The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money

by Ron Lieber

It’s easy to see why parents can’t bring themselves to stop their children from borrowing money to go to college. No one wants to deny a child the opportunity to attend a dream university. Here’s the problem though: The people making the final decision about whether to take on tens of thousands of dollars of student loan debt are mere teenagers. Figuring out how much to pay for a college education is one of the biggest financial decisions people make in their lifetime, and parents often leave the final call to a 17-year-old who has never purchased anything more expensive than a bicycle. There is really only one word for this state of affairs: lunacy.

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.

Juliet B. Schor, the author of a book about children and consumerism called Born to Buy, described childhood innocence as “less a description of reality than a way for adults to project their own fantasies onto children.”

To Joline Godfrey, a consultant who works with many wealthy families, “protect” might as well be synonymous with “pretend” in this context. “Those children are out in the world, seeing things on television and on the iPad,” she said. “So the fantasy that there is any way to protect children from anything . . . I mean, you have to arm them. This is human self-defense!”

And do you want your kids feeling the same way, to know innately that money is important but also utterly off limits as a topic of conversation?

James A. Fogarty, a clinical psychologist who has spent years traveling the country giving seminars to other mental health professionals who work with children, described the potential predicament this way: “The hidden message of offering the truth to children is that you and your children can work together to manage difficult issues. Children also learn that if they ever need a straight story, they can count on you.”

Turn them away, however, and they’re likely to go straight to their equally confused friends or engage in furtive Google searches. It becomes like a family secret, a vacuum that they will fill with whatever noise they hear out in the world. And they may stop coming to you with questions about many of the other important things they’re curious about too.

One way to make sure children know that questions are welcome is to praise their asking them so routinely that posing good ones becomes a habit.

“The Nobel Prize–winning physicist Isidor Rabi once explained, ‘My mother made me a scientist without ever intending to. Every other Jewish mother in Brooklyn would ask her child after school: “So did you learn anything today?” But not my mother. “Izzy,” she would say, “did you ask a good question today?” That difference—asking good questions—made me become a scientist.’”

In my years of research on the topic, I’ve determined that there is one answer that works best for any and every money question. The response is itself a question: Why do you ask? This response is useful for many reasons. The first is a practical one. By training myself to respond this way, I’ve guaranteed one thing for certain: that I will have at least 10 seconds to think through potential responses, depending on the reason for the question. Yes, it’s a stalling tactic. But be careful. There is a right way and a wrong way to question the question, given how vulnerable kids are to the belief that certain topics are off-limits. So I always try to say “why do you ask?” in the most encouraging tone possible. If your tone sounds suspicious, like an accusation or an expression of disapproval, it may shut down the whole conversation.

As we move from why they’re asking to how we’re going to answer, there’s one other overarching issue to keep in mind: gender. A number of polls and studies lay out disturbing parental tendencies. Parents are much more likely to talk to boys than girls about investing, protecting their personal information online, how credit card interest and fees work, whether it’s wise to use check-cashing services and what a 401(k) is. Teen boys in one Charles Schwab survey earned an average of $1,880 from chores and jobs, while the girls earned $1,372. This seems to affect expectations, too, since the boys believed that they would earn a starting salary of $79,700, versus $66,200 for the girls. And what do girls get more of? Parents tend to talk to them more often about giving money away.

So when do we start? By first grade at the latest, though there is no harm in starting sooner. If a child can count and is asking questions about where money comes from and what things cost, then it’s time to begin. Kids who have gotten wise to the power of pestering parents to buy things are ready as well. Even if children seem oblivious to money, there is subtle power in having them watch their small piles of allowance money grow bigger over time.

With children under 10, 50 cents to $1 a week per year of age is a good place to start, with a raise each year on their birthdays.

divide the allowance into three clear plastic containers: one each for spending, giving, and saving. This is, in effect, a first budget.

Keep things easy at first by putting an equal number of dollar bills in each container. Alternatively, divide things up so that you need only singles and no change, say, by distributing $2 each week for both spending and giving and $4 for saving. After a few years, consider allowing the children to decide how to divide the money. At that point, there can be an extra incentive for saving. Financial planner Brent Kessel and his wife pay interest on the money their kids save and that which they set aside for charity.

Parents who remember their first real savings account at a bank may want to open one for their kids. But for children between 8 and 13, it may be best to wait. If we make them put their allowance money in a bank, where the balance is abstract and not visceral like a container full of cash, that account may begin to seem like a black hole for birthday checks, as David Owen put it in his book First National Bank of Dad.

If parents don’t get paid for the regular work they do around the house, why should the kids? Chores are just something that everyone does to keep a household running. It’s a fine idea for children to learn a proper work ethic, but parents can teach it by paying for larger, once-in-a-while tasks that they might otherwise hire someone else to do. And while we want our kids to know what it means to have a boss who evaluates their efforts, they are probably not going to end up working for their parents. So let them learn this from a real boss when they get jobs as teenagers, which they should definitely do.

As for the 13-year-olds who we fear will become mercenaries, think about how it could play out in our own homes. We may think we have some pull over our kids if chores are tied to an allowance. If they don’t do the chores, after all, they won’t get the money. But what happens if they decide they don’t want or need the money? Chances are, we’ll make them do the chores anyway. So why pay for them in the first place if these chores are ultimately mandatory in any event? There are plenty of other privileges we can withhold if kids aren’t getting their chores done in a timely fashion. (Driving that new car, for instance.) Taking away money, which is a tool for learning, need not be one of them.

Seattle copywriter Jake Johnson’s parents paid him to do chores. But when his 7-year-old son, Liam, started clamoring for a fourth football and the latest Beyblades and a regular allowance to pay for it all, Johnson stopped to consider what his own allowance experience had taught him. Upon reflection, he decided that he had learned two things: that he needed to rush to finish his everyday tasks so he could get paid and that working for money was no fun at all. What Johnson wanted for Liam, he wrote in an online essay that quickly went viral, was something different. He and his wife hope that their son will learn to think entrepreneurially and grow up to be someone who sells his ability to come up with creative ideas, not just his competence in performing tasks. They want him to know that there can be joy in a job well done. So while Liam earns no money for basic chores, he does get paid for recognizing problems and solving them. When he spotted all the fallen leaves in the backyard, he offered to rake them and negotiated a price. His grandparents’ dirty car inspired him to wash it to make some money. Later he wanted to wash other people’s vehicles on a regular basis, and Jake helped him write a simple business plan. “I see passion building in him as he looks at making money as a project that involves solving problems rather than as selling his time to hurry through tasks,” Jake wrote in his essay. “Every kid loves a good project, and so do I. I see him slowly turning into ...

Matthiesen hit on the concept of return on investment, though she didn’t call it that. Instead, she asked her kids to estimate the hours of fun per dollar that any particular Want of theirs might provide.

In an effort to explain to students how she made her own consumer decisions, she told them that she asked herself a single question: Which one does the most good and the least harm?

Another tactic that encourages thrift, cuts down on endless nagging, and gives kids some sense of autonomy is the use of prepaid debit cards. These work particularly well during trips or in situations where parents are paying but want the kids to stick to a budget. Lori Embrey, a financial planner in Columbus, Ohio, wanted a ready answer for the chorus of “can I get this?” she feared she would hear on an endless loop when her family went to Disney World for a week. So each kid got a $100 prepaid card that they could use for anything beyond basic food and drinks, which were on Mom and Dad. She even devoted one piece of luggage to snacks and Ziploc bags, so they could choose to tote those around rather than paying $5 for Dippin’ Dots and the like. The combination of a strictly finite resource and the control built into having a card of one’s own practically forces a child to think about value and trade-offs. Still, it puts the kids in control, which makes them feel powerful. Even Embrey’s 5-year-old son totally got it; he thought hard about his purchases and didn’t pick his souvenirs until the last day of the trip. He also had enough left over for ice cream. Cards that we designate for a specific purpose can be useful budgeting tools even when we’re not on vacation or at an amusement park for the day. For instance, we can set up children who love games with a card loaded with a limited amount of allowance money for in-app purchases alone. Parents who want to pay for their ki...

While parents should take the lead, there’s a grandmother in Chicago who started a family tradition worthy of copying, particularly for parents of smaller children. Every year on the birthdays of her three grandchildren, Dana Treister handed each of them a dollar for every year they’d been alive. Then, she took them to a dollar store so they could pick out gifts for themselves. With a small pile of dollars, everything in a true, old-fashioned dollar store is, by definition, affordable. So figuring out what to buy becomes a great way to test how well your children are absorbing the lessons you’re trying to teach. Grandma Dana started her dollar-store trips when each of her grandchildren turned 4. One key, she explained, was never having a time limit so the kids could carefully weigh their choices. Some dollar-store trips would take 90 minutes.

these goods are here to serve us, and it’s not us who serve them,”

Schor refers to these influences as our vertically expanded reference groups. In the old days, we’d compare our furniture or clothes or car horizontally with our neighbors’, who were often a lot like us. Today, our point of reference has grown vertically—mostly up—since we’re now able to see the inside of celebrities’ closets on reality shows and track their day-to-day outfits on a thousand different websites and apps.

It’s against this backdrop, which normalizes the idea of teens buying loads of clothes by literally making a show of it, that Annie Leonard offers her own counterprogramming. She doesn’t set the DVR to avoid commercials on her television. Instead, she turns the reading of commercial messages into a game with her daughter. “We have a race to see who can say first what subliminal messages they’re trying to send us,” she said.

Materialistic people focus more on stuff than they do on people and relationships. (On a playdate, this looks like a persistent inability to share the object of greatest desire in the room.) They genuinely believe that more stuff will make them happy. (Whining and begging unrelentingly even after they’re out of preschool and ought to be able to accept no for an answer.) They care less about the utility of their stuff and more about what sort of reaction people will have to it. (Bragging after parents capitulate in the face of their begging.) They want too much of the wrong things, or they want their things in the wrong way. (More things than they need without having to pay for them with allowance money or to wait for them.) And the fallout is unpleasant in countries all over the world; multiple studies have shown that materialism is correlated with higher levels of depression and anxiety and a range of ills from backaches to drug use.

In 1998 about 45 percent of American kids ages 16 to 19 had jobs of some sort, roughly where the number had been for half a century. But not long after, that number fell off a cliff and just kept falling. By 2013, just 20 percent of teens had jobs, an all-time low since the United States started keeping track in 1948.

A 2013 study found that the higher the percentage that parents contribute to a child’s college costs, the worse their grades tend to be, though the correlations aren’t quite as strong at highly competitive schools.

When she’s not at the baseball field, Johnson is a sociology professor at Lehigh University who focuses her research on social class and the perpetuation of wealth and poverty. She believes that many kids have settled into an understanding of social class as something you earn through merit and hard work—and that you don’t deserve to be in the highest socioeconomic classes if you don’t work hard enough. Plenty of parents and teachers are fine with that, since it dovetails nicely with the desire to get children to buckle down in school and is conveniently compatible with the persistent idea that all kids in America have an equal opportunity to make something of themselves. But Johnson doesn’t quite buy the idea of a pure meritocracy, and it can make people nervous when she explains it out loud. “There is often more to the story than just hard work,” she explained during a talk to teachers at the Gordon School in Providence, Rhode Island. “It’s not but. It’s and. There is luck and circumstance and the family you were born to. All sorts of things factor in. That would be extremely radical if parents just started saying that at the dinner table. If we were honest about our own privilege when we have it. And not all of us have it or have had it, though most of us in this room have had it in some form or another.”

Won’t, as a Denver financial planner named Jonathan Duong puts it, requires much greater conviction than can’t.

He wanted his kids to be considering that trade-off at the earliest possible age. So to create what he hoped would be an exciting alternative to consumption, he started a bank at his house (and on a Google spreadsheet) that pays about 20 percent in annual interest. That’s enough so that when he credits it to the accounts each Sunday, even the kids with the smallest balances can see the number go up.

The Engelharts have introduced trade-offs into other aspects of their children’s lives as well. The family has established a toy equilibrium where any time a new one arrives on a birthday or through a purchase, an older one goes to the children’s hospital

How much is enough, and what should we trade off so that we have all the things we need and enough of what we want to make us as happy as possible? It’s a savings question when it comes to allowance. It’s a spending question when it comes to helping kids learn to buy things that will give them the most utility and joy. It’s a question of impact when giving money away and trying to maximize the good it does.