9 Expert Tips for Raising Money-Smart Kids Who Aren’t Spoiled
When you ask parents to name the worst word that anyone could use to describe their child, a lot of them give the same answer, according to personal finance columnist Ron Lieber.
“A surprising number of them answer right away with the word spoiled,” Lieber writes.
I’m not surprised. No one wants a toddler who throws tantrums whenever they don’t get their way, or a teenager who doesn’t appreciate what they’ve been given.
And, as Lieber points out in his book, “The Opposite of Spoiled,” there’s a culpability at the root of this fear.
“Unlike mean or stupid… spoiled reflects parental actions,” he writes. “Spoiled by whom? Spoiled by you.”
Then keep reading…
I sat down with Lieber and got his best tips for raising kids who are “the opposite of spoiled” — in other words, “grounded, generous and smart about money.”
Why Teaching Kids About Money is Important
Not only is Lieber an author, speaker and the New York Times “Your Money” columnist, he’s the father to two daughters — a 10-year-old and a 10-month-old.
When his older daughter started asking tough questions about money seven years ago, he realized how “crucial” it is to discuss finances with your kids — and that no one really knows how to approach teaching kids about money.
So he talked to families and scientists across the country, and wrote a book called “The Opposite of Spoiled.” Though it’s targeted at families with household incomes of $50,000 or more, the advice rings true for any parent.
After all, being spoiled doesn’t necessarily correlate with how much money you have.
Spoiled kids, Lieber explains, have the following in common: few chores and rules, parents who “lavish them with time and assistance” and “a lot of material possessions.”
Note only the last one is associated with money.
No matter how much money their parents earn, understanding personal finance is essential for all kids — both now and in the future.
Because, as Lieber writes, this knowledge “will quite literally count as they struggle to compare the right numbers and set themselves up for adulthood.”
9 Expert Tips for Teaching Kids About Money
So you want your kids to be generous and financially savvy — and hopefully avoid the same mistakes you made?
Here’s a sampling of Lieber’s excellent advice on how to teach kids about money:
1. Answer Questions With a Question
Kids are going to ask tough questions.
The best response, Lieber writes, is another question: “Why do you ask?”
Not only does this open up “at least 10 seconds of stalling time,” it also “gives you a shot at finding the source of the anxiety.”
And once you find it, he writes, the question becomes much easier to address.
If it’s the result of idle lunch table talk, you can simply redirect the conversation. If it stems from anxiety, often some reassurance — rather than hard-hitting truths and numbers — is all they need.
For example, if your child asks if you’ll become poor because you lost your job, Lieber explains they likely just want to know things will be OK — “that they won’t have to move or leave their school or give up a pet.”
2. Just Say “No”
I’m not gonna lie: This is one of the things that scares me most about having kids.
Since it’s hard to say “no” to your children, Lieber suggests explaining your decision in terms of wants and needs.
When he says “no” to his older daughter, he tells her it’s a “want” and “more than we’re willing to spend.” Then he lets her know she can save up for it if she decides it’s a “need” for her.
As for common parental worries like, “What if my child thinks I’m mean?” or “I don’t want them to hate me,” Lieber’s response is simple:
“Who cares?” he writes. “It’s not our job to make them like us; it’s our job to turn them into adults who can make better financial decisions than we were able to… That’s the goal. We’re in the grown-up making business here.”
Down the road, I think I’ll print that out and stick it in my wallet.
3. Distribute Allowances Between Three Jars
How can a 10-year-old save for a purchase? With her allowance.
Lieber suggests creating three jars and labeling them “spend,” “save” and “give.”
The “save” jar helps kids learn about delayed gratification and avoiding impulse purchases. It also helps them develop “gratitude for the fact they’re lucky enough to have a little bit left over.”
As for how much you should pay out, he says, “For the younger ones, 50 cents or $1 a week for every year they’ve been alive is good.”
For example, you could start your 6-year-old on $3 a week, and ask her to distribute her “paycheck” evenly between her jars.
4. Don’t Tie Allowances to Chores
Lieber believes in allowances — so kids can get practice “thinking and counting” and determining which goals are “extravagant” versus “worthwhile” — but he says you shouldn’t tie them to chores.
Why? Because “it puts you in a bad negotiating position,” he explains.
What if your kid saves up enough money and decides they’re not doing chores anymore?
You can’t just claim, “No, that’s not how it works,” he says. “If you change the rules a year or two into it, then they’re not sure they should trust you anymore.”
Lieber adds: “There’s also a good case to be made that kids shouldn’t be compensated for doing the basic work of maintaining the household. The grown-ups certainly aren’t paid for that.”
5. Let Them Make Mistakes
I still remember one really dumb financial choice I made as a child. Although I was filled with remorse at the time, I’m glad it happened; $7 was a small price to pay for a lifetime of frugality.
Lieber agrees that regret — even if it’s “searing” at the time — is one of the best ways to learn about money.
So, he suggests teaching kids about money by giving them “as much leeway as you can stomach.” Those memories last a long time (yes, yes, they do) and Lieber says “that’s a good thing.”
“We want them to make their big mistakes when they’re still under our roof.”
6. Introduce the Idea of “Hours of Fun per Dollar”
How on earth can you teach your kids about the value of certain items when they don’t yet understand money and prices?
Try using the concept of “hours of fun per dollar,” a strategy Lieber learned from some of his readers.
When you’re at the toy store, ask your kids how many hours of fun they’ll have with a certain toy before they’ll tire of it — and then use that to determine if it’s worth the price.
Take Legos, for example. They’re expensive, but as Lieber says, “[f]or kids who love them, they offer a pretty good amount of fun per dollar, because you can build almost anything.”
7. Encourage Teens to Work
Moving on from toys and toddlers to the joyous teenage years…
Make your kid get a job.
Of course, Lieber acknowledges, helping support the family isn’t a choice for some — but if it is for your teen, you should still encourage them to work outside the house.
“There’s all sorts of research out there that shows that as long as you’re not doing more than about 15 hours of paid work during the week, it shouldn’t affect your grades,” he says.
“It’s a powerful thing to get a paycheck and manage it yourself, and feel like you’re being rewarded for the hard work you put in — in a way that’s fundamentally different than the way
you might get rewarded… in school.”
8. Make Smart Choices About College
What’s the biggest financial mistake parents make?
“Signing up for a bigger tuition bill and more debt than we can afford,” says Lieber.
When your kids are staring at you with their “watery, googly eyes,” he acknowledges it’s extremely difficult to say no.
“But if you don’t put your foot down, you’re signing up for a fair amount of financial pain, potentially, that will last a very long time.”
Don’t co-sign for any loans either.
Since that usually means your child has maxed out their federal loans, Lieber says, being in “co-signing territory is already a strong signal that this [decision] is not affordable.”
9. Emphasize the Importance of Trade-Offs
I asked Lieber what one thing he hopes his daughter knows when she leaves home — and I absolutely loved his response.
“That there are so many ways to be happy in the world, and that having more money than average isn’t necessarily going to help you get there.”
“The best thing you can do is to know yourself and understand which ways of spending money will make you happiest,” he says.
“It’s about learning to make trade-offs — which everybody has to do, no matter how much money they have. If you learn to make those trade-offs well, money ceases to be a source of stress and can potentially be a source of joy, even if you don’t have [a lot of it].”
Now that is a lesson we could all learn.
Your Turn: Many thanks to Ron Lieber for sharing his advice with us! What’s your favorite tip from this interview?
Disclosure: This post includes affiliate links. We’re letting you know because it’s what Honest Abe would do. After all, he is on our favorite coin.
Susan Shain is always seeking adventure on a budget. Visit her blog at susanshain.com, or say hi on Twitter @susan_shain.
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