How to talk to your kids about money

As noted in my last post, parents should identify the qualities they value and deliberately take action to develop those in the adult they are creating. In general, we want to create a kind, generous, healthy adult who is curious about people who are different from them and who understand what it might be like to have less.

When parents ask me for book recommendations, my most common is Julie Lythcott-Haims' book, How to Raise an Adult: Break Free of the Overparenting Trap and Prepare Your Kid for Success, followed byWendy Mogel's The Blessing of a Skinned Knee. Ron Lieber's The Opposite of Spoiled is currently in third place. Readers' reviews indicate that it is best for parents of means, and others can be put off by its examples; that may be a fair assessment. As one who has worked with some of the wealthiest families in the U.S. and the world, I can attest to the negative consequences of overindulgence and "affluenza," and the positive results of setting boundaries and limits, fostering a sense of responsibility, holding young people accountable and attending to their spiritual dimension. When a young person has every one of his/her material desires fulfilled, and life is too easy, it often leads to depression, a lack of motivation and dissipation. It can be imperative for struggle to be deliberately orchestrated or imposed. For that reason, I am delighted to relay information that can help young people to be their best selves. Below is a summary of Lieber's main points.

Parents have have no control over how much money our children will make or how they will manage what we pass down to them, but they can influence their habits about saving, spending, and splurging. Most importantly, we must teach them enough so they can better avoid manipulation by others. They should know also how to share what they have wisely, perhaps through sustainable and ethical organizations that steward resources responsibly.

Spoiled kids have four things in common:

1. They have few chores or other responsibilities, 

2. They have few rules that govern their behavior or schedules, 

3. Their parents and others lavish them with time and assistance,

4. They have a lot of material possessions.

Spoiled children often lack empathy and become entitled narcissists. It's our responsibility to avoid this. It's bad for them, bad for our family and bad for society.

How to Talk With Kids About Money

Kids will have questions about money and you should answer them honestly even if it makes you uncomfortable. Encourage questions about anything, including money. Make sure children know questions are welcome by praising them for asking good questions. Rather than asking, "Did you learn anything in school today?" ask, "Did you ask a good question today?"

When you get a question about money that might make you uncomfortable ("Are we rich?"), ask, "Why do you ask?" in an encouraging (not suspicious/disapproving) tone. This allows you time to think through a response and helps you understand what the child is really getting at. Often the question is based on playground or lunch table talk. If your child mentions a classmate's parents earn a million dollars, have a conversation about how different families make different amounts of money but it doesn't make them better or worse. The question may also be based on a sort of manipulation ("Are we rich?" may be a way to get the things a child wants, as in “Then why can’t I have that?”) Say "I'm choosing not to buy that." 

Discussions about money establish the family’s value for attributes such as work ethic, creativity, kindness, loyalty and generosity.

• Parents' spending behavior shows their priorities and values.

Without context, children form their own notions of what money can and should buy. If you don’t want spoiled kids, you have to take a firmer hand in shaping those notions.

Children must not be shielded from the realities of socioeconomic differences. If you give your children the VIP fast pass experience at Disney, talk to them about why you’ve chosen to spend your money to skip the long lines or get additional access rather than letting them make their own assumptions. If your child asks about the homeless person you pass in the course of running errands, talk about why you do or don’t give money in aid. 

• Discuss the hard work, luck, timing/circumstances, decisions, profession, family you were born to and why you have what you have. 
• BUT! Be careful not to reinforce the idea that social class is completely earned through merit and hard work alone, without thought to their circumstances. With teens, play the brief online game Playspent.org to show the reality of those with less and the decisions they are forced to make. Encourage authentic interactions between your children and those with fewer resources.

One school in NYC takes all students on field trips to visit each other’s homes and neighborhoods, whether on the Upper East Side or a housing project. No exceptions.

What to Do About Allowance Save/Spend/Give

An allowance helps kids learn to save and spend money, a skill they don't get to practice in very many other ways as they grow up. t

• The primary virtue of receiving an allowance is learning patience and delayed gratification, a key part of learning to handle money well. Teaching our children the ability to wait is a big part of our overall goal, and what's most important about allowance is what will happen when they're too old to get one.

If a child can count and is asking questions about where money comes from and what things cost, then it's time to begin an allowance. With children under 10, 50 cents to $1 a week per year of age is a good place to start (e.g., $5-10 per week for a 10 year old), with a raise each year on their birthdays. They should have enough to buy some of what they want but not so much they don't have to make tough choices. Begin with Spend, Save, and Give jars, and split weekly allowance (and any monetary gifts) among the three jars.

•  Younger kids can have a fuzzy sense of time, so any savings goal should be relatively short-term at first. Make the goal concrete too: cut out a photo of whatever it is they are saving for and tape into the container When they're teenagers, it makes sense to consider saving in a bank; earlier than that, it may be too abstract.
• Parents can pay interest for the Save and Give jars/ or match the saving.

The presence of the Give jar reminds children to think about causes they want to support.

The goal is to raise thoughtful people with a healthy definition of “enough” that is unique to them and isn't based on what everyone else has or does. How much is enough? Talk about trade-offs, because we can't have or do everything we want. Even if money is abundant, time is not. Trade offs can be about not buying stuff in order to save for something bigger, or donation a toy for every new one that comes into the house. Try to have enough conversations about money and the values behind our spending choices.

By age 5, introduce the concept of "wants" and "needs." Summer camps and/or camping as a family without electricity are a great way of helping children to understand what is essential.  

Consider letting children pay using their own money for the difference between the amount you'd willingly pay for the need (or its cost at a mid-range retail store) and the amount they want for the "cooler"/fancier version. Determine which items are off limits even if the children want to buy them with their own "Spend" money. If kids want to buy a big purchase that costs more than their current amount saved, consider explaining the concept of debt and withholding their allowance for several months after making the purchase. If kids break or lose items that need to be replaced (e.g., iPhone), they can contribute to the cost of replacing the items. 

Why You Shouldn't Tie Work to Allowance

One reason not to tie allowance to chores is that chores are expected of children as members of the household. Withholding allowance doesn't actually relieve children of the responsibility to do their chores. Paying for chores makes sense for things above and beyond the normal chores expected of everyone. If there's a chore that the family would have paid to have done and a child does it instead, then compensation makes sense.

Kids have an instinct to work; we just need to encourage it: "Our job, then, is to stoke that instinct to work and earn and see just how far their natural born industriousness takes them."

Or reward entrepreneurialism. One couple wanted to raise a son who would sell his ability to come up with creative ideas, not just his competence in performing tasks. They wanted him to know that "there can be joy in a joy well done," so they encouraged him come up with "ideas for doing tasks to solve problems and earn money for doing them." He saw the leaves in the yard and offered to rake them and negotiated a price.

Angela Duckworth at University of Pennsylvania has popularized "grit" (see also How Children Succeed) and thinks getting a job as a teen is a big driver. "I would break the law to get my preteen kids a job right now. Where their boss is not their mom. Someone who doesn't accept your excuses and you just have to show up and perform."

Volunteering

• Volunteering in a poor neighborhood or country can be “poorism” [poverty tourism]. To avoid that, consider four elements:

1. Who are the leaders? Must be adults with extensive experience in the neighborhood or region.
2. Does the work to be done leverage the skills of the participants? If they don’t have skills, how will they be helping?
3. How is the program marketed and by whom? Is it a for-profit operation marketing the beauty of the region or an organization that focuses on the needs of a community and how to help?
4. Sending a child on a trip to a foreign country or even another region like Appalachia with a friend is likely to prevent her from learning from other children. 

Chapter 4: The Smartest Ways for Kids to Spend

Teaching kids how to make decisions about their money is important. Talking through what'll give them the greatest joy for the money is important, but also talking through poor decisions after the fact is just as important. Practicing spending money (which means sometimes wasting it) is part of the process.

• Explain to kids the concept of return on investment through estimating the hours of fun per dollar of any wants the kids might have. A toy that a child play with only once might have a fun ratio of 0.08, whereas a video game that the child plays for hundreds of hours for $60 may be worth the cost since so much fun value is derived from the purchase.

Give kids control to make their own spending choices. For example, give each a fixed amount of cash to spend on a vacation and let them choose how to spend it.

How to Talk About Giving

One of my favorite resources for learning how to be a responsible philanthropist is Stanford's free Coursera online course, Giving 2.0. It's worth your time, no matter how much you have to donate.

Brandeis Hillel School in San Francisco decided to put together all the money that parents would collectively spend on giving gifts to the other children in their children's class for bar and bat mitzvahs, "divide it up, with each child getting a small sum and a gift, and the rest going into a single pile of money for the kids to give away to any charity they chose. The parents would have nothing to do with the selection. Instead, the teenagers would run a foundation and listen to pitches from nonprofit executives who wanted a grant from their fund. This eventually became a class project that the students managed each year." 

In the same way, children should be brought into the philanthropic decisions the family makes.

Establish a gratitude ritual at dinner table: what made you feel grateful or lucky today?

Are We Raising Materialistic Kids?

"Materialistic people focus more on stuff than on people and relationships. They care less about the utility of their stuff and more about what sort of reaction people will have to it. Multiple studies around the world have shown that materialism is correlated with lower self-esteem, higher levels of depression and anxiety and a range of ills from backaches and headaches to drug use."

"Kids are on a quest for dignity; feelings of self-worth often rise and fall on constantly shifting standards around the possessions and experiences that matter in their own little worlds."

Studies have shown that kids who watch commercials are much more likely to want to play with a toy rather than with other kids. So the author recommends severely limiting watching of commercials.

Parents could try to arrange things so that, on average, their children end up in the 30th percentile of stuff, not always or even usually the one child in the class with the latest, best thing. If 10 kids in a community are eventually going to get a car, then your child should have the 7th nicest out of the 10, Or if your children are in the 50th percentile on cars, then perhaps they should be the 9th out of every 10 to get a smartphone.

Talk to your children about the explicit sales pitches that commercials use. After your children have become used to the limits on television time (e.g., 30 minutes per day), consider lifting the limits and letting them self-regulate their television. It will give them autonomy and hopefully they will learn habits that they can carry over to when they're living outside the house. 

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It's far too easy for many parents to just indulge children's every desire. It's more difficult to create a responsible, caring, compassionate and generous adult, who is deliberate and thoughtful about his or her place in the world and committed to making a positive impact on the common good, but that is the task before every parent and educator. Along with Lythcott-Haims and Mogel, Ron Lieber helps us succeed.