Raising Money-Smart Kids: Part Three.

By Richard Rosso | August 17, 2023

Raising Money-Smart Kids: Part Three and the last of the series outlines unique exercises and money conversation starters for parents. I understand how we feel we need to be TikTok stars to get our kids’ attention these days, but as parents, I assure you, they’re interested in money and should form good habits with your help!

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Five Exercises For Raising Money-Smart Kids.

Raising money-smart kids takes time, patience, consistent validation of good habits, and positive awareness of poor habits that parents can help change over time. Candidly, I know parents who can improve their financial position by following these exercises.

Exercise #1: The Wait-A-Week Test.

Tom Petty and the Heartbreakers had a hit in 1981 called The Waiting about how waiting is the hardest part. Mr. Petty wasn’t wrong. We are not the ones who like to wait. If we desire a trip or to purchase another trinket, we’ll use credit to satisfy our wants. As a result, nearly half of U.S. adults (49%) have less or no savings than a year ago, per a 2023 Bankrate survey. Based on spending indicators this year, the American consumer is alive, well, and burning up lines of credit.

We must teach our kids to wait if we want them to build their financial discipline bones. Frankly, I know parents who need to embrace the wait-a-week test.

Here’s how it works:

On Saturday, little Billy eyes the new Spiderman playset, grabs your hand, pulls you to it, and points. Billy has been a good boy, and you hate to say no. But instead of a hard No, can we get him to sleep on his desire for a week?

Waiting instills discipline and cools the want. Sometimes, the waiting places a hot want into a deep freeze.

Last, try to validate positive behavior and share how and why the family delays purchases. ‘We can’t afford it right now’ is an acceptable response, and also add the why behind it.

Recently, a mom told me her daughter wanted a new Barbie t-shirt. She explained how it wasn’t affordable because Mom hadn’t gotten paid yet. For good measure, she also took the opportunity to have a skin-in-the-game moment. More on that later.

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Exercise #2: The Save, Share, Spend Shift.

So, you hand little Susan three shiny quarters to place in her Save, Share, Spend bank every Saturday. And you observe every Saturday that all the coins wind up in Spend.

Houston, we’ve got a problem.

As mentioned in Part Two, parents need to work with children to understand the long-term detrimental effect of overspending, a lesson that must be repeated. The Save, Share, Spend moment is a chance to inspire kids to moderate behavior.

Rock the boat, baby!

When the Save, Share, Spend boat is lopsided, rock it. Remove all the coins from the bank and start from scratch. Before redeposit, work with the kids to balance the ship for each coin. Explain the benefits of sharing and saving. For example, what is your child’s passion for animals or people in need?

My daughter and I removed her share money every December, purchased supplies at Walmart, and delivered them to the local animal shelter.

Also, communicate how saving for a rainy day has helped the family overall. Did your family save up for a new car, furniture, or vacation? Share how it was done. Get them involved. Have kids help with the budget for a fun experience such as a family getaway, dinner, or movie night.

Exercise #3 for raising money-smart kids: The ‘Skin in the Game.’

Delayed gratification and skin in the game go hand in hand when raising money-smart kids. There’s a price pain point when you want your child to participate in the transaction. In our household, it was ten dollars. For example, if my daughter wanted to spend ten bucks or more (after the wait-a-week test) on a new item, she needed to come up with half the purchase price from her allowance and, later, her part-time job. Your household’s spending point may differ, but you get the point.

Now, the most challenging part of this exercise is sticking with it. Frankly, I’ve seen many parents cave and pay. Please don’t do it. Stick to your guns and share the importance of waiting until your child has at least 50% saved to meet half the item’s price.

Exercise #4: The Wish List and Action Plan.

Our kids always want. I did. As a result, I was a goner after a commercial for whatever product Mattel was pushing. Today, I think kids haven’t changed much. Thus, the Wish List and Action Plan to raise money-smart kids. Except this isn’t a list for Santa (you). It’s a wish list of items they want in the future and requires an action plan to pay for them.

For example, little Annie wants Gabby’s Purrfect Dollhouse (this is a thing), and the price is $60. And you can’t have the Dollhouse without Gabby’s Music Room and her herd of cat friends (another $20). First, we lead with the Wait-A-Week Test. Annie’s desire is as strong as it was seven days ago. Check. Next, we’ve got some Skin In The Game but not enough.

Since Gabby is still the apple of Annie’s eye, it’s time to get a pen and paper and create the wish list and action plan.

Let’s pretend we’re Annie’s parents:

Annie needs $80. She has $20 in her Save box. How does she gain the other $60? Her action plan includes 1. Allowance ($20), chores ($20 – 4 chores, $5 each), and parental match ($20) and will take exactly four weeks. This is the plan. If Annie wants these items, she must wait until the action plan is complete. Along the way, conversations will cover the importance of saving money and waiting for good things.

Exercise #5: The Make the Case Document. The final exercise for Raising Money-Smart Kids Part Three.

You may need to collaborate on the Make the Case Document when raising money-smart kids. Here, big-ticket items are usually the heart of the exercise. Gaming systems, bikes, and camp excursions would all be eligible for a make-the-case document. And when I mean a document, I mean a couple of sentences, well written, discussed, and agreed upon.

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Naturally, I wouldn’t expect your child to have too much skin in the game for a backyard swing set. However, raising money-smart kids requires them to understand the sacrifices made to meet large expenditures. In other words, if your child wants a costly item, you need them to make the case for ownership.

For example, a client’s son said he felt unsafe on the neighborhood park’s swings and made a case for having his own. Mom and Dad went over to the recreational area to validate his point. By the way, the boy is very active and loves the outdoors. The parents discovered that much of the park’s infrastructure required improvement. They were able to find a hardly-used swing and activity set that is now anchored in their backyard and enjoyed regularly.

Raising money-smart kids is an ongoing endeavor. A loop of discussion, critical thought, cost assessment, and balanced gratification that motivates and eases future robust money conversations as children grow into fiscally responsible young adults.

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Richard Rosso, MS, CFP, CIMA is the Head of Financial Planning for RIA Advisors. He is also a contributing editor to the “Real Investment Advice” website and published author of “Random Thoughts Of A Money Muse.”  Follow Richard on Twitter
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