At what point should parents start talking to children about money?

Research shows that adult money habits are largely shaped by age 7, so it is important to start the conversation as early as possible. I would say it’s good to start already around age 4, once your child understands the notion of causality (if… then…) and is old enough to know NOT to put coins in their mouth or up their nose!

But isn't it too early to start at 4 years old?

By age 5 a child’s relationship with money is already forming, whether we talk openly about money with them or not. They will have picked up on all the money messages surrounding them from parents, friends and media. Often these money messages are misleading because children only perceive a fraction of the full picture - e.g. they only see adults spending and don’t see adults earning or saving - and this can cause “bad” money habits to form. So it is important for parents to understand which money messages a child has already picked up just by observing or copying adults, and complement those messages with ones that form a comprehensive understanding of managing money.

Why is financial education so important for everybody?

Ultimately financial education serves the purpose of being able to sustain your quality of life. Given increasing longevity, it becomes more and more challenging to sustain life quality after retirement. Our retirement system was not built for 30+ years of retirement. So without enough savings, there is a societal risk of old-age poverty. We cannot afford to sit and watch this “train wreck waiting to happen”. We need to equip adults and children alike with the awareness and the skills to manage money wisely over the course of their lifetime.

Mara Harvey
Lack of confidence and overemphasis on good manners leads girls to be less financially literate than boys.

Girls earn less pocket money than boys even in childhood. Do parents discriminate against girls?

Yes, research shows that by age 10 girls often experience pocket money pay gaps of 10-30%. Shocking but true. I don’t believe it is because any parent would discriminate against their daughters. It is merely a societal reflection of what we see in labour markets. Traditionally we have steered boys towards higher value chores and girls towards unpaid chores. Take washing the car vs washing the dishes as a stereotypical example: in the past, one was considered a boy’s chore and one a girl’s chore. These stereotypes still linger and take generations to overcome.

Why are girls less financially literate than boys?

My experience so far leads me to pinpoint 2 main reasons: confidence and good manners. Girls often need support to strengthen their confidence, which is shaped around age 5. They need encouragement to feel bold - and this is true when it comes to talking about money, too. Yet, society (Switzerland in particular), tends to lead parents to believe that talking about money is rude - and talking about money to children is inappropriate. I think we can comfortably say that in Switzerland talking about money is even more of a taboo than talking about sex!

Research done on an international level has confirmed that many women simply lack confidence when it comes to money due to the sheer belief that their partners are more competent in money matters than they are. This is purely perception - and yet perception shapes your reality. This is why female financial participation is something we need to work on actively. We need to shape a new money narrative that enables little girls to learn about money, giving them the chance to enter the workforce on par with the boys.

Do people talk about finances differently with girls than with boys?

The short answer is yes. A study by Starling Bank in the UK showed how money messages targeting women relate predominantly to spending money, whereas money messages targeting men relate predominantly to making money. Other studies in the venture capital space have demonstrated profound differences in the way we talk with women and with men about making money. These pervasive biases affect children too, hence boys seem to be bolder in talking about money, more curious about earning money, and braver in asking for money, etc.

Do mothers and fathers talk differently about finances?

In many countries, we see women more engaged in short term finances, i.e. daily purchasing decisions and household management. Whereas fewer women than men engage in long term financial matters, relating to wealth planning and retirement planning. I have not come across any research yet that analyses what impact this might have on children, but I think we can safely assume that women and men have different approaches to managing money, so the way they talk about money matters with children will reflect these differences. The best cases of course when both parents align on the money messages they want to share with their children. Financial parenting should never be accidental. It requires careful planning, to ensure both parents - and ideally in alignment with the grandparents, too - are role modelling the money habits they want children to develop.

Mara Harvey
We need to go back to basics and teach children to earn, to save and to spend - in that order.

Does it make sense to give money as gifts?

Gifting money to kids, especially for special events like birthdays or family celebrations, is part of our culture. What is important is to reflect on what a child is learning when he or she is being gifted money. Do they understand the value of the amount received? Do they know how to keep the money safe? Do they know how to prioritise what to spend the money on? Do they understand why it is important to save some (or all) of it for later on in life? All these questions are at the core of financial parenting. It is up to us parents/relatives/ grandparents to make sure that any money gift is part of a money dialogue, that helps a child to understand how money works and why it is a valuable and precious resource.

Should debts be demonized?

I think debts should be avoided when it comes to children and teenagers! There is a time and place for debt in life, but that is not during childhood, in my view. Sadly today, there are too many “buy now, pay later” media messages that surround our children. This is not helpful at all, because children who have not even learnt to earn money are already led to believe that accessing money is super easy and you can spend money you don’t have. It’s like teaching a child to jump into a lake before they learn to swim. It can end really badly. We need to go back to basics and teach children to earn, to save and to spend - in that order.

Why do many parents generally have a hard time with money topics?

Money is often a taboo topic! The fair-pay expert Henrike von Platen explains this exceedingly well in her book “Über Geld spricht man!” (2020, Nicolai Verlag). I was surprised to read how many words there are in German for money, given how little we actually dare to talk about money. Biased money messages are all around us, and have shaped our money conversations over generations. For parents to have good money conversations with their children, they first need to feel comfortable talking about money amongst themselves. And to do so, it is important to acknowledge the underlying values and emotions that each person associates with money.

How could schools contribute to financial education?

Money skills are life skills and they are as important as learning to read, write and count. Financial literacy is a must-have, not a "nice to have", in my view. Our children will face unprecedented longevity so having the financial skills to manage their monetary resources will be key for their quality of life. Schools can introduce money concepts in easy ways for children to understand. Let’s give a simple example: when children have to do math exercises, the exercises can be shaped to be really pragmatic for children to learn about how money works - with real-life situations that are relevant to their age. Solving math exercises formulated as word problems is a very important skill for children so they are able, later on in life, to manage money in real-life situations.

Why do many women have an uptight relationship with money?

Equality is still very young in Switzerland. It is barely 35 years since a married woman is allowed to open a bank account without the signature of her husband. Consequently, women haven’t been fully empowered to deal with money until three decades ago. It will still take time for financial equality to fully emerge, and for women to feel as comfortable and as savvy in dealing with money as men. Luckily, this change is accelerating now that traditional and social media are creating space for more open dialogues on this topic.

Mara Harvey
There is indeed a material risk of old-age poverty that our society is facing as longevity rises - and this problem is predominantly a female problem.

How does a lack of financial education affect later life?

The lack of financial literacy has excruciatingly painful long term consequences. In 2017, UBS ran a simulation of a man and woman’s life journey and wealth creation over a lifetime. The woman’s wealth creation journey was impacted by 5 factions: a pay gap; career discontinuity; work flexibility (part-time); longevity and lower risk appetite. A 10% pay gap alone led the woman to accumulate 38% less wealth, in this simulation. Cumulatively, all five factors affecting the woman led her to accumulate insufficient wealth to sustain herself after retirement. There is indeed a material risk of old-age poverty that our society is facing as longevity rises - and this problem is predominantly a female problem.

Yet simple strategies to ensure that savings are well invested can help mitigate these risks. For this reason, I feel compelled to spread awareness of the importance of financial literacy. It is never too early, nor too late, to take control of your financial future - and shape the financial future of your children.