by Kristen Page
There’s good news and there’s bad news about teaching your children about money. The good news is you’ve probably been teaching them for some time without meaning to. The bad news? You’ve probably been teaching them for some time without meaning to.
For example, after a tough day, do you reward yourself with an $8 latte, or a long bath? Or, conversely, are you so strict with your budget that there’s no room at all for a spontaneous splurge, even if you can afford it? Are fights about money common, or is money simply not discussed at all, up there with religion and politics as a taboo topic?
Talking with kids about money is similar to talking to them about anything else that’s difficult, and many of the rules are the same: Keep it age-appropriate, keep it understandable, and above all keep the conversation going. From preschool to pre-college, there are some strategies to put your mouth where your money is.
Pay to Play?
One of the biggest questions that comes up when parents start to talk about teaching their kids money skills is whether to pay for chores.
“Some families say, ‘here’s your allowance, but you have to do chores.’ Some families take the tack that you get an allowance because you’re part of the family,” said Ann C. Alsina, CFP, CPWA, founder of CovingtonAlsina, an Annapolis-based financial planning firm. “Just like mom and dad have money to spend because they’re part of the family, kids have money to spend — but they also do chores because that’s how we make the household work.”
“We don’t want to pay our sons for things they should do as a contributing member of a household,” said Melissa Gilpin, a Southern Maryland mom to 7- and 5-year-old boys. “The first time we tried, it immediately went from ‘can you clear the table?’ to ‘how much do I get for that?’ And ‘you do it because you’re part of the family’ wasn’t something he could understand.”
It turns out there really isn’t a right way as long as there’s a consistent way. First, if you decide to give your child a regular allowance, determine what it’s for: To compensate them for their work, or to give them the resources to buy the little (or big) things parents won’t cover, whether that’s Pokémon cards for a young kid or a designer purse for a teenager?
If you are going to pay children for chores, there are dozens of different ways to keep track of what gets accomplished and for how much — chore charts, chore wheels, even apps like FamZoo and Homey that keep track of it all digitally. The most important thing isn’t how you keep track, but that you do so consistently. There may be (and probably will be) some pushback at the beginning, but keep at it with clear expectations and consistent reinforcement.
If you pay a standard allowance regardless of chores, then stick with that, too — don’t withhold the money one week because your tween’s room is a mess; the mess and the money are separate issues. When complaints about not getting paid for chores come up (and they will), point out the unpaid, often unseen work the adults in the household contribute. Dinners do not appear without someone cooking, and socks do not magically match themselves coming out of the dryer. Every member of the household, even down to toddlers, can contribute labor that benefits everyone.
Keep It Real
One thing that makes it difficult to talk to kids about money today is that even adults rarely use physical money — our bills get paid automatically, we tip the pizza delivery driver via an app, and we pay at the grocery store by waving our phone at the scanner.
“Our brains don’t process a credit card or a debit card as being actual money,” said Alsina. “We get a dopamine hit from the purchase, but our brains don’t register that we have traded a resource for that.” For your child — especially younger children — to understand what money means, give them actual money (Alsina says that new, crisp bills tend to drive the point home better than crumpled, old ones). When they want to spend their money, have them be the one to hand it over to the cashier.
In one of Alsina’s financial literacy workshops that’s targeted to 4th and 5th graders, she sets up five jars: save, spend, “bigger spending,” give, and invest.
“The idea is that saving is for a car or for college; investing is long-term for retirement; giving is for donating to charity; spending is ‘I’m going to the mall with my friends and I want a smoothie;’ and ‘bigger spending’ is ‘I want this video game, but I don’t have enough allowance right now,’” she said. Putting their money in a physical, visible space, the money is no longer a vague concept: It’s right there.
All In the Family
As kids get older, they can take more and more responsibility for their financial choices and become more involved — or at least aware — of the family’s finances.
“I was raised in a house where I never got an allowance; when I needed something my parents bought it for me,” said Gilpin. “But they also showed us how to save money, and they encouraged us to support them to reach financial goals. They’d say something like “if you can find a Homecoming dress under this amount, we can use the extra to buy this piece of furniture for the house.”
That’s a good strategy, says Alsina, especially when it comes to big-ticket family items like a vacation.
“I encourage people to put a picture of a thermometer on their fridge when they have a goal,” she said. “Say ‘every time we don’t stop at Chick-fil-A coming home from practice, we’re going to transfer that $16 into the account for the trip we want to take.’ Then you color in the thermometer until you reach your goal. That makes it more real for the kids—or even for the adults, to be honest.”
As your child gets older, they can also be more involved in purchases that affect them.
“Tell your kids you’re going to spend a certain amount on back-to-school clothes,” Alsina said. “Then say ‘we have $60 for shorts. If you want one pair of name-brand shorts for $60, that’s fine. If you want three pairs of $20 shorts, that’s fine.’ Give them a budget, and anything over that comes out of their own money.” As they get closer to college, be upfront with costs: What you can cover, and especially the role student loans play.
“I remember when I was in high school and college application time came around, when it came to the money part of the conversation, the financial aid folks were ready to go because I was old enough to sign up for a loan,” said Zack Ball, Gilpin’s husband. “I asked ‘how am I going to be able to repay this?’ and they just said ‘it’s what you do when you get a job.’” Make sure your student knows about all of their options so they can make a fully-informed choice.
In the end, there is no perfect plan, no app, no Pinterest-worthy chore board that will magically get your children to understand the value of money. Just like so much of parenting, conversation and consistency are the watchwords that will communicate your family’s financial values and strategies to your children.
Learn to Manage Money Through Gaming
Chances are, your kids already know at least some things about acquiring, saving, and spending money — at least in the electronic world. For example, in the popular Nintendo Switch game Animal Crossing: New Horizons, players must take out loans to build their houses, and can only upgrade to a bigger space by paying off the previous mortgage. Players also must save money to build bridges and staircases for easier access around their electronic island paradise; they accrue money usually by selling items they’ve harvested, fished for, or built at the island store.
The catch is the store often has eye-catching goodies like house décor, clothing, and even electronics. If your child plays Animal Crossing or a similar game, they already have a language for discussing balancing the “right now” desire for, say, a drum set for the living room against the longer-term need to pay off their house. Minecraft, Roblox, and Fortnite all offer opportunities to discuss management of resources, and those strategies can be applied to the real world of dollars and sense.