The fact is, we need to talk about money. We owe it to our kids to teach them to be smart with their finances and manage their money prudently.
A conversation with Ron Lieber
by Tracy Carter
Ron Lieber is a New York Times finance columnist. He’s an expert on money matters – but he’s also a dad, and he knows how important it is for us as parents to pass on healthy values about money to the next generation. His book, The Opposite of Spoiled, is insightful but down-to-earth. It’s full of useful ideas about bringing up kids that are “grounded, generous, and smart about money.” Ron’s a busy guy, but he kindly squeezed in an interview with Grapevine …
GRAPEVINE: What inspired you to tackle a subject like this?
RON LIEBER: It was a combination of things. First, in my day job as a finance columnist, I was seeing the result of kids being poorly educated about money. You had teenagers making big decisions, like taking on major student debt as they embarked on a university degree or other tertiary training – and they were doing so with little or no experience of managing money … And then at home, I had this young daughter who was starting to become aware of money and the issues surrounding it.
The fact is, we need to talk about money. We owe it to our kids to teach them to be smart with their finances and manage their money prudently. But many parents – right across the income brackets – don’t want to talk about this with their kids. They avoid the subject. I wanted to break this ‘epidemic of silence’ that seems to exist – in fact, I feel that it’s crucial that we find a way to do so.
GV: Why are parents so reluctant to discuss money with their kids?
RON: I think we sometimes avoid the topic out of a sense of wanting to protect them from that side of things – we don’t want them to worry or to have to grapple with some of the stickier parts of handling and spending money. But this is misguided. Even young kids have an awareness of money – and they need help so they can make good choices, especially once those choices really count. Kids need to learn from us before they reach adulthood. After all, by then they’ll be responsible for their own finances.
Another concern some parents have is that talking about money might make their kids overly focused on it – it might turn them into greedy materialists or something. But in fact, it’s only by discussing financial choices and money management with our kids that we’re able to pass on our values.
GV: How should parents respond when their kids ask tricky questions about money?
RON: The best way to answer kids’ curiosity about money is to match their curiosity – ask another question. My favourite is simply, “Why do you ask?” It’s a good way to really gauge where the kids are coming from, and what’s motivating them. Sometimes they want to know where they stand in relation to others – they might ask, “Are we rich?” or “Are we poor?” Sometimes they’ve become aware of the possibility of Dad or Mum losing a job, or other circumstances changing, and they’re wondering if things will be okay … whether we’ve got ‘enough’ … whether our family is financially vulnerable. So “Why do you ask?” helps get to the bottom of the question. (It’s helpful not just for money-related topics, but for other queries, too.)
But, when you’re probing like this, it’s important to use the right tone of voice – if you sound suspicious or accusing then you risk shutting down the conversation before it’s even begun.
GV: Your book is called, The Opposite of Spoiled. How would you describe a kid who’s ‘the opposite of spoiled’?
RON: Most parents want to avoid ending up with spoiled kids. We realise that if our kids turn out spoiled it’s probably because of something we’ve done or failed to do. It’s not hard to spoil a child – and it doesn’t necessarily take a lot of money. We don’t want our kids to grow up feeling entitled. We actually want them to be the opposite of spoiled!
But there’s no single definition – aside from ‘fresh’, which doesn’t seem very useful in this case! However, there are a number of characteristics that, in combination, describe a kid who’s at the opposite end of the spectrum from ‘spoiled’ – things like modesty, prudence, perseverance, thrift, patience, generosity, and perspective. And, as parents, we have the opportunity to teach our kids these values using money.
GV: You argue that our kids’ financial status is fluid, but that their financial values shouldn’t be – is that what you’re referring to?
RON: Right. We don’t know how much money our kids are going to end up having – and we ourselves may be anywhere on the financial spectrum. But what’s consistent is how we think about money. Those attributes I mentioned hold true no matter how much you have or how little you have – and kids who’ve adopted those values will go out into the world well-prepared to make good choices and contribute meaningfully, no matter what their circumstances happen to be.
GV: Is it important to provide kids with pocket-money?
RON: I think so. I see pocket-money as a teaching tool. It’s an opportunity for kids to practice. Having control of some money of their own gives them a safe way to make mistakes while they’re under our roof. And that’s very positive, when you think about it – otherwise you have the situation I see increasingly today, where kids are totally unprepared for the financial responsibilities they’ll face in adulthood.
GV: Should pocket-money and chores be tied together?
RON: No, I really don’t think that’s helpful. Each of those things has its own intrinsic value, and you dilute that by tying them together. Kids learn a lot by having money of their own – and, equally, they learn a lot about contributing to the household plus the value of work in general when they do chores. You really don’t want to remove those learning opportunities.
But there’s another thing about money and chores: when you make one depend on the other you can lose a lot of bargaining power. If your kids end up with a jar full of money, they might just decide to take a few months off chores. It’s far more effective to use things they enjoy as bargaining chips – like changing the WiFi password, reducing or removing privileges, and so forth.
GV: Okay. So how can we help our kids manage their pocket-money?
RON: Well, the way we do it at my home is to have three jars – clear plastic containers – and the pocket-money is divided between them. Each jar is for a different purpose: saving … spending … and giving. Most kids love to actually see their money building up – it’s that sense of having a countable treasure – so the jars are great for that.
There’s lots of helpful stuff online about this, and some great apps. Parents can also do their own research to see which ideas best suit their families. For example, an alternative suggestion is to use pre-paid debit cards, which you can add money to as you go. Kids can take the cards out and spend their money that way without you having to deal with a whole bunch of coins.
GV: Tell us more about your family’s ‘Give-Save-Spend’ approach to pocket money ...
RON: Well, I didn’t invent the idea, but we’ve adopted it for our daughter. It works really well, and she loves it – she’s 11 now and still happy with the three-jar system for the time being.
It’s effectively a very basic first budget. You can keep things easy at first by putting the same amount of money into each jar – later on you can involve your kids in deciding how they want to divide the budget as the values increase.
What you’ll find is that each category – give, save, and spend – helps teach the values you want to instil. Give teaches generosity, gratitude, and perspective. Save teaches modesty and patience. Spend teaches thrift, prudence and avoiding waste.
GV: So let’s talk about that first one: ‘GIVING’. How can we guide our kids in this area?
RON: A good start might be to help kids think about the things they love doing – things like going to the zoo or a kids’ museum – and the needs they’ve noticed around them. There are plenty of worthy institutions or charities that would welcome a donation in person from a child – which is a great way to reinforce the idea that their money is going to help their chosen cause.
Waiting until the ‘give’ jar is full will also teach patience and give kids a real sense of the value of their contribution – they give more, so they can help more.
GV: Do you recommend putting any limits on which charities or causes kids can give to?
RON: Some parents stipulate that at least some of their kids’ ‘give’ money should go towards helping other humans. Places like zoos sometimes offer incentives for donations, like stuffed toys – and it’s easy for kids to respond to the appeal of cute endangered animals. Those things make giving easier for younger kids, especially. But at some point you have to acknowledge that there are people in this world who don’t have enough to eat, don’t have shelter, don’t have other necessities.
Helping your kids identify the needs of other humans and reach out in this way teaches them a lot. It gives kids a sense of their place in the world, and it helps them appreciate what they’ve got.
Not only that, but giving feels good – and research shows that there’s a strong correlation between generosity and happiness. Reaching out to others in their need helps them, but it also makes us happier people.
When you have discussions with your kids about using their resources to help others, it often helps to talk about your own family history. Chances are, you’ve been the recipient of someone else’s generosity – a friend, family member, or community – and you can share what their generosity meant to you.
GV: What about the second area: ‘SAVING’?
RON: First of all, it’s important that you don’t make saving feel like a punishment. Try to keep their goals modest when your kids are young – if they set achievable, short-term goals then they can see their progress and meet those goals within a reasonable time.
It can be helpful to get your kids to draw, cut out, or print a picture – as a visual reminder of what they’re saving up for – that you can tape onto the ‘Save’ container.
When kids get a bit older, you can give them more control over how much they put into each jar – and some parents add an incentive, like offering to match savings dollar-for-dollar, or offering interest on money saved. This is a great way to encourage kids to save – especially if they’re putting their money aside for long-term goals, which might be years away.
GV: So how do we help our kids navigate priorities in ‘SPENDING’, and appreciate the difference between their ‘wants’ and their ‘needs’?
RON: If we want our kids to be smart with their spending, it’s worth discussing our own spending – it’s worth telling our kids why we’re making the choices we do when we spend money. If you generally buy middle-of-the-range stuff, for example, you can talk about that – about how the items meet the need, and the quality you choose to pay for.
If there’s something your kids want you to buy for them, you might illustrate this point with a wants/needs chart – where you put the cheapest option on one end of a horizontal line, and the most expensive on the other end, and then you place a vertical line somewhere in the middle. If you’re prepared to pay for something that falls in the middle, and your kid is hankering for a higher-end item, for instance, that’s where they can choose to spend some of their own money.
And another thing to remember: it’s good for your kids to make mistakes. This is the right time and space for them to experience failure, to choose something they don’t end up enjoying, to regret spending money on something – far better now than when they’re adults and dealing with real-life expenses and needs!
GV: We should let our kids make mistakes – but is there a way to reduce their money-related mistakes?
RON: Letting them fail doesn’t mean you can’t still give them guidance and feedback. You can chat with your kids about the enjoyment they get from what they’ve spent their money on, and whether they’d make that choice again.
One mum, in a post on my Facebook community, described getting her kids to think about how many hours of fun per dollar they’d get from things on their Christmas wish list. Calculating this kind of ‘fun ratio’ is a really useful exercise for pretty much anything on our kids’ want-lists – or on ours! It’s worth thinking about when we’re planning family holidays, for instance, and setting the budget for other activities.
GV: You write about encouraging our kids to work. Why do you feel this is so important?
RON: Kids love to work. And parents are often the ones discouraging them – either because it’s too time-consuming, or because they get impatient with their kids’ imperfect attempts, or because the parents find it easier to just get the job done themselves. But it’s really important to give kids meaningful chores. And, equally – especially when they get older – it’s really important for kids to learn to work for other people.
Working for others helps reinforce the idea that there are standards to adhere to, that there’s value in rigour and sweat. It’s also a great way for kids to learn to serve and it helps them to navigate those relationships that they’ll have with co-workers and employers.
And there’s another practical benefit: having a part-time job is a useful way for kids to save for the future. Even if parents can afford to pay for the whole of their kids’ tertiary education, studies have shown that kids benefit from having some ‘skin in the game’. If they’re contributing to their education, they have better grades and they’re less likely to take that opportunity for granted.
GV: How do we strike the right balance between modesty and materialism?
RON: Part of striking a balance is recognising the negatives on either end of the spectrum. When people are overly modest or miserly with their money, there’s a higher degree of discomfort – they often refuse to turn up the heat or spring for something to eat if they think it’s too pricey, so you could have money and still be cold or hungry … On the other hand, if you’re materialistic, you can be arrogant; your bragging can alienate you from others. So you can discuss those extremes with kids to find a healthy middle ground.
Another thing that helps is recognising the value of non-monetary things. And one way to achieve this – as Tim Kasser’s family do (see panel) – is to give coupons as gifts. The idea is that instead of another toy you give your kids a sort of chequebook of coupons for things like extra screen-time or (a favourite of the young Kasser boys) one that entitles them to an hour of your time. It’s a great thing for kids who’re used to parents sometimes not being available when they want to play, this idea that they can cash in a coupon that says, “I’ll stop whatever I’m doing and play with you for an hour” when they’re really wanting some extra companionship.
GV: When it comes to birthdays and Christmas and events like losing a tooth – how can parents make those events happy and memorable while avoiding extravagance?
RON: I think the best advice is, “Do the uncommon thing.” Get creative. Instead of making it about currency, make it special – leave a trail of glitter leading to a letter from the tooth fairy. The goal is to make memories rather than just spending money. And consider gifting kids with experiences rather than ‘stuff’ – trips to local attractions, lessons or activities they’ve wanted to try, that sort of thing.
GV: You mentioned earlier that gratitude is one characteristic of kids who are ‘the opposite of spoiled.’ How do we encourage gratitude?
RON: One way is to simply begin meals by giving thanks for whatever food you’re about to enjoy, and go from there. Gratitude and grace are important rituals, and it doesn’t have to be a religious thing. Saying grace can be as informal as you like – you can just take turns sharing something about your day that you’re grateful for, or invent a new ritual of your own as a family. The ‘how’ is flexible – the ‘why’ is the main thing.
Giving thanks and reflecting on pleasurable things changes conversations around the table – and it’ll change your family’s perspective. Just as there’s a correlation between giving and happiness, there’s also a strong link between gratitude and happiness. Not only that, researchers have found that gratitude in children is associated with better grades, healthier peer relationships, lower levels of envy and depression, and higher levels of life satisfaction.
GV: And, finally, a big question: how much is enough?
RON: That’s a question for philosophers! But it’s something that’s definitely worth asking throughout our lives. And it’s important for us to grapple with, because in doing so we gain perspective about our priorities and our place in the world. Looking at your credit-card statement is one way to help you uncover your deeper desires and values. You can see the common threads and identify the purchases (of items or experiences) that bring you the most joy.
Maybe you spend more on incredible food but buy budget furniture, because your priority is the comfort and connection you get from gathering friends and family around the dinner table … Maybe you’re ruthless with your food and clothing budget in order to splash out on an annual holiday, because you treasure the memories that are made when you get away with your family …
Most of all, though, the truth of what’s ‘enough’ is that most of us in the developed world have everything (or nearly everything) we need and some of our wants as well. Recognising the truth of that can help all of us to be more grateful, more generous, and more grounded – both with our finances and in our lives overall.
Here are some great ‘starter’ questions to help begin discussions with your kids about giving:
What is our family’s history of helping?
What do you appreciate most about our neighbourhood/city?
If we were to live on less money, what could we do without?
What’s something you’re willing to do without right now?
Check out www.talkaboutgiving.org/resources/ for more ideas.
KIDS & MATERIALISM
Tim Kasser is a psychology professor and author of The High Price of Materialism. He collaborated on a study to see if it would be possible to reduce materialism in wealthier kids. Using materials from a company called ‘Share Save Spend’ they discovered that having detailed conversations and reflection made a noticeable difference in both the kids’ attitudes about money and on their self-esteem.
Check out the website and its resources for yourself at: www.sharesavespend.com.
‘THE OPPOSITE OF SPOILED’ IS AVAILABLE FROM ALL GOOD BOOKSELLERS.
IF YOU’D LIKE TO FIND OUR MORE ABOUT RON LIEBER, CHECK OUT WWW.RONLIEBER.COM