How to Identify Your Children's 'Money Style'

Experts generally agree that our attitudes and behaviors about money are pretty well in place by the time we reach our late teens. I can almost hear the collective sigh of parents who are reading this column and thinking, "Now I have to add financial coach to my already long list of parenting responsibilities."

But the truth of the matter is that financial coaching happens constantly in our homes, often without intention. Our children are incredible observers — like sponges, they absorb everything they see and hear.

The main influence on children's beliefs and values about money tend to come from their parents' and grandparents' attitudes about money. Do children around your house hear maxims such as "a penny saved is a penny earned," "money doesn't grow on trees" or "no risk, no reward"? It isn't hard to imagine that the child subjected to the constant refrain of "a penny saved" might very well develop rigidly conservative attitudes toward money, while the child who hears the mantra of "no risk, no reward" might develop entrepreneurial tendencies.

It would be nice if the Parenting Manual came with a list of adages and aphorisms whose recital would magically transform our children into financially responsible, fiscally well-rounded young adults. But like everything else in life, there is no single silver bullet or one recipe for success. Every child is different; even siblings in the same household can be drastically different in personality. One could be miserly while another is a profligate spender, and in this way financial behaviors are like other behaviors that can vary so widely within a given family.

It would be nice if the Parenting Manual came with a list of adages and aphorisms whose recital would magically transform our children into financially responsible, fiscally well-rounded young adults. But like everything else in life, there is no single silver bullet or one recipe for success. Every child is different; even siblings in the same household can be drastically different in personality. One could be miserly while another is a profligate spender, and in this way financial behaviors are like other behaviors that can vary so widely within a given family.

But it's not hopeless. While psychologists are engaged in academic debate on the effects of nature versus nurture in human development, take a pragmatic approach. Listen and watch your children — this time, you're turning the tables on them, and now you're the sponge. By paying close attention to the financial attitudes and behavior already present in your children or grandchildren, you can identify one of four "money styles" as described by Joline Godfrey in her book "Raising Financially Fit Kids." Armed with this insight, you can begin properly molding your child's financial mind.

• Hoarders. These are the children who stash cash, probably in a secret place. Hoarder children like money for the sake of having money. They generally isn't interested in spending money because they enjoy watching their stash grow, counting it and actually playing with the physical currency. Hoarders are good savers by definition, but hoarding behavior can lead to poor money management skills. Encourage hoarders to use a bank account that better safeguards their money while introducing the incredible power of compounding interest.
  
• Givers. These are the children who are always eager to share and even give away their resources, including money. What can be wrong with generosity, you say? Giving children likely will have a hard time saving because they always see a need somewhere and have a difficult time saying no. Financial mentoring should focus on putting boundaries on this potentially self-harming generosity.
• Hustlers. Every monetary transaction turns into a negotiation with these children. Watch out, because they can become very skillful at getting what they want — which is your money. These children will provide their parents and other adults in their life with many opportunities for financial coaching as they attempt to hone their negotiation skills. Be sure to offer these precocious hustlers moral guidance along with financial wisdom.
• Spendthrifts. It's the trait no parent wants to see in their children. Spendthrifts struggle to control their impulse to acquire things. In fact, spendthrifts don't even have to actually possess the cash before they are spending it. It is not uncommon for parents to view these children as carefree and uninhibited, but without some guidance, these behaviors can lead to big problems down the road. Financial coaching should encourage discipline. Spendthrift children need to learn how to budget and control those spending whims and desires. An allowance can provide children with "learning money" for making mistakes and getting it right.

Financial education is not a one-size-fits-all practice. It is a process of trial and error with each child. Through the recognition of distinctive money styles and individualized coaching, we can help the kids in our lives become more financially competent both now and in their adult lives.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors LLC. Her column on women, families and building wealth appears each Saturday in The Tennessean.