10 Things to Remember when Teaching Kids about $$$
Posted by John Draper | Filed under Kids & Money
I’m about to start working with a couple that is setting some bad examples for their kids. He is stressed out by work, by the debt, by his failure as provider, and gets angry quickly. Then he begs forgiveness by buying his daughter something. Mommy is substituting spending for doing, dropping an average of $150 a month at the local dollar store on crapola. Geepers creepers.
This got me really thinking about how complicated we make our lives with our children. We want to make all their decisions, creating total dependency, and then we whine because they can’t do anything for themselves. We’re so obsessed with them not making a mess we won’t let them pour the juice. We’re so nuts about the image they’ll create we won’t let them wear mismatched socks. We’re so focused on them having fun, we don’t let them have any downtime to just goof off.
I’m not sure when parenting became a university course, but it has. Just look at the proliferation of books on the subject – mine included, on how to teach kids about money – and you’ll see that raising kids is such a complicated thing we need to have a doctorate to do it right. Really?
How about some simple rules, which not only apply to teaching kids about money, but also to teaching kids about life.
Rule #1: Remember that they’re always watching you. You know that old say, “Do as I say, not as I do”? Well, kids learn from what you do. Shop without a list and they’ll learn that when you go into a store it’s to impulse shop.
Rule #2: It’s just as easy to learn bad habits as good ones. Browsing serves a purpose. Unfortunately, in our time-pressured world, we haul our kids in and out of stores, seemingly without purpose, always buying something. If you never leave a store without buying SOMETHING, your kids will quickly learn that their purpose in going into a store is to find something to buy. You can’t then turn around and say, “Do you think we always have to buy something?” because the answer is, “Yes.” That’s what you’ve taught them. Bad habit. And all because you don’t follow…
Rule #3: Explain everything you’re doing. Yes, it can become tedious, so it doesn’t have to be EVERYTHING, just most things. You can’t take cash from a cash machine without explaining how it works or your kids will think, “the machine just gives you money.” You can’t write a cheque without explaining how it works or kids with think, “cheques are money.” You can’t leave a tip on a table without explaining what you’re doing or your kids will think ,“Mommy forgot money on the table, I better pick it up.”
Rule #4: What goes around, comes around. If you’re truthful with your children, you have the right to expect the same from them. But if you lie, obfuscate, and only tell part of the story, why would you expect any less from them. Remember rule numbers 1 and 2? Hmmm.
Rule #5: Keep it simple. The more complicated you make something, the harder it is to deal with. Complicated outfits mean kids will get it wrong and look dumb. Simple colour combinations help them get it right. Complicated rules for how kids can get and use their money are hard to understand and keep straight. That why the Magic Jars work so well (for both kids and adults); the system is simple to understand and use.
Rule #6: Don’t try to do too much at once. Over-scheduling kids lives doesn’t make them happier. Kids need down time to just hang, think, imagine, process, cope. And jamming a whole bunch of money lessons into a day, week or month won’t work either since time is important for practicing and processing. Here’s a line from a Joanie Mitchell song (or was it Joan Baez?)… “Take your time or time takes you and drains your soul away.”
Rule #7: Prepare your kids. Telling your kids what you’re going to do helps them create a mind-map of what’s going to happen. Ditto teaching them about money. Lay out what you’ll be teaching them before you get into the actual lesson so they know what to expect. If you’re going to teach about allowances, tell them you’re not going to get into loans, advances, work for pay or all the other stuff that can make the discussion really complicated, you’re just going to be talking about how much, how often, and what they can do with their money.
Rule #8: Be prepared. Just as you wouldn’t dream of heading out without a bag of clean-up stuff and a set of nibblies to hold hunger at bay, you also have to be prepared when you’re teaching kids about money. Don’t trying giving a kid her $7 in allowance using a five and two ones. How will she put away her 70¢ for saving, or divvy up money between her Planned Spending (for that new CD) and her Mad Money?
Rule #9: Routine is your friend. Keep switching the day when you give the allowance and watch your kid eye you suspiciously. Forget to give the allowance and you’ll prove you’re not trustworthy. Change the rules on how the allowance can be used based on every new situation and you’ll teach your kids you’re a scatterbrain.
Rule #10: Know when to let go. It’s not worth all the hassle to get on your kids’ cases about everything. Know when to let things go and just relax. As long as you deliver a consistent message, love them and have their best interest at heart, they’ll turn out fine. If you’re doing anything “because of the principal of the thing”, it’s because you’re too lazy to weigh each decision on its own merit.
June 16, 2008 at 1:24 pm
My mother and father both had very different views about money and reading this, I wish my mother had influenced me a bit more on the money side. My parents both lived within their means. If that meant our Christmas when we were three had toys bought from garage sales in the Summer, so be it. We didn’t care — we were three!
The difference is my mother would explain about the rules of money and why she did things and why this cost more than that (as a kid I was fascinated by money and economy). Even when we didn’t have enough to buy something, my mother explained that we had more money, but that was for something else, like food or gas money.
My father on the other hand, worried about money. We always had enough. We were never in any danger of losing the house or living in our cars… but he sure acted like it. I was constantly worried about what would happen when we didn’t have enough. As a result, I have become a saver who sacrifices good spending (on things we need) for saving. Eep! Not that it’s his fault — I just took away the wrong lessons from him.
I hope I do better with my future kids.
June 16, 2008 at 3:32 pm
Brilliant blog Gail!
This blog just took me back to my childhood – when it was taboo to talk about money, and we were given an allowance to do with as we please without the guidance of how to divide it up and spend accordingly. This cost me a lot financially once I was on my own – Hard lessons to learn on how to manage money efficently. My husband had been brought up the same way – it’s taboo to talk about money.
When we had our child, we decided to involve him in most of the money spending catogories – eg, grocery shopping, he has to make his list which we would incorporate into our list, and if we are short of the allocated money, we all have to come up with some items we don’t really need that week.
I was pleasantly surprised yesterday, when he asked how he could invest his saved money in a GIC or something safe – so he could make his money work for him. He is 17 yrs old. I must be doing something right! At least I have peace of mind knowing that we are preparing him for the real world where money is a critical part of it.
Thanks Gail, you rock lady!
June 16, 2008 at 4:00 pm
@ NKM – This totally depends on whether the money for your son is long-term or short-term – ie needs it at 18 for his university tuition – but if it is a long-term (ie money won’t be touched for 5+ years) your son should at least educate himself on better investment vehicles than a GIC, which offers pathetic rates of return right now. While other options (ie low-cost mutual fund index) may not be guaranteed, your son is probably has the highest risk tolerance of his life right now. And its worthwhile to note that with inflation at ~2% a year, investing in an GIC may actually result in a negative rate of return. Now when I was a kid (1980s) GIC rates were at 10-12%. That was sweet – unless you needed to borrow money!
June 16, 2008 at 7:59 pm
growing up we didn’t have a lot but didn’t need for much either. so in the middle. my parents never ever spent a penny more than they made and the only penny they borrowed was for the tiny mortgage that was paid off in a hurry.
but i never knew (and still don’t know) how much money comes in and out of that house. so when i moved out, despite having a good income, i managed to rack up the LOC because of my lack of budgeting skills. took awhile to get on track. tough lesson. could have done a lot more good with that money.
when my girl is big enough, i hope to sit her down every month with the family pay stubs and receipts. why the secrets? why can’t she know how much money we earn? how much food costs? heat etc? on the off chance she tells a friend who tells a friend who tells their parents and then they know? GASP! THE HORROR! (dripping with sarcasm by the way there).
never did understand that attitude.
June 17, 2008 at 11:34 am
Thanks Geoff. Will be making an appointment with our financial advisor to guide our son – it’s time he started his own portfolio or at least received the information he needs until he turns 18.
To kristin – this is one of the biggest lessons you will give your child – it will make her life easier when she is on her own. I agree, I could never understand the attitude behind not involving the children or at least guiding them when pocket money was handed out. All the best!
Thanks.
June 17, 2008 at 2:47 pm
NKM:
Choice: short-term until January 1st, 2009 and then long-term? TFSA!
June 18, 2008 at 10:13 am
Thanks Marie!
June 24, 2008 at 3:15 pm
Great post, am linking it in my Link Love post.