Kids cost money, there’s no two ways about it. And, the older they get, the more expensive they seem to be. They exchange their Big Wheels for mountain bikes, and after that for cars. They trade in their Legos for PlayStations and those frightfully expensive video games. Backyard baseball becomes organized ball requiring registration fees, uniforms, and fundraisers. J.C. Penney jeans are replaced with Gap, Old Navy, and Aeropostale.
And yet, you can avoid at least some of this expensive parent trap if you plan ahead and decide just how you’ll relate to your kids about money. Most kids, until they start to earn their own money, and sometimes long after that, don’t have a good sense of the difference between want and need. If they want something, they’re convinced that they need it. And they probably, in their minds, need it today.
Kids are bombarded from the time they’re babies with tremendous pressure to acquire, and they learn to want a lot of stuff very early on. They learn from television commercials that their favorite cartoon characters can come home with them on T-shirts, in books, and on videos. All Mom and Dad have to do is buy them. They know what kind of cereal is cool to eat, which professional sports team jerseys they should buy, and which action figure soon will be available in the kids’ meal at their favorite fast-food restaurant.
As parents, it’s your job to help kids understand the value of money and the difference between wanting an item and needing it. In this chapter, we’ll look at how you can do that, and also how you can set an example of financial responsibility for your kids.
Today’s teenagers are the richest generation of teens in American history and they’re spending money at record levels. A recent report on the PBS television program That Money Show, revealed that teens will spend close to $155 billion in 2001. Much of that amount is money that parents give their children.
That affluence makes them prime targets for marketers and advertisers, who are happy to make their products as desirable to teenagers as possible. Phones and CD players come in 10 colors, two include sparkles. It’s the rare teen that doesn’t know which brands are cool to wear and which are not. There’s a lot of tempting stuff out there, and teens are anxious to get their hands on it.
Teens and young adults aren’t afraid to say what they want, either. What parent hasn’t heard the refrain, “but Mom (or Dad), I really need it!” dozens of times?
To get an idea of the advertising pressure teens are under, pick up a copy of a teenager’s magazine sometime. The ads run the gamut for everything from acne medicine to cell phones, and they give teens the clear message to buy, buy, buy.
There’s been a huge influx of toys and gadgets into our society in the past 20 years. Twenty years ago, personal computers at home were pretty rare. Now many households have more than one computer, each equipped with Internet access and a drawer full of games. Kids “need” their own computers to help them with school projects and to chat with their friends.
They “need” cell phones so they can keep in touch with each other (and sometimes with you), they “need” a vehicle (preferably new instead of used) as soon as they’re able to drive, and they “need” roomfuls of other items that are made to seem so appealing to teens. Kids, teens, and young adults have more money to spend than ever before, there’s more available for them to buy, and they’re constantly bombarded with messages that buying is good. Is it any wonder that young people “need” so much?
While kids and teens are under tremendous pressure to acquire all those tempting toys and gadgets available, parents are under equally tremendous pressure to buy for them. Studies show that kids are typically exposed to 360,000 ads by the time they graduate from high school.
Many parents find it difficult to say “no” to their children. It’s easier to give in and get them what they ask for than have to explain why the child won’t get what she wants. This seems to be especially true of parents who don’t deny themselves anything. Some parents buy into the notion that their 15-year-old needs his own cell phone because they don’t want their neighbor’s kid to have something their child does not. The parents’ “gotta keep up with the Joneses” attitude spills right over to his kids and the Jones’ kids.
As parents, we know that buying kids everything they want is not a good idea. And it’s our job to help our kids understand why that’s so.
We live in the most affluent society in the world. We’re the world’s richest people. Our kids spend more pocket money in a year than half a billion of the world’s poorest people earn in income.
The problem is, kids who are raised in affluence often don’t recognize what they have. They take for granted three meals a day and snacks in between, a good-size house, two cars in the driveway, two or three TVs and VCRs in the house, their own CD players, telephones in their bedrooms, and money in their pockets.
It’s difficult to fully appreciate what you have when you only know to compare your wealth with the wealth of those in your immediate circle. And so, when a 13-year-old comes home from her friend’s very large house, in which Rachael’s bedroom is complete with a complex stereo system, television and VCR, phone with a private number, a walk-in closet filled with clothing, and a computer equipped with Internet access, the 13-year- old is less than satisfied for a time with her smaller bedroom that contains far fewer accessories.
A friend’s 12-year-old daughter was disappointed the first time she slept over at her girlfriend’s house and discovered that she and Amanda would be sleeping in separate rooms. Karen was expected to sleep in the guest room of Amanda’s suite.
As a society, we’ve grown used to having more. Residential space per American increased from 312 square feet in 1950 to 742 square feet in 1993, according to a report by the Worldwatch Institute.
Affluence is fine, but children must be taught that it’s a great privilege and a large measure of good fortune that they live in such an affluent society.
Two thirds of all people in the world have a standard of living that’s just 20 percent of the U.S. average. We should tell our kids that they, as an average American, are five times better off financially than two out of every three people in the world.
It’s hard for kids to fully appreciate what they have. Sure, they catch a glimpse of a TV show about an impoverished country when they’re flipping through the channels. Or they might read an account of a community that was ravaged by a flood, earthquake, mudslide, or tornado.
We, or teachers at their schools or places of worship, can tell them about sweatshops and child labor and starving children. And while our children may feel sympathy for those situations, they can’t ever appreciate the anguish of a mother who’s watching her child starve to death and is powerless to do anything about it. They can’t imagine what it would be like to lose everything you own, including members of your family, in a devastating earthquake or flood.
We should do what we can, though, to help our children—regardless of their age—understand how fortunate they are on a global level. We also should show them examples in their own community or surrounding area of people who aren’t as well off as they are.
We know a minister who takes groups of pre-teens and teenagers to a homeless shelter in the middle of Philadelphia. He and the kids serve meals to homeless men and then spend the night in an area of the shelter in which the men sleep. Every kid who goes comes back with a story, and a better idea of how people who are less fortunate than they are live.
A neighbor volunteers in a city soup kitchen in our area and takes her three children along to help serve. Our children save the clothing they’ve outgrown and deliver it to a Salvation Army shelter for women and children. The shelter is much, much different from Rachael’s luxurious room or Amanda’s bedroom suite, and my daughter comes home and is happy for a while with her own room and possessions.
Money and social responsibility are directly related to some people, while others see no correlation. People of great wealth—Bill Gates types—are pressured to be socially responsible and share some of what they have. The Bill and Melinda Gates Foundation is endowed with 17 billion dollars to support philanthropic efforts in the areas of global health and learning.
We don’t think we need to have our children go to great extremes to be socially responsible. We do think, though, that they should be aware of the concept of social responsibility and encouraged to develop it in their own time.
Adding It Up
There are many definitions of social responsibility, but we think that it’s understanding your place in the world, doing what you can to help others, and respecting and protecting your environment.
You can do that by setting an example of being socially responsible yourself. Tell your children why you take used clothing to the Goodwill Center, where low-income families can buy it inexpensively, instead of tossing it in the trash can. Explain to them why you give up a Sunday afternoon to participate in a walk to raise money for hungry people around the world. Keep a jar on the kitchen counter and have everybody throw in loose change. When the jar is filled, contribute the money to your local food pantry.
You don’t have to go to great lengths to be socially responsible. But, teaching your kids at an early age to appreciate what they have and to share when they can will instill in them the concept of social responsibility while giving them a sense of their good fortune for their place in the world.
Don’t Go There
Watch out that you don’t overwhelm younger children with too much financial information at one time. Start slowly when teaching your kids or grandkids about finances and get into more complex matters as they get older. Too much too soon can discourage children from wanting to learn about finances at all.
Most financial experts agree that parents should start teaching kids about money at an early age. Most also agree that parents aren’t doing enough to help their children understand issues relating to money.
The Joint Council on Economic Education surveyed a group of high-school students and found that the great majority of them had very little understanding about money-related issues, including profit and loss as they apply to business, investment opportunities, and credit.
Some experts feel that parents avoid teaching children about money because they’re uncomfortable with the very topic. While money should be a tool we use in daily living, it often becomes a thorny and emotional issue. Anne Ziff, a family therapist in Westport, Connecticut, gives her view on why many parents do not successfully teach their children about money.
“The money scene in many households is horrendous,” Ziff says. “What should be cool, calm communication becomes complex emotional anxiety and also a source of manipulation. Parents are often at opposite poles, and children get mixed messages instead of good financial experience.”
The current prevailing philosophy concerning allowance seems to be that kids should get an allowance that is not tied to doing chores. Chores should be presented as an obligation of all family members in order to keep the household functioning smoothly.
It’s never too early for Money 101, and the lessons should begin at home. Most schools do an inadequate job with financial education if indeed they include it at all. Kids should start learning about money as soon as they’re old enough to understand the concept that money gets us what we need and want. Most kids, experts feel, are ready to begin learning at about age three.
Parents should use clear examples to teach their children about money concepts. Some of those concepts include the following:
Parents can start teaching kids about checking accounts and checkbooks, for example, by explaining how they write checks each month to pay the bills. When children are older, they could help to balance the checkbook. If your kids already are older and you’re not satisfied with their level of financial know-how, there are books and Web sites that can help. Some of them are listed in Appendix B, “Resources.”
Although there’s constant and ongoing dispute concerning the role of allowance in teaching kids about money, most financial experts agree that giving an allowance is better than not giving one. Whether or not you tie it to chores is up to you, but you should keep the following allowance tips in mind:
Although it’s good to let your child make her own decisions about how she’ll spend her allowance, make sure to give her some up-front guidance about spending and how she can get the most from her money. Point out, for instance, that a less expensive shampoo and conditioner will work just as well on her hair as the more expensive ones.
If your kids are older and you want them to know more about money matters such as investing, take them along with you when you visit your financial advisor or accountant. Ask them to join in your dinner discussion about the latest news on Wall Street, or the 401(k) that’s just been instituted at your place of employment. Or encourage them to start or join an investment club.
Adding It Up
An investment club is a group of people with similar interests and outlooks, who research the investment pros and cons of various stocks, then use their pooled resources to buy those stocks that members feel will give them the best returns. Check out The Complete Idiot’s Guide to Starting an Investment Club for lots of good information.
More than half a million Americans have already joined these clubs, in which members contribute a certain amount of money each month. The money is pooled, and then invested in stocks approved by the members. Investment clubs have formed in some schools, and others are set up and operated over the Internet.
If you’re financially savvy about money, chances are your children will be, too. Teaching them early on to be financially responsible will save you—and them—a lot of headaches and trouble down the road.
The older your kids get, the more money they’ll want and need. If you’ve reached your allowance limit, and your kids are constantly griping that they don’t have enough money, show them a copy of the classified section’s employment ads.
More and more teenagers are working, and holding a part-time job while juggling other responsibilities is a good way to prepare them for the real world.
While working a part-time job can be a good experience for a teen, there are some points that both parents and the potential employee should keep in mind.
Don’t Go There
The National Consumers League says the five worst jobs for teens are delivery and other jobs that include driving; working alone in cash-based businesses such as convenience stores; construction, including work in high places and contact with electrical power; traveling youth crews that sell candy, magazine subscriptions, etc. in strange neighborhoods; and jobs in which employers pay “under the table.”
Summer jobs serve a good purpose in addition to just giving your kid some spending money. Let’s face it, working in a fast food place or mowing lawns when it’s 90 degrees probably isn’t something your child will want to do forever. Summer jobs such as these can be good reminders about how important it is to get a good education, and eventually, a more rewarding type of job.
If your 16-year-old comes to you the day after she gets her driver’s license and tells you she wants a new car, what do you do? Believe it or not, a substantial number of parents will drive her to the car lot and tell her to pick out her favorite color.
We are of the firm opinion that giving your child money every time she asks, or buying her expensive gifts like a car or computer, is doing her no favors. Unless you’re going to support her throughout your life, and have the means to leave her enough money to maintain her lifestyle when you’re gone, you’re setting her up for a very big fall.
Kids want a lot. The best way to teach them how the world works is to have them pay, or help pay, for the things they want. Giving kids everything they desire fosters in them a feeling of entitlement, without a sense of responsibility.
Teach them instead that even a little bit of money saved each week will eventually add up to enough to buy a PlayStation game or new in-line skates. And remember that your job as a parent is to provide a good home, a stable environment, and all the love you can. Nowhere in the book of parenting does it say you must indulge your child with every object that catches his fancy.
Having just said all that, we think it’s perfectly all right to help your kids out with big expenses. If your 13-year-old has cut lawns all summer, saved every penny he made, and still comes up $60 short for the bike he wants to buy, by all means give him the $60 and tell him you’re proud of him for earning the rest of it.
If your 17-year-old has saved her baby-sitting money from the time she was 12 because she’s been planning to buy a car, it’s fine to throw in the last couple of hundred dollars or to offer to pay her first year of auto insurance.
And if your responsible, hard-working 24-year-old has found a little house that he and his wife just love, but needs a few thousand dollars for the down payment, go ahead and help him out. You can give him money as a gift, or work out a schedule to have him pay you back.
There are times when it’s completely appropriate to give your child money to help buy something she wants. If you’ve taught her well, she’ll only ask occasionally, and only when it’s important.
Our job as parents is to help our kids grow up to be responsible adults. Teaching them the value of money when they’re young, and the concepts of money management and sharing some of what they have, will help to assure that goal.