by Ron Lieber
From the day the book was published and I started hearing your questions, I knew I wanted to gather the very best ones and answer them here, in the paperback version of the book. As always, please reach out to me via my Web site or Facebook page if you’ve got others, but here are my favorites so far.
My kids don’t understand why we ought to give money away, and they’re not all that impressed with your notions about community-mindedness and personal happiness making. Got any other ideas?
Try making it personal. Kids love hearing stories about their family, so tell them some about your family’s history of being helped.
Here’s mine: My wife comes from a family of Holocaust survivors. When they showed up in New York City, there were all sorts of strangers waiting to help them out and get them set up. My mother is a breast cancer survivor, and she lived because other families who were not so lucky gave generously to fund research in order to spare others the grief they experienced. I went to amazing schools because there was scholarship money available thanks to others who had donated.
We talk about all of these things a lot. When migrants and refugees were on the front page of the newspaper for weeks in the summer of 2015, it became part of the giving conversation in our household. My older daughter has taken my mother’s survival story and made it her own; she spoke in front of a thousand people at a breast cancer fund-raiser recently. We give to my schools and hers to make sure that others like me, who do not have enough money to pay full freight, can go too. Our connections to people who need help are deep, personal, and real, because we were once those people too. Some of us may still be in any number of ways.
My child stole from his sibling’s money jars. What should I do about it?
I expect to get this question a lot, but even the youngest children generally know enough not to steal. I’ve heard about it only once. Still, I imagine there are other parents who are too embarrassed to ask, so it’s worth addressing.
Money is a teaching tool, like art supplies and musical instruments. If you abuse those—making a mess, breaking or losing expensive things—then a parent will normally limit your access to them. The same thing ought to be true here. Still, we don’t want it to seem like a fine, since connecting a lack of money to punishment isn’t a healthy link to make. After all, we’re trying to create positive feelings about money, not negative ones.
So in this context, limiting access means that children who have stolen still give money away from their Give jar, but they don’t get to store it themselves or have ready access to it. When they earn money or get money from a relative for a birthday or holiday, hold on to it until the kids have earned back the trust. Kids who have stolen don’t get to handle the money at a store or amusement park the way their siblings do either.
If an older child takes money from your purse or wallet without asking first, ask them to consider how they’d feel if their best friend did that to them. Let them bask a bit in the violation, the betrayal of trust. Then figure out what they used the money for and find a way to deny them that experience or item for a good long while to let the lesson sink in. Still, I wouldn’t cut off allowance altogether; they’re going to need spending money, and our goal is still to raise kids who have a lot of practice handling it. Here, that practice will also include punishment for taking money too.
Shouldn’t we exercise some control over what they use their spending money for? Just a little?
No. Let them fail. As long as they are not buying things or using money to do things on your banned list, then this is all just part of the learning process. Do try to engage them later, though, on the question of whether the spending was worth it. Particularly if there are other things that come up that they want to buy or do even more that they no longer have money for. Regret is a good feeling in this context, and the more searing the better. It can help them avoid making bigger mistakes later, when they are living far from us and the consequences will be greater.
I did hear from one family who had an interesting twist on the three jars that I’m considering using myself. The parents, for a variety of reasons, don’t want their kids spending all of their allowance on accumulating more material stuff. So they require that the children use a certain percentage of their money for experiences rather than things. If you do this too, make the reason explicit and repeat it often: Our family thinks we can have even more fun doing things together that help us make great memories than buying things that may not last very long.
What should I do about my child who is not interested in money at all?
I’ve heard this question enough that I’ve taken to responding by asking the asker how old the child in question is. Inevitably, the kid is under twelve. By the time most kids are teenagers, there is usually something they want that their parent or parents are unwilling to pay for or buy in the quantity that the teen desires. At that point, there are immediately many laser-like conversations about money and how to earn it and who pays for what when at home and out in the world (especially at other teenagers’ houses).
So don’t worry if your child doesn’t care much for money. It will matter soon enough. Meanwhile, even if your child is just letting the money in the save and spend jars or savings accounts pile up, do engage them in the giving conversation on an ongoing basis. There are few kids who are not passionate about something. Whatever their academic or extracurricular interests, there is always going to be a way to channel that into a cause or an organization that can use your child’s donations to improve the lives of others.
Your suggestion to pay nothing for chores makes plenty of logical sense on the page, but there has to be some way to introduce money into the equation. They’re working, after all. What about bonuses or fines that are connected to the everyday household tasks the kids are supposed to be doing but often forget or blow off?
I still think that paying nothing for chores is the right approach. Adults do them for free, and so should the kids who live in the house. It’s just part of the deal. Allowance is something separate; money is a tool for learning, and our kids should get a set amount every so often so they can practice using it and get good at it.
But I’m not an absolutist about this either. One approach that might work for some families is the bonusing system that the Clarke family uses with their two girls in San Jose, California. Standard allowance is $40 per month, per girl, and they have to complete a long list of chores. But if their parents have to nag them to get the chores done, if they don’t do them well, or there is a lot of complaining, the amount can go down to $20. Excellent performance and a positive mental attitude can lead to a bonus of $20, which boosts their monthly nut to $60. They get feedback during the month, if necessary, and warnings when their allowance is about to be halved.
Yes, there is some risk here that in months when the girls feel flush, they will let the chores slide. But they are not optional. And the Clarkes are somewhat unique among upper-middle-class families in that they ask their girls to chip in for the cost of some of their extracurricular and summer activities. So the girls are always counting, and the difference between $60 and $20 over several months may affect how many weeks of camp they can attend.
Think it’s OK for my friends and me to loan one another money on the playground?
This one came from a fifth grader, who went on to describe the loan-sharking behavior that was going on at his school at lunchtime. There is really no other way to describe it; they were charging one another overnight rates of between 50 and 100 percent, albeit on relatively small amounts. The audience that night was laughing so loud I could barely think, which was too bad. This is actually a profound question that’s ultimately about financial risk and how best to expose kids to it in a way that is both safe and meaningful.
A conventional adult financial life requires comfort with risk. The majority of undergraduates have to borrow money to attend college; there is a risk that you might not be able to
pay the money back. Buying a home requires an even larger loan, which comes with its own risks given the length of the commitment. Most adults cannot save enough money for retirement without investing at least some money in stocks, which come with the risk that the stocks may fall a fair bit in the short term and not have the kind of long-term returns that they have had historically. There is risk in the workplace too, of failure and firing and, for entrepreneurs, losing a fair bit of whatever money they may invest in the business themselves.
So what is the best way to expose our kids to financial risk and, yes, loss? We want them to feel it, but not feel like failures because of it. We want them to both win and to lose. Investing in stocks is a good way; if you do it enough, there will inevitably be some losers. Starting a small business is another. I wish more parents would ask their children to front the money for supplies for lemonade stands. Then, they have some skin in the game if they don’t sell enough.
Loaning money on the playground, even small amounts, seems like it could lead to a variety of misunderstandings, even if the kids are willing participants and the teachers don’t mind or notice. Nobody much likes people or institutions that charge exorbitant rates. But consider another activity of questionable legality: gambling. Sports betting introduces kids to risk and odds and interesting math problems. Also, you tend to lose a lot, which is a good thing when we’re trying to teach them how it feels. A supervised poker game with relatively low stakes can teach some of the same lessons too.
When our kids were born, in 2007, 2008, and 2012, their grandparents each gave them $5,000 for us to invest in a single stock on their behalf. We picked different stocks, and the stock market has been pretty tumultuous since then, so the children now have very different amounts of money. One of the kids ended up in a particularly good stock and now has $20,000 more than either sibling and at one point it was $30,000. Should we equalize it to make things fair?
No. This is part of the risk conversation. Life is not fair, the stock market is not fair, and so much depends on both what you invest in and when.
But I’m not sure this is a lesson that I would share with the kids now or anytime soon, so keep the balances (and the existence of the money) to yourself for now. If this is money that they will need for college, I might share it with them one by one as they enter high school, so they know where they stand with their savings. If not, I might wait to turn the money over until they are in college. This gives the money even more time to grow and for the amounts—and the lessons—to get even bigger.
My hope as a parent if I were in this situation would be this: After many years of talking about saving for later and spending on meaningful things and experiences and sharing with others who have less, I’d hope that my child with the biggest balance would decide on his or her own to do something nice for the other siblings. Perhaps that sibling with the big balance takes the other two on their first trip together without their parents or helps with a down payment on a car. This might not equalize things entirely, but it would be a meaningful gesture. I might even nudge, or urge, that sibling, even if it wasn’t a strict requirement.
If credit cards are inevitable, shouldn’t we be introducing kids to them before they graduate high school?
Well, the pitches for them are inevitable, but I’m not sure carrying one has to be. Many of us who are parents now grew up before debit cards were widespread. We probably went to college at a time when it was open season on college students, and credit card marketers were everywhere. It may have been the only convenient alternative to cash or checks. But the laws have changed now; college kids generally can’t get a credit card until they are seniors, unless their parent or some other adult cosigns for them or allows them to be an authorized user on their own account.
The lack of easy availability does not mean we should not talk to our kids about credit cards. But, chances are, they will use a debit card for many years before they even have an opportunity to apply for a credit card on their own. This is a good thing, given that unless you turn overdraft protection on, you can’t spend what you don’t have when using a debit card. Spending more than you have or make isn’t a great habit to get into. And you can’t get into that habit if you don’t have a credit card that makes it easy to do so.
Yes, we do want our kids to understand what credit is and establish a credit history early on, and it may be possible for them to do that as authorized users on our credit cards. So by all means, giving them a credit card for emergencies (and define what those are, precisely). Or let them apply for a small student loan even if they don’t need one in order to create a paper trail of timely payments. They’ll be better off over the long haul, however, if regular credit card use simply isn’t part of their lives for a good long while, if ever.
My kids have an insatiable appetite for information about our financial lives. I’m with you on disclosing salary and net worth to them when they’re ready, in their late teens, but what can I do to satisfy their curiosity before then?
Try turning over your credit and debit card bills to them every single month, and let them pore over every transaction and ask you a bunch of questions. Sound like torture? The Epstein family in Lexington, Massachusetts, does this with their eleven-year-old son, and it’s turned out to be a great exercise for all of them.
They call it the Amex scavenger hunt. For the boy, it’s one part chore, one part education. It’s his job to double check his parents’ saved paper receipts with the amounts on the bill, just to make sure there were no mistakes or fraud. His father, Brian, and his siblings used to pay the household bills when they were young, so he wanted his son to have a taste of the task too.
But Brian’s son also gets to ask his parents anything he wants about the numbers he sees. Why are some recurring charges for bills in some months bigger than they are during other seasons? And what of this “Massage Envy” subscription that the mom has, anyway?
The Epsteins are pretty careful, so they don’t have much to be embarrassed about or ashamed of. If you worry about subjecting yourself to this sort of thing, consider what exactly it is that you fear. If you can’t explain your spending in a logical way to your children, what does that tell you about the habits they might be learning? And if you aren’t talking about it, what judgments or assumptions might they be making that are completely wrong? Don’t assume that just because they don’t see the price tags or the monthly statements that they aren’t puzzling out your financial patterns.
Who knows? A scavenger hunt like this one just might be the financial accountability mechanism that you’ve been looking for all your adult life.
My kid wants to be rich, badly. Is there anything wrong with that?
No, though I can see why you might react badly to it. One reason some parents recoil from this sort of declaration is because they see it as an accusation: My kid wants to be rich because I seem not to have provided enough, or I moved somewhere or picked a school where everyone always had more and we were below average. So now my child is both envious and ungrateful, yet I still feel badly that I didn’t have as much money as a lot of other people or have had periods of unemployment or lower income. This is a rejection of all my efforts and choices and represents a failure on my part because my kid turned out this way.
Don’t be this hard on yourself. It’s normal for kids to want things, and almost all of us grown-ups want at least some things we can’t afford. This isn’t a character flaw. And talking about money or things or envy or desire does not subvert values, as Nan J. Morrison, who runs the Council for Economic Education, reminds us. Having a lot of money or wanting a lot need not subvert good values either.
But having the means to have many more things and expensive experiences can make it easier for kids and young adults to be materialistic. So our challenge as parents is try to head this off by talking more, not less, about where this desire to be rich is coming from. Ask questions, lots of them. What does that wor
d rich mean, anyway? Is there someone you know of who is rich whom you are jealous of? Why would being rich be better than whatever it is you think we are now? How much work will it take to become that rich? What won’t you be able to do that you do now if you have to work that hard? Will it be worth the sacrifice? Are you sure that having more money will make you happier? Can you name some expensive things that have and haven’t made our lives better recently? Probe, but do not condemn unless you see patterns that lead you to think that kids value their possessions more than their relationships.
We’re actually pretty rich ourselves, and we’re worried that our risk-averse child will think that she has to pursue law or investment banking out of a desire for financial stability. Should we be worried that she’s already ruling out becoming an artist or musician or something else that might make her genuinely happy?
Not if you’re talking to her about this very concern. There are all sorts of ways to achieve financial stability and happiness, living in all kinds of places and doing all kinds of things. You’ve made the choices you’ve made, and you shouldn’t feel the need to be defensive about them. But what are you doing to expose her to other ways of being in the world? Can you push her to spend more time with family, friends, schoolmates, or relatives who operate differently? Can you send her to a camp or to do extracurricular activities or to a school where there is a lot of socioeconomic diversity? Can you take vacations or set up your second home in a way that is less about stuff and more about simplicity and soul and doing things rather than having things?