How to Teach Kids About Money

The Difficulty of Money As a child psychologist, my clients will often ask me, “How much money is appropriate for my 10-year-old when I give them an allowance?” A typical rule of thumb is to provide a dollar for every year of the child’s age. However, this is a highly simplistic approach to an allowance and does not address the difficulties parents face when trying to educate their kids about money. So why is it that we find allowances in the financial education of our children to be so difficult to implement?

I think there are many reasons why allowances are difficult. Our lives are busy, and we often forget to get actual money from the bank, or we just plain forget. Also, if you ask a few people how they implement an allowance, you are likely to get many very different answers. These varying solutions to allowances include tying chores to money or even grades to money. Other solutions are very basic and loosely held together resulting in an inconsistent distribution of money on an inconsistent schedule. While having an actual plan can make allowances difficult, I think there is another important reason why parents have difficulty teaching their kids about money. In part, our approaches as parents can often be mixed up with crazy emotional messages we learned from our parents early in our own lives.

The lessons we absorbed about money are often passed down to our children without us ever being consciously aware.

The penny-pinching mother and the lavish spending father provide messages that unconsciously affect how we spend our own money, and how we teach those lessons to our kids. Money, like sex, politics, and religion, is hard to talk about. Let me share an example with you about how my understanding of how the concept of money was formed. As a child, my dad would often let me invite a friend to go to the movies. Each time I invited a friend, they would bring their own money. But my dad would pay for their movie even as the kids insisted that their parents gave them money. He would always waive them off and even bought them popcorn. “I BELIEVE IT IS CRITICAL WE TEACH KIDS THE VALUE OF MONEY. EACH GENERATION COMES WITH THEIR OWN BAGGAGE.” I thought it was great my dad would do such a thing because his act made me feel as if we had enough to pay for others. Over time, paying for someone’s way into an activity seemed to be the right thing to do. This message about money unconsciously taught by my dad made me feel proud. I’m not sure why he did this, but now, each time I take my own children’s friends to the movies, I feel like I should pay their way. As an adult, until more recently, the same message would creep into my mind toward the end of the meal. I was even hypervigilant to a fault and seek out the waiter to give him my credit card, so the couple we were out to dinner with would not have to pay. Even now, I feel somewhat guilty when I split the check with someone. Seeing my dad pay for others was generous for him to do, and I am grateful that he did so. But as an adult, the message, “you should pay other people’s way,” can be super expensive. My dad never told me this, but I emphasize that this subtle lesson about money was taught to me at an early age and unintentionally taught. I am sure that my dad had no awareness that his experience of growing up in the Great Depression and having nothing drove him to make choices with money which affected me. Lessons about car buying, clothing purchases, toys, school lunches, savings, and giving to charity or churches can be an emotional minefield for parents. Throw in the reality that most families struggle to manage their finances, and you get the most typical response to allowances. Let’s just ignore it or use the same system we had when we were kids. This line of thought results in a pattern of thinking which continues the transmission of conflicting messages about money to the next generation. If a financial education is to be had with your child, then do so deliberately and intentionally. Teach About Money and Don’t Helicopter I believe it is critical we teach kids the value of money. Each generation comes with their own baggage. Depression era kids learned to save and value work. To the depression generation, having a home loan and multiple credit cards with high balances was a completely alien idea. The baby boomers passed that message along to Generation X as well, but over the years, the lessons of being frugal and careful with one’s finances have eroded. There is a myriad of reasons for this including cultural changes, political shifts, and technological changes. “HELICOPTER PARENTING IS A STYLE OF PARENTING IN WHICH YOU HOVER OR SWOOP IN TO PREVENT YOUR CHILD FROM BEING EXPOSED TO STRESS.” Without digging too much into the details, a new generation of kids has been moving into the college and workforce environments and ultimately failing. More and more parents are being seen on college campuses helping their kids with schedules and life organization. One university professor recently shared with me she has never before seen so many parents on campus trying to get involved with their college age student’s life. She finds them struggling to function independently. She also noted that these college students feel more like early high school kids. She is dismayed by their lack of independence and need for handholding. Parents are doing too much for children to the point that they do not know how to be independent. School lunches are packed for them, or a debit card is filled for them to buy whatever they want. Parents use debit cards, rarely use money, and plastic credit cards are the norm. Money is an intangible object to kids and is almost a magical element appearing just in time to meet their needs. In 2015, 50% of 25-year-old males were living with their parents. Never before in modern history has that number been so high. And much of the reason falls on the shoulders of parents who are helping too much. A research study from Brigham Young University studied 438 undergraduate students at four American universities. The study focused on parenting style and the effects “helicopter parenting” had on the students. Helicopter parenting is a style of parenting in which you hover or swoop in to prevent your child from being exposed to stress. According to the Brigham Young study, the effect of helicopter parenting was a demoralization of the young adult and significant lack of self-worth. According to several other studies, when a parent completes tasks for a child which are developmentally appropriate for that child to complete on their own results in a decrease in self-worth. Not only does self-worth and a sense of independence decrease, but these children are also far more likely to abuse alcohol and drugs in college and beyond. Yes, making the bed is important. Having a child learn to do laundry, fold and iron clothes, as well as do yard work and meaningful chores around the house are activities falling by the wayside. All the old school work values taught valuable lessons. Kids are no longer learning as kids have been the past. And, It’s Not Too Late! New learning can begin at any time, so why not right now? Even if your child is 15 years old, you still have time to teach. Now you know why we must teach finances to our kids (to grow an independent young adult). But the how is the trick. Please let me emphasize; there is no particular way to accomplish this task. Click here for more content by Dr. Frank Gaskill