How much time and thought do you devote to teaching your kids about money? I don’t mean about how to calculate change – that’s relatively straightforward. I mean about the value of money – about how to connect it to personal values, how to understand what it takes to earn it, and how to manage it.
These questions were inspired by an interesting article in the New York Times last week. The author talked about growing up in a hard-luck area of Los Angeles, where her parents were often “broke” and the fear of a car or an appliance breaking down loomed over their lives. She is a graduate of Stanford leading a comfortable life now. She recently took her four children to visit her old neighborhood. She mused about their different reactions to this visit, and asked “what if insulating my children turns out to be a mistake? What if I am depriving them of the very fuel that drove me in my own life?...it was more than a choice to offer my children a different life; it was the whole point of the struggle...”
Living a comfortable life and learning to earn and to struggle to pay for things are not mutually exclusive. Parents, particularly middle and upper class ones, need to understand this and then carefully think about how to teach these concepts in developmentally appropriate ways throughout a child’s life. Laura Shin addressed this a couple of years ago in Forbes. I especially like her idea of creating three jars in a child’s room – labeled sharing, saving and spending. Each time a child receives a gift of money or an allowance, s/he must divide the money equally among the three jars. Young children need this sort of visual representation of these concepts.
My Dad, a well-educated business man and Bank President, had some forward thinking ways to teach me and my sisters about value. In my senior year of high school, he accompanied me to the bank to open my first checking account. While there, he deposited in that account a quarter of the money that he had put aside for my college education – a considerable sum of money. The rest was deposited in my savings account. When we got home, he handed me my first semester tuition bill and had me pay it. I watched my new account diminish significantly in that moment.
From that day on, I was responsible for managing my spending and my tuition payments. I received an occasional boost in my account around special occasions. That account that my Dad set up had just enough for my private college tuition and some spending money. But I decided that I needed to work part time throughout college so that I could have things that I wanted that were not possible given my Dad’s “spending money” calculations. Years later, I realized that was the point. Some of our relatives chided my father for “making” me work throughout college. He never argued with them, nor asked me not to work – he just smiled his knowing smile.
My husband and I have taught our children the same lessons that my father taught me, and as I now watch all three of my adult children manage their finances responsibly, I too can smile that knowing smile. It is my fervent wish that every parent takes these lessons to heart and is able one day to sit back and smile too.