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There's only so much you can teach your kids

How do you talk to your kids about money?

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Tess Vigeland: We were talking earlier about government involvement in financial literacy. Yet like so many things in life, a huge amount of what we know or don't know is because of mom and dad. But even if they showed you how to budget, took you with them to the bank, you may still be terrible with money. And asking yourself why you did that silly thing when you really do know better.

It's a question we mull frequently. What were you thinking? Our look at why we do what we do with our money. Turns out, parents may not have much influence at all on their kids' spending habits as adults.

Ann Dornfeld reports.


Ann Dornfeld: Kate Ramsey and Meg Deines are navigating the maze of clothing racks at Macy's in Seattle to find just the right tank top.

Kate Ramsey and Meg Deines: Look how much it costs. That's $68 dollars. And it's like a looser, cute tank top. Well it's cute, but I mean... But would you spend 68 bucks on a tank top? No. A cotton tank top. No. That's crazy.

If Ramsey and Deines sound alike, it's because they're identical twins. They were raised to have identical spending habits, too. Like when those Cabbage Patch Kid dolls came out in the 80s. Every girl had to have one.

Deines: And I remember not having enough money. So grandma went and bought the Cabbage Patch dolls. And so then she hung on to them and we had to save up and give her like $5 here, $5 there until we paid off the Cabbage Patch doll and then we could have it.

Ramsey: She kinda held it on layaway for us. I forgot about that. So we'd see it there sitting there on her table every time we came over. It was kinda incentive to save.

These days, the twins have very different lives. Both are married, but Meg's a stay-at-home mom with two young boys. Kate is a web designer with no kids. Still, they have similar financial philosophies. Meg sticks to a tight household budget.

Deines: That's the money I have for the two weeks and when it's gone, we're just eating the canned foods out of the pantry.

Kate doesn't rack up credit card debt.

Ramsey: I just have that same mentality -- if I don't have the money, I can't spend it, y'know.

But are they frugal, because they're twins, or because they had the same upbringing? Stephan Siegel looked into that question. He's a University of Washington professor who studies household financial decisions.

Stephan Siegel: It starts basically with the basic question, how much money do people, for example, save in a given period? And then it goes on to, if they save something, how do they invest that?

Siegel says the twins' similar spending habits are partly shaped by their shared DNA. He and his fellow researchers recently compared the spending habits of identical twins and fraternal twins in Sweden. Identical twins have the exact same DNA. Fraternal twins have different sets of genes. What Siegel found is that identical twins' financial habits were a lot more similar. That suggests a genetic link to how people manage their money.

Siegel: We learned that indeed about 30 percent of the decision to participate in the stock market seems to go back to genetic variation across people.

So to translate, Siegel's saying 30 percent of our financial decisions are based on traits we were born with. If that's so, does upbringing shape the other 70 percent? Siegel says yes -- but only to a point. As young adults, all the twins tended to handle money along the same lines as their parents. But by age 30, people's personalities and their own experience with money seem to override whatever their parents taught them.

Siegel: And that was actually, I think, to us the most surprising finding.

Dornfeld: So we can stop bothering to tell our children how to spend their money?

Siegel: Yeah, that's sort of in the long run true.

All you have to do is look at Meg Deines' kids to see how different personalities play out in spending habits. Meg says six-year-old Mick has always been a saver. He's considering becoming a banker like his dad. Four-year-old Jake is much more liberal with his finances. Meg is teaching the boys how to save money by giving them marbles for good behavior. Mick's marble jar is pretty full compared to Jake's. Mick estimates his marble balance.

Mick: Ninety-seven. Ninety-nine, I mean!

Deines: And Jake, how many marbles do you have?

Jake: I dunno!

Mick: Like 37.

Deines: Oh, OK.

When the boys have earned 30 marbles they can trade them in for a $5 toy -- or they can save them. For four-year-old Jake, the decision's a no-brainer.

Deines: Weren't we talking about maybe next week we're going to go to Toys 'R' Us, Jake, since you earned your 30 marbles? And are you gonna spend your marbles, or are you gonna save them?

Jake: Spend!

Meanwhile, Mick says he's never spent his marbles, or his birthday money.

Mick: Because there's stuff that's, like, really big that I really, want but I won't be able to ever have it if I keep spending my money. It'll take longer to get it, and that's why.

So for parents worrying about how to teach their kids how to handle money, there's only so much you can do. The rest is either hard-wired into your kids' DNA, their personality or they'll have to learn it in the school of hard knocks.

In Seattle, I'm Ann Dornfeld for Marketplace Money.

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