Money Psychology

The Influence of Childhood Money Lessons on Adult Financial Behaviour

August 14, 2023

Money makes the world go round. But why are we never taught about money in school? Maybe that's why we are running around the globe in search of it and never getting enough. (Well that is a bad joke, haha).

Despite not having money lessons in our curriculum, along the way we have picked up lessons that have shaped our financial behaviour. Some of the lessons are helpful, some not so much.

Our Childhood and Money Perception

Quick Story

Tom is a young boy barely seven years old. He is sitting with his mother in the kitchen. Those upcountry kitchens that use firewood. Tom’s mum is making supper. As she is preparing sukuma wiki, she lifts the container with cooking fat, there is not much left.

Tom sees this and in his head he thinks, the best thing to do is to divide the small cooking fat portion and use half of it so that they will have some left the following day. However, Tom's mum uses the whole portions, and Tom asks, Mum, why did you use the whole portion, what about tomorrow? Tom’s mum reluctantly answers, “Kesho itajililia” (tomorrow will sort itself out).

Twenty years later, Tom is working with a good salary. When his friends bring up the topic of sacrificing a little today to save for tomorrow, unconsciously Tom thinks, kesho itajililia

Whereas Tom never attended a lesson about money, growing up he picked up lessons that shaped his money behaviour in his adulthood.

In this article, we shall look into similar lessons that we might have picked up along the way, understand how they affect our adult money behaviour, and how we can change them.

Financial Education

As Tom gets into school he is encouraged to perform well. He is told if he performs well he will get to university, do a good course, and secure a good job and he will never have to worry about money. Woe unto Tom. A rude awakening was waiting for him after graduation.

Tom was rudely shocked after finishing school not because the world is unfair, but because the world operates on a demand and supply mechanism and a tonne of marketing. Unfortunately, no one teaches Tom in school how to network, how to brand himself professionally, and how to be an entrepreneur.

Anyone who is financially successful, whether employed or in business, they all provide value but on top of that they have networked, branded themselves, and positioned themselves in a unique position that the world is willing to pay them the much they get paid.

Financial education is not only about money. It is also about the ecosystem where people make money.

Unfortunately, from our childhood, we grow up thinking it is just about going to school and doing well and the rest will be taken care of.

To change this mindset, ask yourself these questions

What unique value do I bring to the table?

This can be your knowledge, skills, experience, or your perspective. Understanding the unique value that you bring to the table helps you define yourself in the market. It differentiates you from every other player.

If you can not define your unique value at the moment, ask yourself, what sparks your interest? Double down on learning the skills, topics, or projects that interest you.

All the social media platforms you see today are a result of some computer programmers doubling down on their interests.

In what circles do I need to exist?

No man is an island. If you want to succeed financially you need to be with people who succeed too. After you settle on what unique value you want to bring to the world, it is high time you find communities that share your interests and vision and start engaging.

Interacting with these communities will help sharpen you. You will understand the industry you are playing in better. You will get people to push you to grow your skills and you will increase your odds of succeeding.

Debt and Debt Management

Today, when you see a child with a piggy bank, you may not be surprised. However, a piggy bank was a foreign idea to Tom. When Tom was growing up they did not have enough, leave alone surplus to put in a piggy bank.

Whenever Tom’s parents needed a big spend, like school fees, they turned to lenders. They took loans to renovate their house, took loans to buy household items, and so on. Tom learned, it is okay to buy things even if you do not have the money, just take a loan.

This lesson desensitised Tom towards consumer debt. Today, Tom cannot escape the rat race with banks, saccos, and shylocks.

It is sad enough that we were not taught how to make money, however, to add salt to injury, we were misguided as to what debt is and how to manage it.

On one hand, Tom was indoctrinated to consumer debts. The other extreme is total debt avoidance.

Debt is a tool. Whether a tool is effective or not depends on how you use it. Debt can be good but it can also cripple you. Tom’s consumer debt will eventually cripple him. However, avoiding debt totally can make you miss out on valuable opportunities.

To know whether debt is good for you, ask yourself these two questions.

Can I afford it?

This question seeks to analyse whether you can service the loan comfortably without turning your life upside down. Ensure you do not over-leverage.

What is the debt for?

Do not take a loan to have fun. Only take loans that will have a return bigger than the interest you are paying for the loan.

For instance, if you are taking a loan that attracts an interest of 12%, your return when you invest the money should be higher than 12%.

You can browse through the Money254.co.ke website to compare lenders with favourable rates that you can afford.

What Is The Appropriate Adult Financial Behaviour?

Despite Tom collecting unhealthy financial lessons as he was growing up, his financial success today lies squarely on his shoulders. So how can Tom turn it around for himself?

How should you think about money as an adult?

Money is what you get as a result of providing value. The school certificates are not valuable by themselves, therefore, you should understand beyond the papers what unique value you bring to the table.

Secondly, money is a resource. If well managed you will keep it, if squandered it will deplete, and if invested it will grow. Avoid getting into consumer debt.

Nonetheless, do not be debt evasive. The important thing is to ensure you are responsible when taking debt and when deploying it.

What are the desired financial habits of an adult?

Learn how to make money.

The first step to becoming financially successful is knowing how to make money. Grow your skills, knowledge, experience, and perspective so that you can increase the value you bring to the table and consequently your earning potential.

Learn how to save money.

When you start making money, learn how to live below your means. You can only save money when you have a surplus. Create the surplus by living below what you make.

Learn how to invest money.

Let the money you save work for you. There are different investment vehicles you can choose from. Invest with the understanding of how much risk you can tolerate.

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Stephen Kimani aka KIMSpeaks is a thought leader, speaker, and writer. He is also the Founder of Living the DREAM. He is passionate about learning and teaching ideas that empower people to improve the quality of their lives. You can connect with Kimani on LinkedIn.