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How to Raise Kids Who are Grounded and Smart About Finances
Last week, Ron Lieber, The New York Times “Your Money” columnist and author of the bestselling book The Opposite of Spoiled, visited the Midlands to talk about raising kids who are financially smart.
During his talk, Lieber mentioned that his interest for the topic came from his experience being a dad.
One day, his three-year-old daughter, sitting in the back seat of the car, asked him the question, “Why don’t we have a summer house?”
“I was stumped at that moment and did not know what to say,” he recalled. “I still remember my wife laughing at me because I was the guy who played ‘doctor money’ on the newspaper but couldn’t deal with questions from my three-year-old daughter.”
But Lieber knew that her question was important.
“It was about much more than having a summer house. It was about figuring out where we stood and what we stood for,” he said.
Lieber started taking questions from his daughter and other kids about money and putting them up on a blog on The Times website. Pretty soon, with the help of the community and readers, “rough drafts” or “scripts” were created that parents could use with their kids.
Parents started reading and inviting Lieber to talk to different communities, particularly around the time when the Occupy Wall Street movements began, a protest movement that began in September 2011 against social and economic inequality.
A lot of these communities were having a really hard time. While kids who had more money than average were feeling demonized and criticized by what they had and who they were, kids that had less than average were also very unhappy.
Parents were concerned about the questions that kids were bringing home, such as, “Why did you decide to be a social worker instead of an entrepreneur or a doctor? Then we could have a house by the beach.”
When Lieber was asked to talk to those parents, he tried to think about what all of them had in common. The conclusion he got was that “nobody wants to raise a spoiled kid.”
Lieber dug into this idea and started thinking about what the opposite of spoiled was.
“I tried to name all the values, virtues and character traits that add to the type of grounded and decent kids we all want to push out into the world some day,” he said. “The list included words such as modesty, thrift, prudence, patience, perseverance, generosity, grit, graciousness, a sense of perspective of your place in the world, and curiosity.”
Then, a new insight had just come to him; parents could use conversations and questions that kids ask about money to get to each one of those values and virtues.
“Rather than shutting up or being stunned into silence, what if we embrace all of those questions to lead our families into years-long conversations that lead directly to each one of those things?” he said.
Lieber makes the case that the use of allowance is a great way to teach kids those values and virtues previously mentioned. He illustrates this idea with the use of three jars with the labels give, save and spend.
“You give them an allowance, you tell them how they are going to split the money up, and then it is up to them to decide how they are going to give, save and spend,” he said.
Each jar is connected to a different set of values and virtues that should be passed on to the kids through lessons, stories and experiences.
The spend jar is about modesty, prudence, thrift, but “not being cheap.” Lieber said he is a big believer in “spending as much money as you possibly and safely can on the things that are most important to you,” but often times it is better to spend money on experiences than things.
“The spend jar gives them the opportunity to practice that and learn it by experience while the stakes are lower and they are still under your roof,” he said.
The save jar is about patience and delayed gratification.
“Forcing them to wait, thinking about what they want and save up for, is a very important skill,” Lieber said.
The give jar is about generosity and gratitude.
When it comes to giving, Lieber suggests that instead of parents simply telling their children about their family’s history of giving, they should also tell their children about their family’s history of having been given to.
When a kid, Lieber studied on scholarships and his mother is now a survivor of breast cancer. All of that was possible, he said, because of other people’s generosity.
“My wife is the granddaughter of holocaust survivors. Her relatives sprinted across Europe away from Hitler. They survived in concentration camps. They finally found their way to New York City in the late 1940s when there was a line of refugee organizations waiting to help them out,” Lieber said.
At almost 90 years old, the grandmother of Lieber's wife tells these stories with great clarity to their family. When the huge refugee crisis going on in Europe hit the news, their family was able to connect the crisis to their own family’s history of having been helped.
“It helped bring it home to our daughter, who had a very personal connection and reaction to what was going on,” he said.
“Whatever it is, share those stories with your kids. They connect in a deep and personal way to those family stories. They love hearing them, they will ask you to repeat them, and it is a powerful way to drive home the importance of the give jar.”
Another way of emphasizing the importance of giving is the practice of gratitude. As Lieber said, generosity is only one single step away from gratitude.
One of the ways of practicing gratitude is to establish a gratitude ritual. It could be something as simple as a “toasting ritual,” as suggested by Lieber. In the "toasting ritual," everyone around the dinner or lunch table has to raise his or her glass to someone or something awesome that happened since the last time they did the toast.
“What you will find is that the more often you do that, the more conversation around the family dinner table tends to tilt slightly from the things that the kids want towards the things that they already have,” Lieber said.
According to Lieber, research has shown that feelings of gratitude allow kids and adults to become even more generous and happy.
Lieber also gave tips to parents on how to answer the tough money question’s children ask, such as, “How much money do you make?”, “Are we rich or poor?” and “Why do they have more than us?”
One of the tips involves throwing another question back, such as, “Why do you ask?” That allows parents to, first, avoid the first question, and second, gain a deeper understanding of where the question comes from. It could be that they overheard other parents arguing, or a friend said something to them like “my family is rich, your family is not rich,” or something of the kind.
“These questions come from somewhere and they are ultimately some version of the following; Am I ok? How are we doing here? Do we have more than everybody else? Do we have less? If we have less or more, is that okay?,” Lieber said.
Understanding the roots of the question could make it easier for parents to come up with a smart response.
“The thing to remind ourselves before answering, ‘it is none of your business,’ is that these questions are natural. It is their job to figure out how the world works. Money is a powerful force in our world, but it is also deeply mysterious because grown-ups don’t talk about it enough,” Lieber said.
To learn more about Lieber's career and life check out Carolina Money's podcast.