"Are We Rich?" Raising Financially Responsible Kids

During an episode of Comedians in Cars Getting Coffee, Jerry Seinfeld discusses with fellow comedian Kevin Hart the moment when one of his kids realized he was famous. The child was in second grade and came home from school and said “Dad, everyone knows who you are!” That statement apparently was followed with the question, “Are we rich?” In typical Seinfeldism, Jerry answered, “I am. You are not.”I got a chuckle hearing about that exchange and wished I had responded as cleverly when my own daughter asked me the same one a few years ago. Kids ask questions, lots of them. It’s their job to be curious. They see everything and are hyper-aware of the world around them. Although most of us living in American society are affluent far beyond the majority of the world’s population, income disparity is in every neighborhood and children are not blind to its existence. My daughter is no different. She went on to ask equally difficult and penetrating questions. How do people get rich or poor?, How much money does our family have?, Should we give some of it to people with less, etc?

As parents we are often very secretive about money, not only what we have but how we spend, save and give. This silence happens for a number of reasons. We're intimidated by the enormity of the topic. We consider it impolite or tactless. We don’t want our responses to sound like moral judgments, demonizing those with more, or making those with less sound inadequate. Money is private and we want to avoid the risk of our children telling others about our finances. However, there is one reason that can be dispensed of right away - fear that talking about money too much with children will fuel dysfunction, producing money-grubbing kids and rob them of ambition and meaning.

Shortly after stumbling through my daughter's interrogation, I read the book by Ron Lieber, The Opposite of Spoiled. It offers guidance for how to talk to kids openly about money and answer even their most uncomfortable questions. It’s about being honest and straightforward with the goal of raising children who have perspective and are financially savvy, hardworking, patient, entrepreneurial, and also generous and charitable. Instead of shying away from the topic, put money at the center of family conversations. Rather than assuming money subvert values, consider how it can contribute to them. All the questions my daughter asked had answers that ultimately can lead back to values and priorities we have as a family.

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Once you start to look, money-related teaching moments abound and should be mindfully embraced. Not only because kids are watching our every move and modeling their financial behavior off ours, but because they are growing up in more challenging conditions. The world our children will face as adults will undoubtedly require them to be financially literate. They are bombarded with marketing and everything is available to buy at the click of a button. Social media allows everyone to know what everyone else already has reinforcing this acquisitive culture. College tuition is increasing, job security is decreasing, the defined benefits pension is disappearing, and unpaid internships and contract positions with no benefits are multiplying.

Lieber's book is basically an attempt to compile the best practices for parents in the areas of allowances, chore-setting, cell phones, clothing, cars, part-time jobs, and paying for college, along with teaching the skills of saving, investing, and charitable giving. It is both a practical guidebook and a values-based philosophy. Money can be a tool to enrich parenting and by extension, childhood. Allowance is about patience. Giving is about generosity. Work is about perseverance. The difference between wants and needs has a lot to do with thrift and prudence.

Here are some of my take-aways:

Be open and talk about money

When the difficult questions come up respond by asking "Why do you ask?" to determine the context. Be transparent about where money comes from and where it goes.

Start an allowance

As soon as they can add and subtract you can start. Give enough that they can buy something, save and manage their money. Parents should then not buy any other "wants" apart from birthdays and Christmas. It will teach them about delayed gratification, a key part to handing money well.

Use money as a teaching tool

Introduce return on investment. Have kids estimate the hours of fun per dollar on their “wants”. It will teach priorities and how to spend wisely on the things that make them happiest.

Give control over spending decisions

They'll inevitably make mistakes and have regrets. Let them. Better to experience it now when the stakes aren’t as high.

Let them have a real job

It will foster essential skills for their future like responsibility and work ethics. They will learn the value of a dollar once they experience how long it takes to earn it. It also will help direct them on a path toward meaningful, useful employment which can be critical to their long-term happiness.

Practice gratitude

Children should have the chance to pause and reflect on what they have and count their blessings. As Leiber says, "If you want to feel rich, count all the things you have that money can't buy."

Finally, my favorite quote from the book: "There’s no shame in having more or having less, as long as you’re grateful for what you have, share it generously with others, and spend it wisely on the things that make you happiest. It’s true for our kids, but it’s true for us, too."