This is a special series as part of CentSai’s commitment to financial literacy at every level. We’re collaborating with financial education advocate Sam X Renick on a series of short interviews, videos, and tips. In this installment, Stuart Ritter, a senior financial planner at T. Rowe Price, tells Renick a money lesson he learned as a child and shares advice for teaching kids about money.

A Childhood Money Lesson

Sam X Renick: What is the most important money habit you learned as a child? Briefly share the story behind how you learned the habit and what impact it has had on you throughout your life.

Stuart Ritter: Different people handle money differently — and sometimes the other person’s approach is the better one. I was one of those kids who spent it as fast as I got it. My next-younger brother was a great saver.

I remember one instance when we both wanted to buy something and I couldn’t because I was out of money. But my brother “magically” made some appear and got to buy it.

This was the first time I realized that other people didn’t spend the way I did. Now I make sure I’m saving and consider what I might want to buy in the future (even if I don’t know what that is yet) when I consider buying something today.

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The Most Important Money Lesson to Teach Kids

Renick: If you could only teach a child one money habit, what would money habit would you teach them? Briefly explain why.

Ritter: Set some money aside to be able to buy things in the future — even if you don’t know what that is yet. It both teaches you to spend less today than you have today, and lets you buy more in the future without borrowing.

Why Do Parents Struggle With Teaching Kids About Money?

Renick: A variety of surveys indicate it is a challenge for parents to talk to kids about money. What would you say are one or two of the primary reasons that parents find it difficult to talk about personal finance with their children? And if you have a suggestion on how they can overcome the obstacle, please share that, as well.

Ritter: Our Parents, Kids & Money Survey found that parents who have a troubling relationship with money are more reluctant to discuss it with their kids. For example, parents who have declared bankruptcy are more than twice as likely to say that they are very or extremely reluctant to discuss money with their kids (44 percent vs. 20 percent).

We saw similar findings among parents who have more than $5,000 in credit card debt (35 percent vs. 21 percent). We also know that millennials are more reluctant to discuss money with their kids than Gen Xers and baby boomers. So it could be that parents don’t feel like they know the right thing to say about money.

But even if parents struggle to manage their money, there are benefits of openly discussing their finances with their kids — the good, the bad, and the ugly.

Kids who are aware of their parents’ bankruptcy are more than twice as likely to say that they are very or extremely smart about money compared with those who aren’t aware of it (68 percent vs. 30 percent). If kids have the opportunity to learn from their parents’ mistakes, they may be less likely to repeat them.

Another reason is that some parents think kids will be able to learn what to do by watching them. But it’s important to recognize that kids are forming their own conclusions as they observe what’s going on. And without their parents’ input, they may misinterpret what they’re seeing.

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When my daughter was about six and we were checking out of the grocery store, she turned to me and asked, “Daddy, may I have my own credit card, please?” When I asked her why she wanted one, she replied, “Because, when you’re in the store, you just show them the card and you can have anything you want.” And I realized that from her perspective, that’s exactly what it looked like.

She never saw a bill arrive at our house (because, like many people’s bills, it’s delivered electronically). She never sees me pay the bill (because, like many people, I have it paid automatically from my bank account). So all she sees is the buying part! When I explained to her how the rest of the process worked, she asked if she could see a bill, and the conversation continued.

Teaching Personal Finance in Schools

Renick: Why do you believe there is not more personal finance being taught in schools?

Ritter: Time is a very precious commodity in schools, and there are always competing interests. At the same time, as school systems recognize the importance of certain topics, they begin including that information.

Personal finance is one of those areas that more schools are adopting as part of their curriculum — either incorporated into current subjects (math, social studies) or as a stand-alone class. And our survey shows that students who have received financial education have better money habits.

A Final Thought: What If the Research Is Wrong?

Renick: Cambridge University research indicates that adult money habits are set by age seven. What if the research is wrong and adult money habits are formed earlier — perhaps around the age that the “give mes” set in? What does this mean for families, schools, and the financial education industry?

Ritter: It means that everyone should be talking sooner about more topics — something T. Rowe Price has been advocating for quite some time. As soon as kids realize that money buys things, parents should be talking to them about it. (See the above story for what happens when we don’t!)

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And we sometimes underestimate kids’ ability to understand the overarching concepts. My kids, like others, would “bonk” at each other on the drive to school in the morning. One morning, I suggested that we buy a bigger car, so they could each have more space, and I asked what they thought of that idea.

Not surprisingly, they loved it. I then pointed out that spending the money on a bigger car would mean that we would have to skip family vacations for the next three summers as a tradeoff, since we’d have spent the money on the car. They agreed to sit quietly for the rest of the ride instead. While it garnered some quiet in the car for the remainder of the ride, it also set the foundation for later conversations about money tradeoffs in all kinds of areas.

Talk more often and about more topics!

Take Action

Set some money aside and save it this week!

Discover more about Stuart at T. Rowe Price.