Executive Summary
No parent wants to knowingly raise a spoiled child. Yet in a world where money is a taboo subject, there is remarkably little guidance available about how to turn a child into the opposite. Certainly making children financially literate is a good start – so at least they understand the mechanics of money and how it works – but that still doesn’t necessarily mean they’ll make good responsible decisions. But what else can be done?
To answer this question, New York Times personal finance columnist Ron Lieber has written a new book, aptly titled “The Opposite Of Spoiled”, exploring the parenting techniques that can not only avoid spoiling a child, but can raise one to be the opposite – a child that grows up to be thrifty, modest, patient, and generous. In fact, given that being not-spoiled is basically about having “good” values, Lieber makes the case that raising fiscally responsible children is all about using money as a vehicle to teach those values.
Accordingly, Lieber’s book navigates issues from “how much should children receive as an allowance” to “should children have to do chores to get their allowance”, as well as how to guide children towards the three fundamental pillars of financial decision-making – whether to spend, to save, or to give. Ultimately, “The Opposite of Spoiled” is something of a manifesto for parents about how to introduce money conversations to children as a means to teach good values, which means it is a book that could easily become a great gift for every client who is a parent likely struggling with these issues, and is equally relevant for advisors who are parents with children of their own as well!
What IS The Opposite Of Spoiled?
Although there’s not quite a universal definition of a “spoiled” child, there are some common traits. Spoiled children tend to have relatively few responsibilities, are lavished with attention, don’t have a lot of rules to limit their behavior, and have a lot of material possessions. And unfortunately, spoiled children who are overindulged tend to grow up with a wide range of problem behaviors. As parents, we want to raise our children to be (fiscally) responsible adults, not spoiled adults… as such outcomes are not only bad for the child, but reflect poorly upon us as parents, too!
However, as Ron Lieber points out in his new book “The Opposite Of Spoiled: Raising Kids Who Are Grounded, Generous, And Smart About Money”, while there’s a general consensus about what it means to spoil a child, there’s remarkably little agreement about what the opposite would be. Meat that is not spoiled is fresh, but children who are not spoiled are… well, there’s really no single word to describe it. As Lieber notes, at best not-spoiled children are described by the values they embody, like curiosity, patience, thrift, modesty, generosity, perseverance, and perspective.
And unfortunately, there’s also remarkably little guidance about how to raise a child to be not-spoiled, as money itself is so commonly a taboo subject, there’s little discussion out there when it comes to money-related parenting techniques. In many cases, parents seem to fear that just talking about money will itself create some kind of money-grubbing obsession for their children. In other situations, talking about money becomes a necessity only because the family lives paycheck-to-paycheck and constantly faces hard choices, but even then there is often a desire to shelter children and keep them from having any awareness of the family’s difficult financial situation. And in the case of children of more affluent families, the conversations can be even more complex, since by definition any financial constraints put in place will not actually be based on necessity, but simply artificial or arbitrary limitations put in place just to try to prevent “spoiled” behavior.
Yet as Lieber ultimately points out, the decisions we model as parents to our children about money actually are opportunities to demonstrate and teach value. Deciding not to buy something for the family isn’t just a purchasing decision, it’s also a teaching moment about thrift and wants versus needs. Saving for the future isn’t just about not spending now, it’s about patience and perseverance. And the decision about when, whether, and how much to give isn’t just a family decision about charity but a chance to teach generosity. In other words, Lieber advocates that having conversations around money with children is crucial, not to talk about money for money’s sake, but because being not-spoiled is defined by values and the conversations we have around money and our financial decisions are actually values-teaching opportunities. Or as Lieber puts it, “I want to help all of you recognize that every conversation about money is also about values.”
How Much Allowance Is Right To Teach Giving, Saving, And Responsible Spending Lessons?
Perhaps not surprisingly, given his view of the importance that money conversations plays in teaching values around money, Lieber advocates that the “traditional” approach of giving children an allowance as a reward for doing their chores is the wrong way to go. Having children do their chores is important, but Lieber suggests that parents should either reward or punish as appropriate with privileges (TV time, access to the car, etc.), not through allowance. Instead, allowance should be given regularly and consistently, because of the teachable moments that come from parents guiding the child’s decisions of what to do with that allowance.
Source: My Half Daily Dozen
Accordingly, Lieber suggests that when children are started with an allowance, they should be guided to split the money into three groups – one for Spending, one for Saving, and one for Giving – literally, by having three clear plastic containers for each. Younger children can simply split the allowance equally amongst the three containers. With older children, having a discussion around how much to allocate to each is particular part of the values-teaching opportunity. A “typical” weekly allowance might be $0.50 - $1 per year-of-age of the child, starting around kindergarten, and increased each year on the child’s birthday. (If you want to give some reward to children for work, over and above their allowance, Lieber tells the story of one parent who pays “extra” for children who spot additional/new problems and come up with solutions, as a form of teaching entrepreneurship.)
The Spend jar is, as implied, for the child to spend. Aside from setting certain items as forbidden (e.g., certain toys you just don’t want in your house, even if the child bought it themselves!), the idea of the spend jar is to give children the latitude to make their own spending decisions, even “bad” ones. Guiding children about their spending is an opportunity to distinguish between wants and needs. For older children, they can get even more flexibility; for instance, let a high-school-aged child have their entire clothes budget for the school year in a lump sum up front. Either they’ll learn to manage the money to make it last throughout the year and teach themselves a financial lesson, or they’ll mismanage the money and be stuck wearing their “old” fall clothes during the spring school season and learn perhaps an even better lesson about the consequences of mismanagement. Better to learn in the “controlled” environment of school, than after they graduate from college where the consequences of mistakes are more serious.
The Save jar is to teach children the virtue of saving, and the benefits of perseverance and patience in allowing the balance to grow. As Lieber notes, having the plastic “Save” container be clear is important for having the child be able to actually see the dollars increase (similarly, Lieber suggests that opening a bank account for the young children is less effective, because it makes the saving a less tangible lesson). As the Save container grows its balance, parents can help children formulate goals of what they’re saving up for, and then celebrate with them when the goal is reached and the purchase can be made. This is also an opportunity to teach kids about growing savings and compound interest – e.g., by paying them an interest rate on their Save jar. Just be careful that the compounding doesn’t get out of control!
The last container is the one for Giving, and is an opportunity to teach children about the value of generosity and giving to those less fortunate. Helping children decide what charitable need or cause to give to also provides teaching opportunities, and Lieber notes that many charities will work with parents to help children who are going to do their giving in person – so you can take the child in to the facility, from a pet shelter to a homeless shelter, and let them see the impact of their giving.
Helping Clients Introduce The Money Conversation With Their Children
For those who are parents, Lieber’s “The Opposite of Spoiled” provides a valuable handbook on how to think about having money conversations with children, from handling the tough questions (“are we poor?” or “how much money do we make?”) to some very practical strategies about how to teach children money values, from setting the dividing line between Wants versus Needs for children to setting up the three spending jars. While some might debate or nit-pick particular techniques and strategies that Lieber advocates, parents who will the book will certainly be far ahead of parents who are trying to make these decisions blindly and without any experience.
Ironically, though, perhaps the most contentious aspect of Lieber’s book is simply the fact that he advocates having these money conversations in the first place, and that parents need to avoid succumbing to the flawed belief that children can somehow be effectively sheltered from thinking about, talking about, or at least wondering about money. As Lieber points out, eventually children will begin to get curious, if only from conversations they have with their peers, sometime during grade school. And so they start asking questions (which Lieber notes is usually not because they want to share the answers with their peers and make themselves the outlier who is the richest or poorest, but simply because they want to make sure they can quietly fit in with their peers). And with today’s accessibility of the internet, even young kids can actually find out an astonishing amount of information, whether the parents answer the questions or not.
After all, just typing your own address into Google will typically bring up a Zillow result as the first hit, complete with an estimated value of the residence. There are any number of websites that can provide information on average salaries for a wide range of jobs. And parents who are in positions of leadership – perhaps at a public corporation or a non-profit – will have their compensation already disclosed in public documents, that children can now find rather easily. And failing anything else, many children will immediately get a clearer perspective on the family’s financial situation as soon as the time for college comes, and the financial aid forms begin. In fact, Lieber makes the case that it’s rather absurd we don’t have these conversations with children, given the incredibly high-stakes decisions we vest in them by the end of high school – where a 17-year-old is expected to make what can be a multi-hundred-thousand dollar choice about what college to attend despite “never [having] purchased anything more expensive than a bicycle!”
From the advisor’s perspective, it may not necessarily be us who have and introduce these conversations with the children of our clients, though we certainly have the opportunity to encourage our clients to have the discussions themselves, possibly even by teaching some of Lieber’s recommended strategies. Alternatively, I suspect many advisors may choose to purchase and give copies of Lieber’s book to their clients, as it’s really relevant for parents who have children of any age from preschool to high school.
And for those advisors who are parents, you may find it helpful yourself; in fact, Lieber quotes financial planners who are parents and the strategies they use to teach their children about money regularly throughout the book. So if you’re a parent, I’d definitely encourage you to check it out “The Opposite of Spoiled” for yourself as well.
