An investment expert in the United States has pointed out that parents’ behavior can have a significant impact on their children, potentially leading them to repeat their parents’ financial mistakes as they grow older. According to the expert Mellody Hobson, if parents have bad financial habits, their children are more likely to struggle with money management and endure long-term financial pressure in adulthood.
Hobson, who is currently the co-CEO of Ariel Investments, a leading asset management firm, made these remarks recently on “The Oprah Podcast” hosted by Oprah Winfrey.
Born in a single-parent, low-income family with six siblings, Hobson shared that her mother’s poor spending habits instilled financial anxiety in her at a young age. Growing up, the family often faced financial struggles, worrying about eviction and utility cut-offs, even living in an abandoned house at one point. Her mother’s irresponsible spending on Easter clothes to show off rather than paying bills left them in the dark without electricity.
These early experiences led Hobson to develop a keen interest in money and financial literacy, determined not to repeat the cycle of financial instability she witnessed growing up. She emphasized the importance of making informed financial decisions and breaking the cycle of poor money management habits.
Hobson highlighted that one common mistake parents make regarding money is avoiding open discussions about finances and inadvertently passing on bad spending habits to their children, leading to detrimental financial lessons being learned.
She cautioned that children often mirror their parents’ financial behaviors, such as consistently making only minimum credit card payments or overspending if that is what they observe at home.
In her own case, Hobson expressed how her mother’s overspending caused her confusion and distress, leaving her feeling helpless and unable to control her circumstances as a child. This traumatic experience influenced her decision to pursue a career in finance and become a distinguished investment expert, recognized as one of TIME magazine’s “100 Most Influential People” in 2015.
To break the cycle of financial struggles within families, Hobson emphasized the importance of teaching children positive money management habits early on. This includes discussing the value of money, the importance of saving, and leading by example.
She shared a practical example of giving her children $3 in cash and taking them shopping at a dollar store, allowing them to choose between consumable items like candy and toys versus items with reusable value. This exercise helped her children gain a new perspective on spending, as evidenced by their choice to purchase a discounted $189 Lego set on a subsequent shopping trip.
Furthermore, Hobson suggested that using cash in front of children is beneficial, as it helps them understand the tangible value of money that may be lost when transactions solely occur digitally. She stressed that by using physical cash, children can grasp the concept that money is finite and not endless, unlike what may be perceived when swiping a credit card or receiving money from an ATM.
In conclusion, Hobson underscored the importance of instilling good financial habits early on in children, providing them with a solid foundation for responsible money management and financial independence in the future.