The Secrets to Raising Unspoiled Children
Even though he pens the “Your Money” column for the New York Times, Ron Lieber found himself tongue-tied when it came to answering his own daughter’s questions about the family’s finances. As he began to interview other parents, he realized he wasn’t alone.
He discovered that children are keenly aware of issues related to money, yet parents often avoid tough conversations about the topic because they don’t know where to start. As a result, they lose out on a tremendous opportunity to teach financial responsibility and often instill the wrong behaviors.
In his new book, The Opposite of Spoiled, Lieber lays out a plan for helping parents of all means have open dialogues about money matters, thus raising kids who are more grounded, generous and financially savvy. Below he shares his thoughts on how best to start the discussion, particularly for families of considerable wealth.
What is your definition of a spoiled child?
I really define it four ways, and only one has to do with money. First, a spoiled child has very little, or anything, that is expected of them. There are no set requirements for helping around the house or being a contributing member of the larger community. Second, they have few ground rules and no consequences for not adhering to them. Third, they are lavished with time and attention, to where they are literally incapable of failing. Finally, spoiled kids get a lot of stuff or get to do a lot of things, yet never have to say “thank you” or be gracious. This develops a sense of entitlement and ultimately leads to materialism. By the way, you don’t need to be rich for this to happen. I know plenty of kids from extremely wealthy families who are wonderful, humble people and have none of these negative traits.
So how do you raise a child who is the opposite of spoiled?
When you come from a family of means, in particular, it’s important to draw lines as a form of symbolic deprivation. In other words, explain to your kids why some things are worth spending money on and others are not, and then set a good example. Interestingly, I found in my research that parents who grew up comfortable — those with second-generation wealth — actually tend to scale things back for their kids because they want them to have a more modest upbringing. By contrast, those with first-generation wealth are often excited to give their children what they weren’t able to experience when they were young.
What responsibility do parents have to talk with their kids about money and the family’s particular financial situation?
I believe you should tell kids everything, including your salary, by the time they are in high school, if not sooner. They’ll eventually figure it out anyway. You should also use money as a tool for learning. Pay your kids an allowance and set parameters for how that money must be earned and used. Being open and honest about everything, including how much you make, helps kids to understand what it costs to maintain a certain lifestyle.
Should you also share your family’s total net worth?
I don’t see a reason not to. Kids are curious. It’s their job to figure out how the world works. They’re going to google you anyway, and they’ll see what kinds of donations you make and how much your home is worth. If you’re an executive at a public company, they’ll get an indication of your wealth. They may even peer over your shoulder as you read your investment statements. When you hide that information, it’s a sign to your children that you don’t trust them. I think it actually hurts the relationship.
Is there any downside to all this transparency?
The downside is they think they have it all coming to them and won’t have to work that hard. It’s your job to make it clear this is not the case. In fact, you might not give them another cent after they graduate from college. You should explain that you plan to live a good long time and may very well spend everything you have. I get that some wealthy families set up trusts for the kids that are set to be turned over at a certain age. But even keeping this hidden, in my view, can be damaging to the relationship if they find out about it by surprise.
Do you recommend that parents bring their kids along on regular visits with their financial advisors?
I think that’s certainly worth doing, especially once the children are in college. It makes sense to get them involved in the conversation and may lead to more responsible decisions later on.
In your book, you talk about the three-jar concept of money: give, save and spend. What’s the right balance?
I use this because it’s the foundation of adult budgeting. We may not have jars, but we typically have mental accounts that serve as stand-ins for all of our values and virtues. It’s important to give to instill gratitude, save for delayed gratification and spend on those things that deliver the most happiness. By the way, I think parents should make their kids budget their allowance according to these three jars. It will get them into the practice of giving and saving early on and teach them grown-up ways of handling money.
You have a unique take on allowance that goes against conventional wisdom.
People think I’m some kind of softy, but my belief is that an allowance shouldn’t be tied to completing certain chores. I feel kids should be doing a lot around the house, including cooking, whether they get paid or not. You want them to understand they have a role in the completion of household tasks, just like the grown-ups, and this should be done for free. An allowance is a way for them to learn how to be responsible with money, not a reward for helping out. Otherwise, it’s easy for them to say, “I don’t need more money this week, so I think I’ll take some time off from doing chores.”
Does that mean parents should force their kids to buy basic necessities, such as clothes, with their allowance?
Partly, yes. One way to keep kids from getting too materialistic is to have them learn to wait. If you force them to save up for something they yearn for today, they may decide they really don’t want it all that badly as the months go by. It also teaches them about trade-offs: if I buy this, I can’t get that, since I have a limited amount of money. It’s important to distinguish between wants and needs. For instance, everyone needs underwear, but you might want a brand that’s very expensive.
You also encourage parents to get their kids involved in making philanthropic contributions.
We talked earlier about having part of that jar money go to giving. But children need to be part of the discussion around how the household charitable budget or even funds from the family foundation get allocated. If you’re focusing on certain organizations over others, you should discuss why that is the case. Kids have their own strong feelings and may want to try and talk you into changing your focus. If so, you should listen and encourage their wishes and desires. My wife and I shared our charitable allocation with our daughter right after she turned eight. She thought of more than one thing that we hadn’t come up with ourselves and decided ought to be a priority. Children often help to open your mind to a completely new way of thinking.
In your book, you write about a principle dubbed the “fun ratio.” What is this?
The fun ratio came from a family in the Midwest that realized they needed a way to help their kids keep score of whether the things they were buying were worth the cost. They began calculating the number of hours of fun and enjoyment they would get from, say, a toy or entertainment experience. It’s a great way to teach kids about math and helps to concentrate spending on those items that deliver the most oomph.
Have you noticed any differences between boys and girls when it comes to responsibility with money?
What I can tell you is that research shows parents generally don’t talk to girls about money as much as they do boys. The net result is that girls often end up thinking they’ll earn less than boys, even though that’s not necessarily the case. The lesson is that silence as it relates to money is bad. I encourage families to have open conversations about finances and wealth. The issues and questions may be complex, but it will allow you to raise children who grow up to be much more financially responsible — and less spoiled.