What is a Financial Mindset?

Last week we covered talking with your partner about money, this week we’re moving on to kids; what they should know about money and how to teach them. Even if you don’t have any, keep reading. The principles we’re covering are applicable to everyone!

The Consumer Financial Protection Bureau’s research into what leads to financial capability in adults identified three key building blocks. The first of these building blocks is what we call “Mindset.” Developing a financial mindset doesn’t mean thinking about money all the time. Rather, it means helping your child prepare for the real world so their finances can help them achieve their goals rather than hold them back. There are different milestones for different age groups but the basic idea comes down to:

1) Being future oriented. Thinking concretely about the future and recognizing that the actions they take today impact their future.

2) Impulse control. Learning to recognize and exercise control over impulses, usually related to spending.

3) Prioritizing. Choosing between multiple things they may want by recognizing they can’t necessarily have everything at once.

4) Understanding limited resources. Similar to prioritizing, this means making recognizing that their resources (money, time, etc) aren’t infinite and their choices on how to spend them matter.

One of the best ways to help your kids learn this is to model the behavior yourself. Kids pick up on behavior whether you mean for them to or not, so showing them how to think about the future, prioritize, and exhibit self control when resources are limited should help them with this first building block of financial capability. Want to learn more about the financial mindset milestones? Read more here.