All parents want their kids to have the skills they need to thrive in the world. But, while most parents feel comfortable talking about the importance of safety, health, schoolwork, and relationships, when it comes to the importance of money, many fall silent. In fact, most parents feel more comfortable talking about sex with their kids than about how much money they make.
Perhaps that’s because money can bring up extremely strong emotions. How much we have or don’t have, and how our income compares to that of others, can be a source of shame—whether we perceive ourselves as having too much or too little. Parents often find themselves fighting over finances, leaving the impression on kids that money causes conflict. Nobody is dispassionate about money, and parents are certainly not calm and rational about their kids, either. This potent mix often makes it hard for parents to talk openly and honestly with their children.
In my role as the personal finance columnist for The New York Times, parents often ask me for advice. For people living paycheck to paycheck, talking about money is often a necessity. Those with the biggest incomes, meanwhile, sometimes struggle the most with how to approach the topic, not knowing how to explain to their kids why they have means while others don’t, or why they want to set certain limits around spending when their kids know that they don’t actually need to.
As a parent myself, I know that these issues can get thorny. But if we want our children to have a healthy relationship to money—and not become spoiled or entitled or materialistic or left totally unaware of its importance—we need to overcome our own shyness and discomfort and give them some straight answers to their many questions.
In my new book, The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money, I write about where parents get stuck and how they can do a better job of teaching their kids about money. Here are some tips I have for parents, based on my book.
1. Talk about money and your values around money
Kids are curious about money and want to know more about it. They are bound to ask questions that may be difficult to answer. But, evading the topic or lying about it isn’t a good solution. If we parents want our kids to understand how money works, we need to talk to them openly and honestly about it…though not necessarily in the way we think.
In my years of research on the topic, I’ve determined that, when kids ask parents about money, it’s best to respond by first asking: Why do you ask? Responding this way allows us to get at a child’s actual underlying question or concern. For example, children who ask “Are we rich?” aren’t necessarily asking for your salary level. They may have heard that another family purchased a new car and be wondering if you could afford one, too. Or, they may have seen a homeless person and be wondering if your family could end up on the street. Knowing a child’s actual concern and where it comes from gives parents a chance to respond appropriately.
As kids get older, they will have more pointed questions, and we parents should be ready to answer them. It’s important for us to share information about family finances and what it actually costs to pay for things that the family has and does. Try looking for opportunities to discuss larger questions about money, like, how much is enough? And, What should we spend so that we have all of the things we need and enough of what we want (or want to do) to make us as happy as possible?
Talking about how your family handles financial decisions will help kids understand how money works and the values you have around saving and spending it. This will encourage them to grow into young adults with perspective—people with a healthy definition of “enough” that is unique to them and isn’t based on what everyone else has or does.
2. Give children money to manage on their own
Allowance helps kids learn to save and spend money, a skill they don’t get to practice in very many other ways as they grow up. And since they are at a time in their lives when the stakes are pretty low, the inevitable mistakes won’t matter so much. Plus, one of the primary virtues of allowance is learning patience, delayed gratification and the value of self-control.
It’s the rare study that tracks the same group of children well into adulthood, but a 2011 study out of New Zealand followed 1,000 people from birth to the age of 32. By that age, it was clear that those who had poor self-control as children were less likely to save money, have a retirement account, and own homes or stocks as adults than others with more self-control. Lack of self-control was even more predictive of money problems than their social class as kids or their IQ.
Once you decide on giving your kids an allowance and how much it should be, you’ll need a system for tracking and storing the money. In my family, we divide the allowance into three clear plastic containers: One each for spending, giving and saving. Splitting the money introduces kids to the idea that some money is for spending soon, some we give to people who may need it more than we do, and some is to keep for when we need or want something later.
Some parents will give their kids bigger or smaller allowances; some will rule out items that their children cannot buy—such as candy—even if they have the money. Though there’s no right answer, it’s great to aim for consistent rules and to follow them. Once the rules are understood, though, there is nothing like putting kids in charge and letting them learn from their mistakes.
3. Teach kids to spend wisely
Thrift is an odd word, often synonymous with cheap. But, the root word of thrift is thrive. Our goal as parents shouldn’t be to promote the stingy type of thrift or the resolute version that previous generations of Americans turned to only when the economy or war shortages demanded it. Instead, we can aim for three things: Setting some spending guidelines to lean on, modeling a few sensible tactics for our children, and adopting family rituals that make spending fun—but only on things that have real value and meaning.
Every new generation of parents is astounded and alarmed when confronting the goods and experiences available to their own children. But there’s something about the always-on, instant-access nature of so much of life in recent years that really does seem fundamentally different. Our culture of consumption can make it challenging for parents to navigate kids away from materialism and toward more strategic spending or cultivating more satisfaction with what they already have.
Yet, multiple studies have shown that materialism is correlated with higher levels of depression and anxiety and a range of ills from backaches to drug use. So, we want to deploy whatever tactics we can to keep kids from becoming materialistic. This might include keeping them away from commercial television—or making a sport of poking fun at the advertising that surrounds us —and not giving in when kids pressure us to buy stuff for them because “everyone else has one.”
It’s a good idea to teach kids about value and getting the most for your money, too—whether it’s buying specific items or spending money on an experience. Research shows that spending on experiences tends to bring more happiness than spending on goods, and we can talk to kids about testing this idea out themselves. Have them check in with you months after a purchase to report how much they still use and enjoy what they’ve bought. Often, this teaches them that the pleasure of a purchase is fleeting, while a pleasurable experience lingers longer in their memories.
4. Put kids to work
All kids should have chores at home—even young kids. Why? Because it helps them to build confidence, and sharing the labor of maintaining a home reminds them that we’re all in this family thing together.
It’s all too easy to default to the assumption that it’s more trouble to teach kids how to perform household tasks than to just do them ourselves. But in doing so we send clear, strong messages: We expect little of you, and you’re living mostly for yourself. Giving kids reasonable chores to do will teach them that they are an important part of the family and will help them to develop a sense of competence and responsibility.
I personally don’t like to tie getting an allowance to fulfilling household chores, as I feel kids ought to contribute to the family regardless of compensation. But, when kids get older, encouraging them to work outside of the home for money can be a great experience. What our kids learn from paid employment is a work ethic—that loose phrase that captures the ability to listen, exert ourselves, cooperate with others, do our best, and stick to a task until we’ve done it right. They should do it at least one summer during high school. Or perhaps more: Some parents require their children to pay for a portion of their first year in college, even if the parents could write a check for it easily.
5. Teach kids the importance of giving
Parents have an essential role to play in modeling generosity, and researchers have shown that if parents give, kids tend to as well. If you haven’t primed the pump of generosity with your kids by talking to them about your charitable giving, you’re not alone—many Americans don’t. But, giving, like everything else that we do with money, shouldn’t simply happen without comment.
Correcting this is easy enough, and there are at least three ways to explain why giving money to help other people is a good thing to do. One way to describe it is as a sort of duty: families who have more than they need ought to give something so that others who have less can afford things they need. Older children might appreciate the second explanation, which is a self-interested one: research on happiness shows that the amount we give away is a great predictor of how happy we are. In fact, it’s as strong a predictor of happiness as our income is. Finally, there’s this point to make: Communities are stronger when people know they can rely on one another.
Like most conversations with kids about money, we don’t need to have this one all that often. But we could probably start talking about giving earlier, as children are hardwired for the happiness-making part of generosity starting at a very early age. Try allocating part of their kids’ allowance for giving and include their kids in decision-making around charitable giving. It’s a great way to get children’s minds thinking about what’s important to them and how they can contribute to the causes they believe in.
6. Practice gratitude
Beyond our general tendency to avoid conversations about money, it can be difficult to step back and recognize our own good fortune. Many parents avoid talking to their kids about their socio-economic status because they believe that children don’t notice class differences until they’re teenagers. But even very young children have a basic sense of what the words “rich” and “poor” mean. And, as we’re sorting out our own complicated feelings about the differences between our social class and that of the people we know, our kids are jumping to conclusions. They may not come to the right ones if we’re not engaging them in conversation.
It’s important for kids to not only understand socioeconomic issues but to learn to appreciate all they have in life. Scholars who study happiness have measured gratitude levels in children and found strong correlations between gratitude and higher grades, levels of life satisfaction and social integration. There’s also a link between gratitude and lower levels of envy and depression.
So, how best to foster a culture of family gratitude? One way is to establish a grace-saying ritual around the dinner table—one in which you express gratitude for the food, for each other, or anything else that comes to mind. Another is to purposefully turn to the outside world and recognize that not everyone has what you have. Engaging in volunteer work or simply participating in an afterschool activity with kids from different social worlds can help kids get some perspective on what they have and help them feel a sense of gratitude.
While these tips aren’t foolproof, parents who follow them have a better chance of raising children with a wise relationship to money. It’s up to all of us to make sure our children understand our values and know how to save, spend, or give away money in a way that is consistent with those values. If we all approached the topic with more honesty and openness, we might avoid a future where children end up either crippled by debt or thinking that everything should come to them on a silver platter. Personally, that’s the world I would rather live in.