Over the Christmas holidays, we were out as a family and looking for a place for lunch. We came across one restaurant, I looked at the menu and said to my wife:
"Nah, that's too expensive, let's go somewhere else."
What was interesting was that as we walked away, my eldest daughter grabbed my hand and asked, in a quiet voice:
"Dad, are we in financial trouble? Can't we afford to eat in that restaurant?"
This led to a really interesting conversation. My daughter had clearly got the impression that when I said "That's too expensive" I meant "We can't afford it".
I quickly assured her that we are doing well financially (I actually said "We still have plenty of Blue Trees which is the analogy we use when talking about savings and investments").
I explained that I said "That's too expensive" as I didn't think it was good value, not that we couldn't afford it.
This experience led me to think about 3 really important points that I believe all parents need to be aware of:
1. Kids Are Always Listening
Kids learn most of their money knowledge by observing the world around them. They will listen to what adults are talking about and reflect on it.
As mentioned above, I made the "That's too expensive" comment to my wife but my daughter was listening.
As kids don't know the full context of the conversation they are listening to, they can easily get the wrong impression and this can lead to them worrying about money (as happened with my daughter).
We need to be careful about the words we use when talking about money when our kids are around. I would highly recommend that you read my blog 'Avoid These 3 Money Sayings':
As my next point highlights, when I say we have to be careful about what we say in front of our kids, that doesn't mean 'Don't talk about money around your kids'.
2. We have to be open about money with our kids
I talk to my kids all the time about money. I believe this is why my daughter felt comfortable asking me the question "Are we in financial trouble?". I'm so glad she did ask rather than worry in silence.
So many adults today are suffering from financial stress in silence. They believe that money is a taboo subject and shouldn't be spoken about.
We need the next generation to know that it is completely fine to talk about money. It's a hard topic and we all need help. This means, as parents, we all need to be open about money with our kids.
This doesn't mean telling them all your financial details. It means asking them some simple questions from time to time.
If they ask a question that you don't know the answer to, be open and say "I don't know, let's find out together" (we need to make it OK for them to ask questions about money).
3. Teaching Kids About Value
The question my daughter asked me led us to have a really interesting conversation about paying for things when they are 'good value'.
The context for my comment "That's too expensive" was that we had just bought tickets to see Wonka at the cinema in an hour and needed some lunch. As we only had an hour, we wanted something relatively simple and quick.
The restaurant that we walked past was a fancy Italian place. My kids love spaghetti bolognese as much as the next kid but they definitely won't appreciate the difference between a regular and a fancy version. Also, when you are paying a lot for a meal, you want to appreciate it and as we only had less than an hour, we weren't going to be able to do that.
Given the above, I didn't believe the restaurant was 'Good Value' and decided it was 'too expensive'. I should have extended what I said to be 'It's too expensive for what we want right now'.
Don't get me wrong, the restaurant looked nice and is a place I might go on a 'date night' with my wife when we have more time to relax and enjoy the meal together.
'Good Value' means different things to different people
I explained that 'good value' is different for everyone. It depends on their preferences and their financial situation. The interesting thing is that both of those factors can change over time.
Preferences...
For example, I know someone who is a great cook and enjoys cooking. They don't like eating out. They say 'Why would I pay all that money when I can make a meal just as nice at home for half the cost?!'. They see eating out as 'poor value'.
Another friend who is also a great cook and enjoys cooking loves eating out. He likes going to new places to try new dishes. He sees eating out as an experience and feels it is 'good value'.
Financial situation ...
Two people who have different financial situations will see 'good value' in a different light.
Someone with very little money could easily feel that spending $5 on a coffee is a waste of money. Whereas someone who has money and needs that coffee boost before entering the office for a day's work sees it as an 'essential purchase' and worth every cent.
The interesting thing is that both of those factors can change over time.
For example, I wouldn't pay for business class seats on a plane. I don't feel that spending all that money is 'good value' just for a bit of sleep. I could save that money so I can retire earlier.
However, that might change when I am old, hopefully wealthier and retired. I could imagine the benefits of sitting more comfortably being worth the additional cost at that stage in my life and paying for the upgrade. Especially if the thought of not being comfortable was stopping me from travelling (which I do value a lot).
Focusing on value is a key to becoming wealthy
Many people lose sight of 'good value' when they earn more money. They have a mindset of 'I can afford it so I'll buy it'.
They fear that people might judge them as not having enough money if they say "That's too expensive" when it's not good value. Similar to the initial thoughts of my daughter and the restaurant.
I want my daughters to grow up spending their money on the things that they believe are good value. This means as parents we have to take the time to teach our kids about the value of the things they buy and in the process, help them avoid buying things which aren't good value (which can often be hard due to social pressure).
As a parent, this can be hard as what our kids see as 'good value' is likely to differ from your view (you need to remember you used to care a lot more about what other people thought of you than you do now).
Talk to your kids about 'Good Value'
I hope you found this blog insightful. I want to encourage you to talk to your kids about what you see as good and bad value when buying certain things.
I'm sure you'll find it interesting to hear whether or not they agree with you.
This exercise will also help avoid situations like I had with my daughter and it also shows that you are happy to talk about money with them. Each of these points is going to help them grow up financially healthy.
Next week I will continue this topic as I talk about a conversation I had with my daughters about 'Spending to Impress' vs 'Spending for Personal Value'. Make sure you subscribe so you don't miss that.
In terms of the restaurant choice for lunch, my daughter later said:
"I'm really glad we didn't go to that Italian restaurant, Nando's was much better!" 😀
Thanks for reading!
Will
P.S., If you believe that buying a book which can change your kid's financial future is 'good value' then you should buy a copy of Grandpa's Fortune Fables! Available on Amazon.
