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: 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. It was my husband who had originally signed up to chaperone the event, thinking that spending a few days with his 11-year-old daughter and her compatriots would serve as an excellent anthropological experience. But when an unexpected work obligation made it impossible for him to attend, it was me left holding the bag

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.

Helping your kids stick with music lessons

Some clever-clogs is playing Rachmaninoff on the piano at a party, and there it is again, that oft-heard adult lament of lost opportunity from a dejected onlooker: "I wish I could play. I wish my parents hadn't let me quit music lessons. I was just a kid -- how was I to know?" It's a reasonable complaint.

A summer camp quiz for parents

If you're checking out summer camps for your child, there are many issues -- some obvious, some less so -- to keep in mind. Here's a list to keep handy when you contact camps and camp directors, looking for the perfect spot for your kids to have fun, relax, and learn this summer.

Mama Madison: Lessons in dining out

I know, in the grand scheme of things, that my kid issues, when it comes to dining out, absolutely pale in comparison to those of parents whose kids have special needs. Many kids, especially those who are on the autism spectrum, are disturbed by changes in their routine, or anxious around noisy places. They may not be able tolerate waiting for a table or standing in line. So unfortunately, many of these families just avoid eating out at restaurants altogether.

Mama Madison: Natural vs. un-natural parenting

It's weird to admit this, especially in a city surrounded by as much outdoor beauty as Madison. But frankly, I'm just not that into nature. I'm more of an indoor kind of gal. Give me an afternoon at the Chazen or the Wisconsin Historical Museum over the Arboretum or Olbrich Gardens any day.

Mama Madison: Theatrical talent close to home

Lavish costumes, gorgeous sets, a full orchestra and a concession stand where nothing cost more than two bucks and you have a pitch perfect experience at the theater. Oh, and did I mention the ticket prices were just $10 dollars apiece? One could afford to take the whole family for a live theater experience for less than an evening at the Lego movie would cost including popcorn.

Mama Madison: Race to shame

I think the first time in recent years that I've felt a real sense of shame, as both a parent and community member, was last Tuesday evening as I sat in a crowded elementary school LMC to listen to Ken Taylor, executive director of the Wisconsin Council on Children and Families, and his colleague, Torry Wynn, present key findings from the 2013 Race to Equity report to our PTO group.

Hancock Center addresses bullying through body movement

It's Wednesday morning at Allis Elementary School on Madison's east side, and 16 third-graders -- 10 boys and six girls -- enter into an open-space classroom in typical wiggly, giggly style. Some are making goofy faces at one another, some are bouncing around hand-in-hand with friends, and others are just trying to stay out of the whirling-dervish path of activity.

Mama Madison: Get in the picture

Of the 789 poorly-composed, way-too-dark and out-of-focus photos currently living on my iPhone, I can count on two hands the number that show my kids and me together. And my husband is in probably no more than three or four of those.

Mama Madison: Welcome to the Parenting Olympics

Something kind of magical has happened these past two weeks during the Sochi Olympics. There is no question, debate or disagreement on what will be watched on television once all homework is done. Everyone in the family makes time to sit down together to watch an hour of so of the primetime televised games.

Mama Madison: Facebook's instant nostalgia fix

Truth be told, though, this month I'm feeling a bit cinematically fried. In some ways, I already feel like I've spent the last week or so at a film festival. A festival specializing in minute-long glimpses of ordinary lives all ending with credits that feature the ubiquitous blue thumbs-up. Yes, it's been the February of the Facebook movie.

Mama Madison: The kindness question

Just last week, on precisely the same day the Momastery post was getting over a million well-deserved views, Madison mom Suzanne Buchko was telling a similar story. Not on a blog but instead in the confines of the modestly circulated Franklin-Randall Elementary School weekly newsletter.

Toddlers take to tablets

Late last month, the Madison Metropolitan School District adopted a five-year, $27.7 million technology plan calling for all district students, including those in the primary grades, to have significantly increased access to their very own tablet or notebook computer by 2019. Some parents, as well as education professionals, questioned whether elementary-aged kids, especially kindergarteners who aren't even able to read or write yet, will gain much benefit from introducing yet another screen into their lives.

Mama Madison: Science or study hall?

This past Monday, had winter's unrelenting weather allowed, Middleton Cross Plains School District teacher Andrew Harris would have once again been at the helm of a classroom. After nearly four years of fighting his dismissal from Glacier Creek Middle School for viewing and passing on sexually explicit material on district computers, MCPSD has been legally forced to reinstate Herris, this time as a seventh-grade science teacher at Kromrey Middle School.

Mama Madison: MTV provides a teachable moment

In a study published last week by the National Bureau of Economic Research, academics have found that the 16 and Pregnant series may have played a significant role in the recent decrease in U.S. teen pregnancies.

Mama Madison: Planning for the MLK holiday

In our house, sad but true, we've rarely spent the Martin Luther King holiday discussing race, social justice or the power of non-violent civil disobedience. Instead, the third Monday in January has historically been treated as just another day off school, just another long weekend. And it's been a missed opportunity.

Mama Madison: The long vacation

It's not something that happens very often, but last Friday, as news of the impending arctic cold snap reached our house, my kids were rooting for Governor Scott Walker. They were rooting for him to take Minnesota Governor Mark Dayton's lead and cancel school throughout the state. They couldn't care less if he had the authority to do such a thing -- if he called off school, he'd be their hero.

Mama Madison: Cheating 101 at Middleton High School

Late last semester, as students were packing up their backpacks one final time before winter break, Middleton High School principal Denise Herrmann and assistant principal Lisa Jondle were co-authoring a note home to parents informing them of a widespread cheating scandal involving nearly 250 calculus students at the school.


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!