New York Times personal finance columnist Ron Lieber was surprised when he realized that the most difficult money questions he was being asked were coming from his toddler. That experience got him thinking about how we talk to our kids about money and how we can raise children who are grateful, thrifty, generous and prudent—in other words, not spoiled. Lieber explores those questions and offers practical guidance on everything from how to handle the tooth fairy to how much to spend on college in his book “The Opposite of Spoiled: Raising Kids Who are Grounded, Generous, and Smart About Money.”
1. Let kids buy their own luxury items.
Yes, your children need clothing, sports gear and many other personal items. But, every purchase does not need to be top of the line. Lieber recommends that parents establish a spending continuum. For example, he is happy to provide rain boots for his daughter, but isn’t willing to pick up the $150 tab for Hunter boots.
“I like to draw the line at Land’s End,” Lieber says. “If our daughter wants something to the right of Land’s End [on the spending continuum], she will pay the difference. You can use continuum for any spending on kids—sports equipment, summer camp—and explain to kids what you’ll pay for any given category. You may be a Wal-Mart underwear family and a Patagonia outerwear family.”
2. Include kids in your family’s philanthropic decisions.
Don’t just tell your kids that giving is important; get them involved in the process. Even at a young age, kids can understand what it means to help others. And, you may find they’ve got some great ideas to contribute to your family’s philanthropic plans. Try Lieber’s method for making philanthropic decisions as a family: Put 100 black beans on the table and divide them up based on the amounts you currently donate to various causes, and then discuss changes and additions. When Lieber introduced this exercise, his daughter said she’d like to help other kids attend her summer camp, so the family shifted a portion of their giving to the camp’s scholarship fund.
3. Don’t tie allowance to chores.
Lieber says parents should give children allowances (and require them to divvy it up among spending, saving and giving), and he believes kids should do chores, but he says the two shouldn’t be tied together. If chores aren’t getting done, you can take away privileges like screen time or sports practice.
As for teaching the value that money comes from work, Lieber says: “I think it’s great for kids to work, but not for people who are related to them. Work has gone out of favor, especially for upper-middle class families. Mostly, the reason kids don’t work as much is because of the college admissions industrial complex, and the view that college admissions officers don’t value work as much as they do starring in school plays.”
The truth, Lieber says, is that college admissions offices get a lot of essays from star athletes and student council presidents, but very few from teens who can write movingly about what they learned from working an after-school job. “College admissions officers crave those, and they wish they could see more of them,” Lieber says.
4. Pass your old phones and cars onto your kids.
It’s true that in our constantly connected society, kids (of a certain age) do need phones. And often, it’s easier to provide them with a car than to continue to shuttle them around. But, your teenager doesn’t need an iPhone 6 and a Lexus SUV. Instead, Lieber says to give them your hand-me-downs. If they want an upgraded phone or a fancier car, let them save up their allowance money to pay for it.
5. Don’t let teenagers make six-figure financial decisions.
“Something weird has happened in the U.S.: Kids are making six-figure decisions…about what you will pay and what they will borrow as teenagers [for college tuition],” Lieber says. “The fact that kids are leading this charge is absolute lunacy. It’s a national embarrassment.”
When parents pay for pricy private schools, they’re usually making that decision based on emotions rather than logic. Lieber says there’s no reliable data that demonstrates a correlation between college tuition and future earnings.
“The best data is self-reported income data, but it is useless,” Lieber says. “And that data tells us nothing about the quality of people they are meeting or the relationships they are forming. These are quarter-of-a-million-dollar investments and we know nothing about what we are getting—and that is crazy.”
Lieber concedes that the temptation is strong to shell out for a “brand name” college education. But, he encourages parents to think long and hard before spending what could be $250,000 per kid or letting your teens get into major debt in the form of student loans.
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