As kids grow up and start to use money, they gain some distinct, personal perceptions of assets, which become part of how they define what money is and means. Often, the perception includes the idea that it’s possible to tell who is rich and who is poor. This is largely inaccurate, and as a parent in charge of educating your kids about finance, you’ll need to explain why.
1) Many people hide wealth to avoid complications.
It’s a fairly consistent trend that, as soon as people get their hands on a decent amount of cash, the requests for loans start coming in. Although lots of individuals who have a little extra money don’t mind helping out friends and family, over time, these types of requests can make motives unclear. Do people really like you, for example, or do they just like your funds? Some individuals with money also don’t want to take the risk of being perceived as snobbish or “hoity toity” because they have assets.
2) People work hard, so they don’t always feel they can spend or act rich.
Although there are wealthy people who have their money because of inheritance or other good fortune, the majority of the rich work their way to the top. They struggled, invested and believed in ideas they had. Sometimes, the previous psychology of being in need of money prevails and old habits or mannerisms remain, even when bank accounts are overflowing. So millionaires still do dishes or haggle for better prices.
3) Having something doesn’t mean ownership.
Despite economic downturns, standards are still pretty high. A house. A car. A nice flat-screen TV. All these things can give the appearance of being financially secure, but that’s often all it is. Appearance. Many people have a house, for example, but are struggling to make mortgage payments. Cars are leased, and the TV is being paid for in installments or is part of a larger credit card bill.
4) Some people live simply out of ethical/moral choice or obligation.
In some cases, wealthy individuals are more than aware that they don’t have to shop at the dollar store anymore. They still do, though, because they believe in saving, not wasting, and that their lives are richer with less material stuff. Many people cut corners in their own homes so they can give more to others, as well.
What It Means for Your Kids
There is no magic way to tell whether someone is well off. Those who look like they have money often don’t, and conversely, individuals who are financially set can sometimes appear to be just the average Joe living from paycheck to paycheck. Most kids are not going to immediately understand this. For starters, they are still developing cognitive and social abilities, so they usually apply simple rules very broadly (e.g., daddy goes to work, so therefore, all daddies go to work). Secondly, they are still gaining life experience, which, to some degree, is necessary to keep an open mind about what people may or may not have, want or do.
There are simple steps you can take to help your child grasp that financial situations are not always as they appear. For example, you can show your kids the candid shots many photographers get of celebrities doing everyday things like pushing strollers, leaving the gym or hugging friends. Then you can point out that, even though the celebrities have more money, they’re doing really “average” things and don’t look that different from everyone else. You can read biographies or trivia about the wealthy, too, pointing out quirks like the fact Google founder David Cheriton cuts his own hair. Wealth, unemployment, foreclosure, debt, poverty and similar statistics are another route to explore—don’t let the numbers hold you back, because you often can get complex figures across through games, toys and other activities. It’s also a good idea to teach your child to put his assumptions aside in favor of direct but polite and compassionate questions