Teaching your kids to manage money

The importance of being honest with your kids about finance

Money has become the new sex. No, not in the way you think. Parents who unblushingly give their kids the lowdown on the birds and bees clam up when the topic turns to nickels and dimes. It's not just worry over the high cost of daycare, or how to best save for college. It's what, and how, do I teach my kids about money?

Not discussing money openly with your kids is a wrong turn, says CUNA director of youth outreach Phil Heckman: "Parents make a huge mistake when they're not sharing decisions about what to do with limited income. And everyone has a limited income, it's just at different levels."

Heckman believes one of the best ways parents can teach kids about money is to talk openly about their own financial decisions. "There's a lot you can share with kids about how you make decisions. If you don't do that, you're ignoring the opportunity to teach and model."

Madison-based personal financial counselor Connie Kilmark feels that parents need to clarify their own values in the process of providing financial education to their children -- just as with sex education. "It's all about values," says Kilmark. "What is important? What are my beliefs?"

Kids will rejoice in the fact that both Kilmark and Heckman advocate allowance-giving that is unconnected to grades, chores or behavior. Kilmark explains why kids must be given an allowance in order to learn about money: "It's the cradle of teaching. It is to money education what food is to nutrition education. You can't teach kids about money if they don't have any."

But why not connect the money to work done by the child? After all, adults have to work for pay. Both Kilmark and Heckman are adamant that allowances should not be contingent on anything. Otherwise money "gets all tangled up in disapproval and unhappiness," explains Kilmark. Heckman agrees that having the allowance hinged on chores "introduces a contingency that interferes with learning. Getting into power struggles with kids over money can be as destructive as having a four-hour standoff over a serving of green beans."

Both instead believe that kids should be expected to do age-appropriate chores, not for money, but simply because it is an expectation. Failure to complete those chores should instead be punished with loss of privileges. Otherwise, parents are likely to find that children will often simply choose to forgo allowance in order to avoid helping around the house.

Similarly, withholding money to punish a child for misbehavior teaches the wrong sort of lesson. Kilmark explains it this way: "We don't want money to be [seen as] the universal solvent that dissolves all difficulties."

What positive associations, then, do we want to teach kids? Heckman believes that one of the chief goals of financial education is inculcation of the benefits of saving. "The earlier you start saving, the less you have to put aside. You are constantly hearing from peers and parents, 'I wish I'd started earlier.'" He adds, "Not that 8-year-olds need to be thinking about retirement."

Kilmark believes that 8-year-olds don't even need to be thinking about college. She describes a scene she witnessed in which a preschooler threw a tantrum in the lobby of a bank, screaming, "I want my college money! I want my college money!" Kilmark encourages parents to help children with saving for smaller, obtainable goals -- a bicycle or a gaming system, for instance. "You need to teach deferred gratification gradually," she says.

A second benefit of teaching kids deferred gratification is that they will have more resources with which to avoid the temptation of easy credit, which Kilmark describes as a "looming danger," now that credit card companies begin aggressively marketing themselves to teens as soon as they turn 18. In Kilmark's view, credit not only enables young people to spend "next year's money today," but "destroys the intrinsic and intimate relationship between money and time."

A basic game plan for financial education, then, begins with an allowance, one not tied to chores, grades, behavior or anything else. The size of the allowance is a complicated decision, influenced by the age and interests of the child, and also what the child is expected to pay for.

Kilmark recommends a threefold approach: money for now, money for later (savings toward a bigger purchase), and money for sharing (set aside for gift giving and philanthropy). She likes to keep things simple, recommending simply dividing cash into three envelopes. The parents and child should develop an agreement that states explicitly what the child is expected to pay for with the money in the allowance; the usual costs include snacks, CDs, admission to movies or other entertainment and expenses associated with hobbies or collections.

As children grow older, they should progressively be given responsibility for managing larger amounts of money. For instance, lunch money, scouting dues, sports fees or clothing allotments may be included in the allowance, with the expectation that the child will be responsible for covering these costs, and will accept responsibility if the money is not adequately managed. (Parents also have the right to set limits, such as requiring lunch purchased to be at least marginally nutritious or insisting that a clothing allowance cover the cost of socks and underwear in addition to trendy designer jeans.)

Obviously, deciding what a kid is expected to pay for need to be based on common sense and knowledge of how the kid operates -- it's probably not a good idea to give a profligate spender lunch money for a month and expect that child to eat for more than a few days before going broke. Holding on to the lunch money entirely or doling it out three days at a time may be a wiser bet.

"The personality structure of each child should guide the quality and content of the experiential learning opportunities you offer," advises Kilmark, noting that impulsive kids need help with delay of gratification, while methodical, cautious kids may need help setting a goal and then permitting themselves to follow through with that goal.

That doesn't mean a parent can save a kid from the consequence of a bad decision. In fact, says Phil Heckman, "kids learn from making bad choices" if they are allowed to experience the consequences of those choices.

That sounds good on paper, but in practice is probably more painful for a parent than for a kid. Heckman's advice to parents who squirm while watching a child make stupid decisions with money and then blithely continue down the same path, is straightforward and simple: "Be patient. Kids learn at their own pace. You can remind them of things, point out consequences to them, and they will get it eventually. The most powerful motivation is internal."

Giving that hard-won but long-lasting gift to your child is, as the credit card commercial says, priceless.


Bucks for Buckaroos

Grace Weinstein's Children and Money: A Parents' Guide earns high marks from Kilmark for its simple, no-nonsense advice. It's long out of print, but can be had on Amazon.com used for a song.

Heckman recommends The Sink or Swim Money Program: The 6-Step Plan for Teaching Your Teens Financial Responsibility by John E. Whitcomb, especially for parents of kids 10 and up.

CUNA offers online financial education for kids from elementary school through high school with its Googolplex program, as well as on the websites of many credit unions. CUNA is launching a new program for parents of preschoolers soon; it will be available here.

comments powered by Disqus

More to read

Loading More Articles
No More Articles

Mama Madison: Parental dice rolls?

Last week, in response to the county-wide Sleep Safe, Sleep Well public health campaign that encourages parents to "share the room, not the bed" with their sleeping infants, Isthmus contributor Ruth Conniff penned a lovely opinion piece in defense of bed sharing entitled "Confessions of a Co-Sleeper."

Mama Madison: What constitutes a keepsake?

As much as I'd like to believe there is latent genius in my daughter's early finger paintings, I'm pretty sure her works are not distinguishable from those created by the pointer fingers and pinkies of thousands of other children from across the world.

Mama Madison: Young love

Seeing Romeo and Juliet this past weekend was a definite reminder that I need to prepare for something that might resemble a (Near) West Side Story around our place pretty soon.

Mama Madison: What a mother fears most

All during childhood, we calmly tell our kids they don't need to be afraid of the dark, thunder or the monster under the bed. But it's pretty hard to keep your parental cool when your kid is about to embark on the one thing that terrifies you. I knew the problem wasn't really with him. It was with me.

Operation Fresh Start's Youth Conservation Corps helps kids, and kids help parks

Last January, when temperatures dipped below minus 30 and most people between the ages of 16 and 24 did anything to stay inside, a small yet sturdy group of at-risk teenage boys and young men stacked wood and managed controlled burns at Festge County Park near Cross Plains. Five months later, following a temperature swing of more than 100 degrees, Isthmus found some of those same guys removing invasive honeysuckle and buckthorn at Lake View Hill County Park on Madison's north side.

Mama Madison: Summer stress solved by yoga

The first week of summer break at our place usually comes and goes without incident. At times, one could argue, it even verges on pleasant. I have no school lunches to pack and the kids have no 7 a.m. buses to catch.

Mama Madison: The greatest fans of road repair

Have you tried getting anywhere on either Verona Road or East Johnson lately? I'm pretty sure a six-month old could crawl to Fitchburg, or across the isthmus, in less time that it takes me to drive there these days.

Mama Madison: The alarm sounds

As soon as the door closed behind him, I poured myself a cup of the coffee he had made and took a moment to let the enormity of what just happened sink in. My son was ready that morning despite my inability to properly set an alarm clock. My kid was ready that morning without nudging, cajoling, or reminding. He was ready, even when I wasn't.

Mama Madison: My summer book list

For the past 17 years or so (i.e., since I've had kids), I haven't made books the priority in my life I know they should be. It's not that I don't try. Just this past weekend I had the best of intentions of picking up, and even finishing, I am Malala, this year's UW-Madison's Go Big Read pick. But the copy still sits untouched on my nightstand.

Make Music Madison gives young artists a chance to perform

The longest day of the year is upon us. For those of you keeping track, the sun will rise at 5:18 a.m. and set at 8:41 p.m. on Saturday, June 21. All that daylight, courtesy of the annual summer solstice, will provide the perfect backdrop for Make Music Madison, a daylong event featuring hours and hours of free performances in nearly every corner of the city.

Mama Madison: Watching talent grow

Last week, for the first time, I made my way up to one of the open gallery nights during Madison West's Fine Arts Week, the school's annual showcase for all things creative. The scope of the event is huge, with nearly 1,600 students participating, and the quality of the presented works is phenomenal. It's almost as if the school had been lifted off its perch on Regent Street and traveled back in time to Belle Époque Paris.

Mama Madison: Writing time at Olbrich

If you have aspiring authors in your house, this summer offers a fabulous opportunity for them refine their writing skills. For its second summer, the Greater Madison Writing Project, in partnership with Olbrich Botanical Gardens, is sponsoring two week-long camps in August for young writers entering grades 3-8.

Mama Madison: When UW-Madison's semester is over, the kids want out too

There are lots of benefits to living in a college town. First and foremost, there is always something going on -- a lecture, a film series. Maybe even a protest, if you're lucky. And since becoming a Madisonian, I, for the first time in my life, find myself interested in college football.

Mama Madison: Another amazing talent show

My passion for the talent show clearly runs deep, but I'm more than just a fangirl. This year marked my second as one of the "Ziegfelds" of the Follies, Hamilton's annual showcase for singers, musicians, dancers and other varied forms of entertainment. Trust me, when you are part of the spectacle's "producing/directing" team you get a new-found appreciation for how hard the kids worked to get up on stage.

Mama Madison: Preserving children's stories

My daughter, who turned twelve just this past week, is not legally "of age" when it comes to social media. But I guess, in many respects, especially in those that involve screens, I am a permissive pushover. I've allowed her join some networks.

Tenting tonight? Not so fast -- take the time to prepare for the first family camping trip

What adults love about camping -- sleeping under the stars, getting away from it all, the sounds of nature -- can be scary for children. It's dark in a tent. Nothing is familiar. Of course, camping with kids is more work for adults, too. Stay cool, live in the moment. Forget about that lost fork. Making s'mores, spotting wildlife, that's what kids will remember.

Mama Madison: It's time for the college tour

I have just returned from a whirlwind, five-day, four-city college tour with my son. You know those "101 Things to Know Before Visiting Disney World" guidebooks that experienced theme park travelers have written to help the uninitiated? I think I am now officially seasoned enough in information sessions and campus tours to give some serious thought to penning a similar "insiders guide" for the junior-year parent.

Mama Madison: When mom gets a new roomie

This past week, against both my will and better judgement, I accompanied 50 or so middle school kids to the Future Problem Solvers Wisconsin State Bowl, a popular academic and skit-writing competition.

Mama Madison: Earth Day awareness

It may be a bigger waste of breath than electricity to ask my kids to turn off the lights when they leave a room. If I've nagged them once, I've nagged them a thousand times. No, I've never noticed anything amiss with their fingers. But it appears they are physically incapable of flipping a switch to the "off" position.

Mama Madison: Parents should know and understand school codes of conduct

I want to say thank you to the Board of Education for allowing Maia to return to class, unquestionably the place she belongs, as well as to thank them for adopting the new policies. But just as importantly, I also want to thank Maia and her family for their willingness to come forward with their story.


Emails from Isthmus Parents feature event highlights, story links, site updates, and occasional special offers from trusted sources. Name and email address are required. Thanks!