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: Mom dates are hard

You may call them "play dates," but I like the term "mom dates," especially since my kids are still too young to really care that there's another small person to squabble over toys with.

Mama Madison: No judgments with No Excuse Mom

If there is an excuse for not working out and eating healthy, I have used it: I don't have time. I'm too tired. I'll start tomorrow. I'm no good at this, I give up. I don't know where to start. Yes, I have used all of these and more.

Mama Madison: Introducing kids to your CSA box

At almost a year old, my kids are in the blissful stage of life where they'll eat nearly anything that I put in front of them (at least as long as it doesn't require much in the way of molar action).

Mama Madison: Changing tables, changing times

My family recently went through something that we have not experienced in over eight years. We have become a household that no longer harbors a crib or a changing table.

From museum to school with MMoCA

"There really is no wrong way to do it." That's how Madeline, age 13, describes creating artwork. She and her classmates at Prairie View Middle School in Sun Prairie are honing their artistic skills by participating in the Madison Museum of Contemporary Art's Art on Tour program.

Mama Madison: Coping with toddlers in a Wisconsin winter

I'm having trouble enjoying the season, because I can't keep myself from thinking about the miserable weather that's sure to be following close on the heels of the crisp, pleasant fall we've been having. I am not at all emotionally prepared to be the parent of two toddlers during a Wisconsin winter.

Mama Madison: Melissa Wardy pushes positive messages

I've always been a supporter of companies that empower women and girls, and when the creator of such a company is a fellow Wisconsinite, I get even more excited. When Melissa Wardy of Janesville got fed up with stereotypes found in clothing for girls, she started her own company.

Mama Madison: Three cheers for reading at the Wisconsin Book Festival

Do you have a little reader or an aspiring teenaged writer in your house? If so, you may want to venture to the Wisconsin Book Festival this weekend, to whet their appetite for wonderful words as well as your own.

Mama Madison: What's in a name?

When I was pregnant with my daughter, my husband and I had two names picked out. Upon her arrival we had not yet come to a conclusion on what that name would be. Everyone told us that when we saw her we would just know. We didn't.

Mama Madison: Eugster's is more than just a visit to the farm

At age 10 months, my kids have seen the zoo a lot already. I was a zoology major in college, and I have something of a zoo addiction still, so the twins (and their dad) are more or less condemned to a future rife with zoo visits.

Help for home-schoolers at the Madison Mentor Center

Home-schooling can be a lonely proposition. Even as a college professor, Juliana Hunt remembers struggling to find support to home-school her now-grown daughter. "I was always hoping to find like-minded people who were in the same position as me," she says. "I know that children learn best through a give-and-take, question-and-answer process of teaching and learning, but where do you find mentors who can make that happen?"

Mama Madison: Yummy Sprout is a wonderful resource

After sleep patterns, I think the next biggest parenting concern I have and hear about revolves around the topic of food. How can I make sure my kids are eating enough vegetables? Did I pack them a lunch that is healthy enough? What can I feed them after school that doesn't come from a box? How many gripes am I going to get about the dinner I'm about to prepare?

Mama Madison: Tips and tricks for baby air travel

As far as places to embark on Baby's First Air Travel go, Dane County Regional Airport is a pretty sound choice, especially at 6 p.m. on a Saturday night. My biggest fear was that my nine-month-old son would start screaming in the airport; my second biggest fear was that my son would start screaming and some of my former Epic colleagues would be around to hear it.

Mama Madison: Apple-picking time

The recent shift in the weather is just another sign that autumn is fast approaching. That means one of my favorite activities is just around the corner -- apple picking. My husband and I have been picking apples every fall since before our kids were born.

Mama Madison: Baby feeding recommendations

I have a lot of questions about what to put on my eight-month-olds' plates -- and, if I'm honest, a deep and abiding fear of putting the wrong thing there. Did I start them on solid foods at the right time? What's the deal with baby-led weaning -- how much self-feeding should they be doing? At what age should I give them potential allergens like shellfish or nut products?

Heartland Farm Sanctuary helps animals that help kids

Lily the potbellied pig arrived at Heartland Farm Sanctuary blind, lethargic and too overweight to walk. The children of Heartland's summer day camp program took it upon themselves to put the curl back in her tail.

Mama Madison: Back-to-school confidences

Is it just me or does each summer seem to go by quicker than the last? The end of summer is upon us and for many families this means the start of a new school year.

Mama Madison: Does back-to-school really mean a whole new wardrobe?

This past week, on the way to the grocery store, my daughter asked what I believed she thought would be a innocuous question, "Mom, when are we going back-to-school shopping?"

Mama Madison: Next generation of bloggers

Volunteering with the Young Writers Summer Camp this past week really helped me to remember how utterly creative kids can be when encouraged to come up with their own ideas and use their own words.

Mama Madison: Returning to the workforce

This past week I gleefully accepted an offer for new job on the UW-Madison campus. My kids are getting are older and I guess I've felt for a while now that it was time to figure out what would be next for me on the professional front.