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Psychologists have found one key financial lesson everyone should teach their kids

Parents that make a point of being generous with their money could inspire greater financial responsibility in their kids. Alongside budgeting and saving, a new psychology study suggests that responsible giving is one of the most valuable lessons a child can learn about money.

Interviewing individuals of all generations, the research is some of the first to explore how the habit of giving is passed down in families.

Altogether, the study interviewed 90 undergraduate college students, as well as 17 of their parents and eight of their grandparents. Despite never asking questions about giving specifically, nearly 83 percent of the participants brought it up as an important financial lesson they either gave or received.

“When you think about money and what kids learn about money from their parents, most of us wouldn’t think about giving as one of the basic principles of finance,” says psychologist Ashley LeBaron from the University of Arizona.

“We tend to think more in terms of budgeting and saving and things like that, so it was surprising, but really cool, to see that giving was so prevalent.”

For parents in the study, however, the underlying lesson had less to do with finances and more to do with altruism. Their true motivations, LeBaron says, are about imparting a desire to help others or to give back, or to instil a sense of religious duty in their offspring.

Combing through the interviews, she noticed that parents usually taught these lessons in three ways: through charitable donations to organisations, through acts of kindness to those in need, or through investments in family members.

Most people in the study say that they learned the habit of giving through charitable donations; among religious participants, these financial gifts were almost always given to their respective churches.

“Many religious participants believed that if they made faith-based contributions, their financial situation would work out, not just despite their financial sacrifice but because of it,” writes LeBaron.

“One White mother put it this way: ‘If you pay your tithing first, then you’ll always have enough money.'”

For all three types of giving, participants seemed to care deeply about passing on the underlying principles or meanings behind the gesture. After doing so themselves, or watching their parents do so, participants often reported feelings of happiness or emotional reward.

In some cases, there were even signs of true self-sacrifice. When times were tight, for instance, one woman recalled her mother saying things like: “So-and-so needs money, and that’s okay because I have a little bit saved up, so I am going to help them.”

LeBaron points out that that’s the start of a budget right there, and if children can be shown and involved in decisions like these, it could help them becoming more financially savvy in the future.

It’s an idea that psychologists call family financial socialisation theory, and it suggests that parents can influence the future personal and financial well-being of their children, and vice versa.

“Parents and grandparents report that they have this awareness that their kids are learning financial attitudes and values from them, so sometimes they were more giving because they knew that their children were watching them, and they wanted to set that good example,” explains LeBaron.

Past research has shown that even a small generous act can change a person’s brain activity to produce greater feelings of happiness. If this can be passed down from one generation to the next simply through the teaching of a lesson, then we need to know more.

The present study is rather small, so it would be good to see similar investigations done with larger sample sizes in diverse settings before we know for sure how solid this lesson truly is.

That said, since the 1980s only a handful of studies have looked at the importance of financial giving and the ways that it develops. Virtually none have researched the social phenomenon in its natural setting through qualitative research. 

“In finance classes, we never talk about giving,” says LeBaron. “But we learned that giving is maybe one of the more important facets of financial socialisation, so we need to be paying more attention to how it is taught.”

The research has been published in the Journal of Family and Economic Issues.

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