The money conversation. It can be one of the hardest conversations we have with our kids (let’s be real: it can be one of the hardest conversations we have with anyone). But it’s also one of the most important conversations we have to have as parents.
This is a guest post by DiAna Kelley, founder of the Giving Me Life Foundation, a nonprofit organization that teaches strategies about monthly budgeting, credit, and financial retirement to teenagers and young adults in order to create healthy financial lifestyles.
At some point, your child will probably notice that your family is a bit different from others, financially speaking. This can happen whether you’re a family of modest means or your income is way up in the stratosphere. There is always someone else who just has more stuff than you do.
Maybe the families around you have bigger houses, newer cars, glitzier toys, or go on more elaborate vacations than yours. Your child will eventually realize it. Then they may start asking you questions like: “Why don’t we have those cool things and how/when can we get them?”
Kicking the Comparison Habit
First, know that your child isn’t necessarily a materialistic person for asking these kinds of questions. Kids naturally compare. It’s a normal part of their development to wonder who they are in the world and how they fit in.
However, your child is likely to be a happier, more content and more grateful kid if you help them understand that constant comparing can make them cranky. Plus, it’s not always good or necessary to have the same “stuff” that other people have. Here are some ways to discourage your kids from trying to keep up with their friends and neighbors:
- Listen to your own commentary. Do you ever make snarky or wistful remarks in front of your kids about your neighbor’s new SUV or your coworkers’ latest kitchen remodel? The children are listening. Every time you say something that sounds like you wish you had more—or that the belongings and experiences you have aren’t enough—you’re teaching your child to do the same. It may be time to edit yourself.
- Answer kids’ questions. When kids ask why you don’t have a bigger house or fancier car, an honest answer might be: “We certainly could buy a larger house, but this one is just right for us. Plus, we’d rather use the extra money (that a big house) would cost to let you play travel soccer/ visit the grandparents more often/ make sure you have money for college, etc.”
- Consider your children’s peers. It’s awesome that you bought a house in a great neighborhood so your kids can go to a top-notch public school. However, your kids’ social circle may be pretty affluent. Do all of your kid’s peers have designer clothes and expensive shoes? If so, that expectation could rub off your child.
No, you don’t have to move to a different zip code in order to burst your child’s materialistic bubble. However, consider enrolling your child in a scout troop or other activities in another part of town. Your kids may have a chance to meet friends who come from a more diverse range of families. They’ll quickly see that many kids happily get by with a lot fewer luxuries.
- Encourage volunteerism. Teens can serve meals to the homeless or help deliver food to homebound residents. Younger children can go with you to a senior center and play games with residents.
Helping others is a great way to encourage kids to develop an attitude of gratitude. It’s much harder for kids to whine about wanting expensive electronics when they realize that some folks don’t even have enough to eat or can no longer walk without help.
- Let them earn it. There are times when your child may really, really want something that’s a bit more expensive than you would normally buy them. Maybe it’s a certain backpack brand that’s currently popular at school or a smartphone with extra features, just like their friend’s. As long as the purchase doesn’t go against your family values, consider greenlighting it.
However, this is an ideal time to let kids save up and pay for all or part of the item themselves. Why:
- When kids put their own money toward a purchase, they tend to treat their belongings better and appreciate them longer.
- Your child might decide that the gadget just isn’t worth it—even if it’s the “it” item to have at school—if they have to shell out their own dollars.
By the way, you’re not being a mean parent—and you’re not dooming your children to be a social outcast—when you discourage them from comparing their “stuff” to others. You’re actually teaching your kids to be content and appreciative about the things that really matter.
(photo courtesy © Zack Weinberg cc2.0)
We know what you’re thinking: A kid who saves too much? Is there really such a thing? And can that truly be a problem?
Believe it or not, yes, yes and yes.
Most kids probably are in the opposite camp: they’re more than happy to spend every penny they can get their hands on. And if they do save, it’s probably a modest amount. Most likely they’re saving up for something they want to buy later.
However, a small number of kids are extreme about saving money. Parents who have an over-saver know exactly what we’re talking about, and raising them isn’t always a picnic. A few of these kids are natural-born tightwads. Others may have heard family members argue or worry about money. Anxiety about “having enough” can lead these kids to hoard away every cent of their allowance and earnings—just in case.
Why over-saving can backfire
Now, don’t misunderstand: Saving money is an awesome habit. In fact, it’s a critical part of becoming a financially responsible person. However, if saving is the only thing your child does with money, their financial life can get out of balance.
The long-term result: Your kid may carry their over-saving pattern into adulthood. Adult over-savers argue with their spouses or partners over even the smallest purchases. And when an extreme saver needs to make a significant purchase, like a car or a house—watch out! They may get paralyzed by the decision or become overly anxious after writing a big check or signing for a loan.
How to teach kids financial balance
If you’ve got a budding money-hoarder in your family, now’s the time to teach them how to loosen up. (Their future friends and families will thank you!). Here’s how to start:
- Create a beginner’s budget. Budgeting actually is a very calming tool for anxious over-savers. Here’s why: Once kids put money into categories (envelopes, jars, or digital) for specific purposes—friends’ gifts, saving for an electronic item, etc.—that money is “protected.” Your child can now feel comfortable with any leftover money. It’s safe to spend.
- Encourage the “small splurge.” Make this a family ritual so it takes the choice (and associated stress) out of this for kids: Whenever your child gets extra birthday cash or a special check from the grandparents, teach your kid that they are supposed to spend a little of it right away. You can tell them it’s part of showing gratitude for the gift.
Have your child take 10% of the money ($2 out of a $20 gift, for instance) and buy an inexpensive toy or food treat. The amount is small enough that even extreme savers will feel OK spending it.
- Teach them to give. The donating habit is an important one for all kids, but especially for extreme savers. How much or how often is a family choice.
Be sure you help your child separate their “giving” money from their other funds. Keep donation dollars in a special container or a digital category. Setting the money aside this way and adding the label “Donating” or “Giving” helps kids psychologically separate themselves from it. Later, it’ll be a little easier for them to let go of this green.
Again, it’s definitely important to teach kids to save. However, children also need to learn this: Part of having a healthy relationship with money is being able to let go of it responsibly, too.
(photo courtesy © Tauno Tõhk cc2.0)
The way I see it, there are three main options for giving your kids an allowance.
Option One: Give them an automatic allowance. With automatic allowances, parents will usually set a standard amount of money for their kids to receive, weekly, bi-monthly, or monthly, and their child will receive that money no matter what (for the most part, of course).
Option Two: Don’t give your kids any allowance at all: self-explanatory.
Option Three: Have your kids earn an allowance. Many parents use this option and assign certain tasks or chores to their child, which upon completion, will result in a rewarded allowance. Of course, you’ll find pros and cons of any decision you make as a parent, including the decision about allowances. However, out of these three main options, I think there is a clear, front-runner that is beneficial for both parents and children.
Through the course of my life, and my more recent research and inquiries into this topic, I have been exposed to numerous variations of the allowance situation. Two stories stuck with me, though, as extreme, yet surprisingly realistic examples of the negative consequences of giving your kids an automated allowance or not giving them an allowance at all.
Extreme Scenario #1: The Jean-Ralphio and Mona-Lisa Saperstein Story
Parks and Recreation is a sit-com that recently went off the air in 2015. It follows the quirky and endearing Parks and Rec. department of Pawnee, Indiana through the trials, tribulations, and triumphs of life. While most of the characters are lovable and good-hearted people at their core, there are two characters, Mona-Lisa and Jean-Ralphio Saperstein, who should serve as a warning to any parent considering the automatic allowance option. Mona-Lisa and Jean-Ralphio come from a rich family, headed by a father who clearly does not regulate the money they receive. It is quite evident that, in their fictional lives, they’ve probably never heard the word “no” before as a response to any request, thus resulting in their annoying and outrageous request of “Money please!” This demand is made often, without remorse, and almost rarely without an affirmative answer from their father. They are so used to receiving money whenever they want, automatically and without any effort, that they perfectly illustrate an extreme consequence of giving your kids an automatic, no-strings-attached allowance.
While this is obviously an extreme example, taken from a fictional TV show, there is some real truth that lies at the core of Mona-Lisa and Jean-Ralphio’s roles. If you don’t require any effort from your children in order for them to receive their allowance, then what’s to stop them from taking it for granted? What lesson will they learn about how to get money? Will they turn out like Mon- Lisa and Jean-Ralphio, assuming that all they need to do in order to get money is sit around and wait for it, and then if it’s not enough, just whine until they get more? Do you, as a parent, really want to hear “Money please!” all the time, even after you’ve already given your child money? I don’t think so.
Extreme Scenario #2: No Allowance: The Story of Put-Back Pancakes
My aunt and uncle adhere to a much different philosophy than that of fictional father, Dr. Saperstein, from Parks and Rec. They didn’t believe in giving their kids an allowance at all. So, my cousin, let’s call him Jim, had to figure out another way to get money. As many teenagers do, Jim turned to the job force and got a part-time job as a carhop at Sonic. He worked at Sonic all 4 years of high school, and in this time, he learned to budget and save his money since he knew his parents weren’t going to be his main source of income. So far, so good, right?
In almost every way, my cousin is a perfect example of how not giving your kids an allowance is a good option. He learned the value of hard work. He didn’t bother his parents for money all the time. He had a good head on his shoulders and was able to understand the basic principle of saving money, which is advanced for a teenager. However, there are two things wrong with this story. Number one, my cousin is an anomaly. He represents a small population of teenagers who are stable and level-headed enough to make these responsible decisions, like finding and maintaining a job and saving the money he made at this job. Other teens may not be as dedicated as he was to earning and saving money during those carefree, teenage years.
The second thing wrong with my cousin’s story is the end. Jim managed to save more money during his high school years than I think most high schoolers could even comprehend. But, this resulted in him being extremely stingy with his money, to a fault. Perfect example: his honeymoon. After my cousin got married, he and his wife vacationed in Mexico for their honeymoon. One morning, at breakfast, Jim piled his plate high with food from the buffet, taking full advantage of an “all you can eat” meal. However, before he went to sit down to his feast, he was stopped by the cashier at the end of the line who told him that breakfast was not actually included in his room rate and that he’d need to shell out a rather hefty sum for his overloaded plate. My cousin, the too-money conscious man that he’d become, looked at the cashier, turned around, and dumped his food back in each, individual serving pan from which he’d taken it just minutes before.
The moral of Jim’s story is this: not giving your kids an allowance might be a good idea. They might find a job, work hard for their money, and learn valuable lessons about managing their own finances. Or, they might end up like my cousin, dumping pancakes and scrambled eggs back into hot plates in Mexico, effectively embarrassing himself and his new wife on what should’ve been a lovely honeymoon.
So, what do you do as a parent then? Ultimately, the decision is up to you and what you think is best for your family. However, considering the pros and cons of each side, setting up a system for your kids to earn their allowance seems like the best, least painful, and most beneficial way to go. By having to earn their allowance, kids will hopefully learn the lesson of working for what they get. Ideally, they’d value their money more because they had to work for it, thereby making them more conscious about spending and saving. And finally, the system of working for their money at home will mirror their future, independent lives when they have to work for their paychecks and balance their adult finances. Exposing your kids now to the realities of money management and working to earn their money is an invaluable experience, and you can easily start by implementing an earned allowance policy in your house today!
(photo courtesy © Carissa Rogers cc2.0)