Thursday, January 25, 2007

When Reality is Different Than Perception

There are lots of instances when financial reality is different from financial perception. The difference can be very confusing to children.

Financial Perception

Example 1 - When I was about four years old, I remember becoming frantic when my uncle paid cash for a gasoline purchase. I kept telling him that my dad had a plastic card that enabled him to get gas without using any money. I recall thinking that my uncle was wasting money because he didn' t have a plastic card.

Initially, both my dad and uncle couldn't figure out why I was so frantic. When my dad finally understood, I recall they both had a good laugh.

Example 2 - A colleague at work told me that her children don't understand that an ATM dispenses money from one's bank accounts. They believe that an ATM is a place to go to get money that one doesn't have but needs. The children believed the ATM was an endless supply of money.

Example 3 - Last year I drove by a house I knew was going to be auctioned in a sheriff's sale. The people appeared to be doing well financially. The appraised price of the house was around $400,000. There were two nice cars, including a BMW SUV in the driveway.

Explain the Reality

Remember that financial reality generally prevails. For children, my solution is to explain the situation or tell the "rest of the story". For example, I can show the child that I also deposit money into the ATM. I can explain or show that I pay a bill every month for my credit card. Hopefully, my children will benefit from understanding the reality versus believing the perception.

For more on Crossing Generations , check back every Thursday for a new segment.

Photo Credit:, Michael S. Richter

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

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