Show & Tell Your Kids About Debt

This was an interesting article that I read and I thought that I would pass it on. The article was written by Linda Stern and published in Reuters.

By Linda Stern Sat Aug 19, 9:31 AM ET

WASHINGTON (Reuters) - It’s not your fault. Mind games you learned as a child might be to blame for that rising MasterCard balance.

“We make decisions about money and debt and spending from what we saw as children,” says Stephanie Jaeger, a consultant whose “Mind Over Money” business counsels everyone from currency traders to cash-crunched young adults. “Most people have experiences … (as children) that they spend the rest of their lives recreating.”

Jaeger’s theory is that people overspend and get into trouble with debt because they are using their adults powers to soothe their childhood hurts. Someone who heard “no!” all the time as a child might like to go shopping and say “yes!” to himself, for example.

People are taught, in very subtle ways, that money is laden with messages that they need to address. One person might think money is dirty or tainted, and need to get rid of it as soon as possible… by spending, of course. Another might think they have to spend profligately to feel good about themselves.

There are myriad other emotional reasons why people get into debt. Some people just feel stressed out from too many responsibilities and too little time; they tell themselves they “deserve” some new reward. Others shop because they get an emotional rush from the excitement of it, or spend excessively on family members because they feel guilty about other attention not paid, or to prove to themselves or others that they are worthy.

Of course, not every debt problem is caused by bad attitudes or psychological troubles. Sometimes health problems, job problems, or just the high cost of living can leave you with big balances. But to the extent that attitudes and past family patterns contribute to big debts, you can attack the debts by fixing those attitudes and using some tricks of the psychologist’s trade.
Here are some pointers:

– Identify the feelings you have about money. Jaeger tells her clients to recall their earliest memories about money and to see what messages those memories carry. Recall the way your parents made financial decisions and how they used money in your house. Analyze whether you came away with ideas that hurt you today.

– Be logical about those messages. Once you’ve identified them, try to put them in their place. Start thinking about money as a means to an end: As a tool with which you can build your life according to your priorities, or as energy which can power your life in the direction you choose.

– Create different rewards. The child in us does need soothing, says Jaeger. Just don’t use cash to do it. “Find healthier energies to fill that hole.” Find free activities that make you feel good.

– Use a behavioral approach. Don’t allow yourself to go into a store unless you absolutely have to. Go in for an hour without any money or credit cards, and just walk around the store and observe what triggers the urge to spend. Tell yourself you will wait three days before you buy anything that grabs your attention.

– Give yourself better rewards to make the savings worthwhile. Being debt free should be its own reward, but it isn’t always enough. Choose something you really want and make that the prize for not spending impulsively. Tell yourself, “I’m not going to buy that pair of shoes, I’m saving for next summer’s vacation.”

– One day at a time. Debtors Anonymous teaches that recovering from overspending is just like recovering from other kinds of addictive behavior. Don’t bite off full recovery every day. Just agree to behave better on that day. Every day of earning more than you spend puts you closer to that firm financial footing.

– Start giving your kids better habits than you were given. Don’t just say “no” to your kids, said Jaeger. Tell them why. “We aren’t buying any toys today, this is the money for next week’s family movie night.” Don’t use money instead of praise to reward good report cards or family chores well done, and don’t always say yes, either.

Demonstrate to your kids that you capably manage the family’s money, and that they will too. Let small children make small choices about their small allowances, and let those choices and sums grow as the kids do. Let them see some of your trade-offs, and let them know that it doesn’t bother you if their friends’ parents have bigger television sets or smaller cars.

A low-stress financial life is worth buckets and buckets of money.