The New York Times had an interesting article in its Sunday paper about talking to your kids about money entitled “Why You Should Tell Your Kids How Much Money You Make“, which argued the benefits of teaching kids about money from a young age.
One dad in the story brings home thousands of dollars in $1 bills, which represents his monthly salary, and then separates the pile of cash out in front of his kids to demonstrate where all the household’s income goes each month.
The recommendations in the article aren’t quite that extreme – talk to your kids about the grocery bill, talk to them about the cost of their activities, etc – but it got me wondering about how much folks out there are talking with their kids about money regularly, what they’re discussing, and and how important they believe it is.
Photo courtesy of 401k 2013 via Flickr
Our 15 year old has a vague sense of our yearly household income, as well as what our mortgage payment is, what it costs to make payments on and maintain a car, and what grocery stores and restaurants cost, but we’ve never gone out of our way to make an educational program out of it. Personally, I think “You want it? You pay for it.” is the quickest, most effective way for kids to start getting a sense of what things cost and what it takes to be able to afford them.
Mine are not yet teens, so I try to communicate very general concepts: the importance of saving, avoiding debt, and the concept of investing. We don’t answer questions like “how much was this house” or “how much was your car” because they don’t yet have sufficient perspective to really understand that. Plus, kids talk about that stuff with their friends.
I’d like to talk to them about the costs of their activities, but they’re so damn expensive that I’m the one who would rather avoid the subject!
Right on Scott! That’s how we were raised. On a related issue: Teaching the idea of delayed gratification is probably one of the most difficult things to do for ourselves and our kids today. Everything appears to be instantly available. We struggle with this idea with our 5 and 8 year old children. The thing that has been most successful to date, has been the opening of an old fashioned savings account with regular trips to the bank to make deposits after birthdays holidays,etc. I hope it lasts! Just an example of our instant-gratification-society for your amusement: I ordered a toy from Amazon for Christmas this year. I placed the order with a, “click” at 8:47 a.m. At 12:04 p.m. there was a knock on our door. The toy had been delivered in approximately 3 hours. While kinda neat, I was strangely disturbed by this.
Saw this article last week and found it very interesting.
We’ve always been pretty open about outflow. They have a vague idea of our income, but at their ages, it doesn’t really compute. As they have gotten older, their concept of value vs. price has sharpened, so they are becoming more aware of what things cost.
We’ve always stuck by the “save some, spend some, donate some” rule, and they seem to get it. We are also conscious of making sure they understand the concept of saving for a rainy day/big purchase, and prioritizing their purchases (“if you buy that toy, you can’t afford that candy”).
As the real Warren Buffett put it: “Price is what you pay. Value is what you get.”
We’ve always stuck by the “save some, spend some, donate some” rule, and they seem to get it.
This is by no means an attack, just an observation. I totally agree that one should save some, spend some, donate some but get super annoyed by gimmicky little toy banks with three slots and the idea that those three categories should be equal. I want my children to save as much they can, donate as much as they can, and spend as little as possible.
With you 100%. No gimmicks. Just straighforward conversation, continual reinforcement and setting the right example. Will it work? Don’t know, but we’ll never stop trying.
I also read another fascinating article in the AJC paper edition about siblings who grew up in the same household under the same set of circumstances, and whose financial situations are worlds apart. It was so interesting, because it perfectly described my brother and me. One of the themes that stood out in the article was about decision-making, and how decisions (e.g. college, spouse, children) can have lifetime-lasting effects on wealth.
And in response to DM’s question about how important it is…it’s critical. Never shy away from money lessons.
And +1 on the no debt / delayed gratification message. I neglected to mention that one. We’ve emphasized this by saying “You don’t like being told what to do? You want to be free to do what you want? Well, keep that in mind when it comes to how you spend money because, every time you incur a debt, you give away some of your freedom. The more indebted you are, the smaller your menu of choices becomes to do what you want with your life.”
But as I said, I’ve got a 15 year old. So who knows if any of this stuff is sinking in.
“The more indebted you are, the smaller your menu of choices becomes to do what you want with your life.”
Such an important concept, and yet such a difficult one to get across when so much of the culture is implicitly claiming the opposite, that credit (the word used instead of debt) equals freedom. So we have seven year car loans, mortgages that consume half of people’s income, etc. Isn’t there even a credit card called “Freedom”?
Maybe we should be also asking what adults tell themselves about money. According to a Bankrate survey, over a third of mortgage holders don’t know what their interest rate is.
cnbc.com/id/102389180
And then there is this article, which makes a good point about the “inflation of the American Dream”, i.e. a belief that each generation should have more stuff and bigger houses than the previous generation.
finance.yahoo.com/news/this-is-why-the-middle-class-feels-trapped-152616810.html
I once knew a health teacher who would tell his students that, from a health perspective, we needed to talk less about food and more about bowel movements. Well, maybe we should talk less about stuff and more about the money that buys it. We don’t have kids, but I like to think that if we did, we would talk about how money works as much as about what money buys. It can be boring, messy, and awkward, but it can be empowering too.
“we needed to talk less about food and more about bowel movements”
Please, let’s not.
Bristol scale, FTW!
He actually used a different word, but I cleaned it up.
So many synonyms from which to choose . . .
http://www.thesaurus.com/browse/bowel%20movement?s=t
Like the aforementioned digestive processes – the best things in life are free!
Two basic rules you can’t go wrong with are 1)pay yourself first and 2) never carry a credit card balance. Not sure at what age those would make sense. Another I’d add is one I remember an uncle of mine saying, “If you can’t afford to light your cigars with $100 bills, you can’t afford to gamble.” (my cousins and I were probably too young to grasp that one).
Does anyone do allowances anymore?
We do an allowance and for a few years we have had a family contract that details what our child has to do to earn her allowance. Allowance for our high school student is $250 and she must pay for cell phone, car insurance/gas, all meals and entertainment when not with us, and shopping other than clothes. Amount is designed to force her to make hard choices every month about what to spend money on as car insurance and phone are about $160. She lived off her allowance and saved nearly everything she earned last summer — she has a savings goal for heading to college.
The whole college application process pretty much forces families to talk openly about finances — whether there is a college savings account and how much is in it, whether/how much parents can afford to contribute annually to college. I agree with other posters that most 17 year olds lack perspective to really understand the big numbers.
What are typical household responsibilities- at various ages- for earning an allowance?
For our highschooler, she does dishes every day, her own laundry, takes out dog after school, keeps her room clean, and doesn’t get anything lower than a B in order to get her allowance. She is also responsible for telling us what personal items and food she needs before we go to grocery store (forced planning).
But it is all relative to income. Which kids (and college students, I’m a professor at GT) often have no clue about.
I was impressed when my younger kid (I don’t recall if it was 5th grade at FAVE or 6th grade at Renfroe) came home after some school exercise where they learned a lot about annual salaries of various occupations. “Dad — a chemical engineer makes a lot more than a social worker!” And that started an ongoing conversation about jobs, income, what things cost, and what you can do with it. I was impressed with what she learned and how she handled the conversation. She clearly understands that different occupations offer different financial rewards, but they may not match up with the job satisfaction.
We’ve started the whole money conversation with our 7-year old, but we still get some blank stares and “I don’t get it’s” when we talk about income and where our money comes from. We didn’t grow up with much, my parents didn’t save a lot, got into some trouble with debt and a failed business at some point, and the one thing I promised myself was to save early and save often. I learned the hard way about credit cards and getting into debt for the wrong reasons, but we seem to be on the right track now.
The one thing we still struggle with is how to instill in our son a sense of responsibility and not entitlement. It’s nice to not have to scrape something together to pay the mortgage or choose between paying GA Power or the credit card bill, but how do you pass that lesson on to your kids? Yes, you could have that new Lego set, or you could save that $50 and not take it out in student loans. And since when did Legos cost over $50 a set. Ugh.