three main themes around what participants learned from the financial experiences they were given as children: how to work hard, how to manage money and how to spend wisely. The researchers also identified three primary reasons why parents said they provided their children with hands-on experience with money: to help them learn financial skills, acquire financial values and become independent.

LeBaron, who is a millennial, said she was interested in studying financial socialization partly because of the persistent stereotype that millennials are bad with money. She began to wonder if perhaps younger generations were not given the same degree of hands-on experiences with money that their parents and grandparents had.

While LeBaron doesn't yet have data to support those generational differences, she suspects many parents today may hesitate to trust their kids with money - and that could be problematic down the line.

"I think it's hard for parents, sometimes, to let their kids make mistakes," LeBaron said. "It's tempting to just shield kids from everything related to money, but it's really important for parents to get money into kids' hands early on so they can practice working for it, managing it and learning how to spend it wisely."

Ideally, LeBaron said, parents will teach their kids about money through modeling, explanation and hands-on experience.

"The best approach is a combination, where parents are setting a good example, they're having open, ongoing conversations about money, and kids have the opportunity to practice," she said. "If parents are doing all three of those things, there's a really good chance their kids are going to learn important lessons about money."
-end-


University of Arizona

Related Learning Articles:

When learning on your own is not enough
We make decisions based on not only our own learning experience, but also learning from others.
Learning more about particle collisions with machine learning
A team of Argonne scientists has devised a machine learning algorithm that calculates, with low computational time, how the ATLAS detector in the Large Hadron Collider would respond to the ten times more data expected with a planned upgrade in 2027.
Getting kids moving, and learning
Children are set to move more, improve their skills, and come up with their own creative tennis games with the launch of HomeCourtTennis, a new initiative to assist teachers and coaches with keeping kids active while at home.
How expectations influence learning
During learning, the brain is a prediction engine that continually makes theories about our environment and accurately registers whether an assumption is true or not.
Technology in higher education: learning with it instead of from it
Technology has shifted the way that professors teach students in higher education.
Learning is optimized when we fail 15% of the time
If you're always scoring 100%, you're probably not learning anything new.
School spending cuts triggered by great recession linked to sizable learning losses for learning losses for students in hardest hit areas
Substantial school spending cuts triggered by the Great Recession were associated with sizable losses in academic achievement for students living in counties most affected by the economic downturn, according to a new study published today in AERA Open, a peer-reviewed journal of the American Educational Research Association.
Lessons in learning
A new Harvard study shows that, though students felt like they learned more from traditional lectures, they actually learned more when taking part in active learning classrooms.
Learning to look
A team led by JGI scientists has overhauled the perception of inovirus diversity.
Sleep readies synapses for learning
Synapses in the hippocampus are larger and stronger after sleep deprivation, according to new research in mice published in JNeurosci.
More Learning News and Learning Current Events

Trending Science News

Current Coronavirus (COVID-19) News

Top Science Podcasts

We have hand picked the top science podcasts of 2020.
Now Playing: TED Radio Hour

Listen Again: The Power Of Spaces
How do spaces shape the human experience? In what ways do our rooms, homes, and buildings give us meaning and purpose? This hour, TED speakers explore the power of the spaces we make and inhabit. Guests include architect Michael Murphy, musician David Byrne, artist Es Devlin, and architect Siamak Hariri.
Now Playing: Science for the People

#576 Science Communication in Creative Places
When you think of science communication, you might think of TED talks or museum talks or video talks, or... people giving lectures. It's a lot of people talking. But there's more to sci comm than that. This week host Bethany Brookshire talks to three people who have looked at science communication in places you might not expect it. We'll speak with Mauna Dasari, a graduate student at Notre Dame, about making mammals into a March Madness match. We'll talk with Sarah Garner, director of the Pathologists Assistant Program at Tulane University School of Medicine, who takes pathology instruction out of...
Now Playing: Radiolab

What If?
There's plenty of speculation about what Donald Trump might do in the wake of the election. Would he dispute the results if he loses? Would he simply refuse to leave office, or even try to use the military to maintain control? Last summer, Rosa Brooks got together a team of experts and political operatives from both sides of the aisle to ask a slightly different question. Rather than arguing about whether he'd do those things, they dug into what exactly would happen if he did. Part war game part choose your own adventure, Rosa's Transition Integrity Project doesn't give us any predictions, and it isn't a referendum on Trump. Instead, it's a deeply illuminating stress test on our laws, our institutions, and on the commitment to democracy written into the constitution. This episode was reported by Bethel Habte, with help from Tracie Hunte, and produced by Bethel Habte. Jeremy Bloom provided original music. Support Radiolab by becoming a member today at Radiolab.org/donate.     You can read The Transition Integrity Project's report here.