Written by Miquela Rivera, Ph.D.
TEACHING KIDS ABOUT MONEY IS NEVER JUST ABOUT MONEY – DAVE RAMSEY
In a society with continuous advertising, digital apps to find the best stuff for the best price, plentiful credit card offers and equally plentiful title loan companies, what are we teaching Latino children about money?
In low-income Hispanic families, the talk about money is often about scarcity – not having enough. If only there were more, things would be better (and in many cases that is true but only partially). Money is often the goal itself. In middle-income Latino families, money talk is often about acquisition – which digital device, clothing or vehicle one owns. For many in that niche, possessions are a way of telling others how well one has done (it is often more a measure of spending than of wealth and is often inversely proportionate to self-esteem – the unhappier you are, the more you spend since there are never enough possessions if you are miserable). And for those with slightly more money (and usually more education), the talk might be about the return on investment and diversification. Money is viewed as a means, a way to enjoy other things of value. It is not prized for its own sake but for the access it gives to a life of options. Travel, art, education and possessions that rise in value are measures of doing well. So is doing what you want to do.
Regardless of parental income, Latino children need to learn about money through intentional teaching. Parents talking rationally about money as a part of life, explaining financial processes and teaching by example are the most powerful ways to help children to develop healthy fiscal attitudes. The Jump Start Coalition for Personal Financial Literacy emphasizes that teaching must be age-appropriate: taught when the child is ready to understand and use the concepts. Latino kindergarteners learn that money buys what things they desire and begin to figure out ways to earn, and school age children can learn the difference between a wage and a salary; middle school Latinos can learn about earned versus unearned income and the role of government support; high school students can understand compensation and benefits and determine what it will take to support the lifestyle they want. Understanding credit, planning and saving, and recognizing the responsibilities associated with having money are the other concepts children should be explicitly taught.
The primary lessons, however, are conveyance of assumptions, which will underlie a Latino child’s lifelong relationship with money. First, money – like time and energy – is a resource. Since resource management is mathematically based, teach the Latino child math first in developmentally appropriate ways and relate it later to money. Young children, for example, learn concepts of quantity early through counting. Adding, subtracting, multiplying and dividing are taught as basic mathematical functions by using hands-on manipulation of objects. A child may not realize they are learning math, but the adult is teaching it – intentionally and with a long-range goal in mind. Math becomes less intimidating to people when it is useful and when they are familiar with it. Teach children the basics and application of math in daily living and understanding and managing money follows.
Next, teach Hispanic children the difference between needs and wants. A family needs to eat; they want fast food or carryout. People need transportation; they may want oversized pick-ups and expensive, new status cars. By teaching math first, the Latino parent can then teach children how sticking to needs primarily can help conserve the resource – money – to fulfill their wants later. How many carryout pizzas, for example, pay for a day at Disneyland? If parents help the children do the math, they are also helping them set goals and develop a plan to reach them.
Latino parents are wise to teach their children the difference between cost and value. Something high priced is not necessarily more valuable. I bought a comfortable, durable pair of shoes on my tight budget in graduate school; they cost $5. Years later when I had my first salaried professional position, I bought shoes for $120 (seemed like a fortune then); they fell apart within a month. Children can learn that having a designer’s name on their back pocket isn’t necessarily worth the extra money required to wear those clothes, especially when they have a larger financial goal in mind. It is the difference between cost and value.
Latino children need to learn to invest, not just spend, money. They need to learn the importance of purchasing things that appreciate, not decrease, in value. While you’re thinking about an expensive, new car, consider how it depreciates once you drive it off the sales lot compared to what you save buying a recent pre-owned model that serves the purpose and saves bucks. Millennials are more apt to consider purchasing used goods and renting, not purchasing, housing. If goods are disposable, it’s an expense; if the expenditure increases in value, it’s an investment. Spending and saving is the strongest way to demonstrate the importance of looking ahead and planning for the future. If you spend the money now, you won’t have it later.
Education is one of the best investments there is. Latino families of modest means often view education primarily in terms of what it costs, not in terms of how it appreciates in the child’s future quality of life. While money is a realistic concern, Hispanic parents need help in understanding the ins-and-outs of college financing, the options that make the most sense for their children now and later, and the many ways they can access education for their children. Work-study, internships, government-backed loans and loan forgiveness are options that Latino parents and students need to know, understand and access to pay for higher education as they go through college and pay off educational debt. Too many college-able Latino students get hijacked by the idea that they must earn money first to afford college but then are lured by the purchases (and trapped by debt) once they see a paycheck. To prepare to pay for college they get a job. Then they buy a car and purchase clothing for work and spend on going to socialize and cope with their jobs. Their earnings go to supporting their jobs; many never make it to college. If money and finance are understood, options are greater and choices made are smarter.
Bottom line for Latino parents teaching their children about money: View yourself and money as a resource. Manage and invest, don’t simply spend. •