Talking to Your Kids About Money
A year ago, my mother-in-law gave us Make Your Kid a Money Genius (Even if You’re Not). I finally got around to reading it. It’s an instruction manual on how to help your children develop financial mindfulness. Beth Kobliner offers tips on how to talk to your children about money from preschool age through young adulthood. My husband and I are always on the lookout for better ways to teach our children about money so they can avoid making some of the mistakes we made. Yes, we both have a laundry list of basic mistakes we made, some more egregious than others.
I loathe money talk. Always have. I dislike consumer culture, and our desire to spend, spend, spend. The ads targeting me on social media make my skin crawl. The clothing magazines I receive in the mail go straight in the recycling bin. I want to shout, “ENOUGH!” But the reality is my kids are (and will continue to be) consumers in a consumer-driven economy, and I want them to be smart, savvy consumers (and even smarter, savvier savers). As much as I loathe money talk, it’s necessary to continue fostering dialogue with my children in order to create financial mindfulness in them.
Make Your Kid a Money Genius contains ten chapters. Each chapter gives age specific suggestions from preschool to young adulthood. I focused more on the elementary, middle, and high school sections because those apply to my family situation right now, but I read the college and young adult sections as well and found lots of interesting advice I’ll refer back to in the future. For instance, Kobliner writes about new money rules for weddings and investment rules for young adults. She also provides a detailed budget for college (there is an entire chapter dedicated to college planning).
Below, you’ll find some of my personal takeaways from the book.
Money Genius Tip #1: Have a Plan.
“Inoculate yourself: before you enter a place with temptations, have a game plan” (p 19).
While we discuss saving and spending on an ongoing basis with our children, I wish we had been more mindful during their early years. Kobliner suggests being candid with children. For instance, if you stop at a sporting goods store for socks, tell your child you are shopping for socks (not toys, candy, shoes, clothes, etc.). Put it all out there for them before you even enter the store, and then set expectations for your child’s behavior. “We are here to buy socks because your feet grew. We are not here to buy candy and toys.”
When I shopped with multiple kids in tow and they started whining for things they wanted, I grew overwhelmed and stressed. I’ll fess up. To maintain my sanity and get through the store, I often caved and gave in to their requests. If I owned a time machine and could go back to those early years, I would whisper in my younger self’s ear. Be strong. Don’t cave. You got this.
Once, I abandoned a full shopping cart in the middle of an aisle at Costco. My kids were 8, 6, 5, and 3. The older two ran off and disappeared from sight, while my younger boys pretended they were dogs and crawled around on the floor. Can you say, “I’m in hell?” Just…no. I rounded up my wild posse and abandoned ship.
My kids knew better. But I had failed to reinforce my expectations before we entered the store. Outnumbered and overwhelmed, I buckled under pressure.
Money Genius Tip #2: Pick a Rule of Thumb, Stick with It, and Be Candid About Money Matters.
The responsibility is on parents to discuss how they’re going to deal with money when it comes to their children. As the kids get older, money matters become bigger. It’s good to be on the same page and make some of your financial decisions (phones, cars, clothes, etc.) before the kids broach these subjects with you. Have a plan. You spend more money when you make impulsive decisions.
On page 75, Kobliner says, “Take your kids shopping for big ticket items and explain how you’re paying for it.” What a helpful little nugget of advice! I plan to do this more often. It helps teach children about what it takes to commit to a financial goal. There are many opportunities for discussion here too: debt, credit card debt (including the lessons of not charging what you can’t pay off and living within your means), and how to plan for purchases. For example, our front door needed to be replaced because it was unsafe. We took our youngest son to the shop with us to look at and price out our new door, explaining to him that this was a need and not a want. While it wasn’t a glamorous outing for him, he learned a few things about money.
Kobliner suggests “parents explain why you buy the things you do” (p 103). By involving kids in the purchase process, you can use these moments to explain to kids how your purchases reflect your family’s priorities and values. For example, we buy pork from a local farmer. When one of our children asked why we bought pork from a farm instead of the grocery store, we used it as an opportunity to explain why we support local farming (from the ethical treatment of animals to its impact on the environment and our wallets). Even younger children can be included in the family budgeting process in smaller ways.
Money Genius Tip #3: Cash, Cash, Cash.
Kobliner recommends the use of cash through grade 12. On page 72, she writes:
Debit cards and prepaid cards don’t necessarily allow kids to feel the weight of their spending choices. Studies show that parting with actual dollars when you make a purchase can be more painful than simply flashing a plastic card.
After doing some research, we decided to stick with cash when we started our kids’ allowance schedule. We had looked at some of the new plastic spending cards, which come with handy features like parental controls and set savings goals, but it was important to us that they have cash. We believe they are less likely to spend frivolously when they can see and hold their money. It’s tangible. For us, Kobliner’s suggestions reinforced this decision.
She suggests sticking with cash until grade 12. At that point, your teen can open up a checking account and apply for a debit to draw against it. I don’t have a senior yet, but I do have a sophomore. He receives cash allowance, and he has his own savings account. That is enough for now. When and if we need to discuss debit cards, this book provides a fine outline on how to go about doing that. Kids often think it’s the big purchases that can get you in debt and don’t consider how the little things add up. Pizzas. Ubers. Mocha lattes at Starbucks.
***Minor criticism of book: The section on debit cards and app-based services may be dated. I would have liked to read a section on responsible use of debit cards for teens, college students, and young adults. Some places don’t take cash anymore, and young people rely on services like Uber, Uber Eats, Apple Pay, etc. The economy changes fast, and our advice to our children needs to reflect those changes.
Money Genius Tip #4: Becoming a Responsible Consumer
I appreciated Kobliner’s section on researching before buying big online and off. For instance, she says, “Tell her to seek out known unbiased sources of information like Consumer Reports and reviews by journalists and other experts who aren’t being paid by companies” (p 106). I dig this. Personally, I’ve taken to writing more product reviews to help other consumers on sites like Amazon. We’ve taught our children to read up on products. In fact, they aren’t too young to contribute their own thoughtful, honest product reviews.
Our music-loving sophomore wanted a turntable. He saved for it and spent days reading product reviews and researching different turntables. After a week of conducting research, he settled on a model that was highly rated and affordable. He had done his due diligence as a consumer. He made a smart purchase.
Kobliner suggests following “Shirley’s Do I Love It Rule.” This rule encourages children and teens to wait 24 hours before making a purchase. If after 24 hours they still absolutely love it, then purchase it.
I’ve been applying this to my own spending this year. Let’s say I want a shirt. I give it three days (longer than Shirley’s 24 hour rule) and go back to it. I ask myself some questions. Do I love it? Do I have to have it? Will I wear it multiple times? Or will it sit in my closet with the tags on and become another impulse buy? I’ve found that nine times out of ten I don’t need it, don’t love it, and don’t buy it. I saved myself from another impulse buy.
Money Genius Tip #5: Chores & Obligations
When our governor gave the shelter-in-place order a few months ago, we started a new system of doing chores in our house. All four of my children receive an allowance, but they don’t get it for doing chores. When they don’t finish daily and weekly chores, we don’t withhold money. They lose privileges instead. This works for us. Kobliner reinforces this notion, asserting that doing chores is simply part of being a family. I say do whatever works for you. If you pay per chore, that’s how your child earns money. Every family has to find a system that works for them.
Kobliner writes a lengthy section on keeping obligations. This wasn’t new to me. My parents preached the importance of honoring commitments any time I wanted to quit something. They explained that when you make a commitment, you finish and see it through. When I begged to quit that recreation sports team I hated, my parents wouldn’t let me. I signed up, and I was going to be part of the team. The others counted on my presence. Once the season was over, I could reassess and determine if the activity was something I wanted to abandon or continue. Reading Kobliner’s advice made me think of those lessons my parents taught me about hard work, commitment, and money. At the time, I was angry and resentful because I felt like I had no agency when it came to making decisions. But it was a solid lesson they taught me! You finish what you start. You fulfill your obligations.
There is a handy section on high school jobs/summer jobs and how to discuss juggling jobs and school. She provides a money genius guide to understanding paychecks to show to your teens. This is something I’ll probably refer back to once my oldest gets a summer job.
I highly recommend this book. It’s never too late to start talking about these things with your children. I hope my children spend wisely in the future, start thinking about savings, and know what they’re getting into when they consume goods and sign contracts. I want them to learn how to budget and know what things really cost. As much as I want to protect them from making financial mistakes, I know they’ll stumble a bit. We all do. But they’ll stumble less if we arm them with financial mindfulness.