Originally posted on GeekWire.com
When kids enter the picture, it can be hard to decide when to start educating them about finances. Where do you begin? How do you help them develop an understanding? Do you feel you grasp finances well enough to adequately answer their questions? *Scary*
Recently I re-read Ron Lieber’s The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money.
This book had a few too many first world problems for my taste, but I did take away some nuggets of wisdom.
One of my favorite stories from the book is a scene right out of My Super Sweet 16 tv series. A community where the bar mitzvahs keep getting pricier and more glamorous with parents spending tens of thousands of dollars on presents for these kids. Years later, one of the parents asked their child what presents he remembered receiving at his party. He said he remembered only two presents out of the hundred received.
Were these forgotten presents worth the money? I can imagine this response may make some reconsider their gifts after hearing this. Maybe a more meaningful and valued contribution with a smaller price tag. This question did help the child realize that for all the money spent, it didn’t provide any extra value in his life.
If we can take a pause and ask why we want something and what value it will bring to our life, it may help us discover what we really want with our money as a family.
So not only are your kids learning from you, but you are also learning from your kids. Having financial conversations with your kids is a cycle of knowledge and empowerment. It can also feel overwhelming if parents are uncomfortable talking about finances with their family.
Without these conversations, kids rely on cues from peers on how to think about spending money, and what their financial goals should be.
One of my favorite quotes from the book is “any conversation about money also had to consider the emotional context – the wave of mixed feelings almost all of us experience about the money we have and what others around us spend.”
Ron’s book relays stories about creating an open dialogue with kids around finances in an emotionally charged world. How can you add their voice to family discussions on what is valued, and why money is spent the way it is? Only through conversations can you increase awareness of the way social media and instant gratification changes our behaviors today.
This is about preparing kids to make good long-term decisions and to further family goals in practicing a life based on living their values.
The following are two further takeaways I plan to use from the book.
When your child asks a question relating to finances, respond eagerly with “Why do you ask?”
This question can help you see into the world of your child. Many questions asked around money originate from perceived differences, or a fear of not having enough. For example, your kid may see the number of toys another kid has and think, “They must be rich, and since I don’t have as many toys, I must be poor.”
By not blurting out a response that cuts the conversation short, we can create a more constructive and meaningful moment. We can teach our children more about the world around them, and how each family’s values shape the experiences and physical things they decide to spend money on.
You may find it quickly becomes clear whether your own spending priorities match your values as you impart wisdom to your kids.
*the circle of life/money*
Use allowance as a tool, and reconsider tying your child’s allowance to chores
If chores need to be done to keep a home running, why do we tie this to an expectation of compensation through allowance? Ron walks through an alternative way to consider allowances and how allowances might change as a kid grows up.
He believes in beginning an allowance as early as when a kid can count, or when the child is in first grade, at the latest. An allowance can be used as a tool to show budgeting through a three-bucket system (spend, give, and save). You can also allocate raises over time and facilitate an example of compounding interest.
I appreciate Ron’s approach to early involvement. Often when I chat with young tech employees starting their first job, many habits are already taking root. Our chat revolves around determining goals and reevaluating which habits are aiding them or causing roadblocks when it comes to money.
The book makes it easy to start early by detailing common questions parents are asked over time, giving creative ways to incorporate savings and budgeting into a kid’s daily life, and describing how to build delayed gratification skills.
Often, things are simple and clear to our kids – either we are doing what we say, or we are not. I encourage you to grab a copy of the book and check it out!
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The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.
