Raising Money-Smart Kids: Part Two.

By Richard Rosso | April 13, 2023

Raising Money-Smart Kids: Part Two outlines action items to help parents adjust their children’s money personalities. If readers recall, I outlined the four types of money scripts and how parents can identify them through a simple online exercise.

Here is the link again: Receive a complimentary KMSI-R at www.datapoints.com

Part Two is your cues and teachable moments.

Above all, delayed gratification is most important for raising money-smart kids. Therefore, it’s worth a reminder about the benefits of marshmallows!

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Lessons from the Stanford marshmallow experiment. A key to raising money-smart kids.

In 1972, psychologist Walter Mischel at Stanford University began the marshmallow experiment. He explored what made preschool children temper immediate gratification in exchange for a more significant delayed award.

Per the Bing School at Stanford:

These studies showed how self-control and emotion regulation could be taught and learned beginning very early in life, even by children who initially had difficulty delaying gratification.

In addition, the Bing research yielded a surprise: What the preschoolers did as they tried to wait unexpectedly predicted much about their future lives. “The more seconds they waited at age 4 or 5, the higher their SAT scores and the better their rated social and cognitive function in adolescence,” Mischel wrote in his book about the Marshmallow Test.

Delayed gratification: A key to building financial discipline and a secure future.

Teaching kids to delay gratification is the gateway to financial literacy. Children who wait to purchase or weigh the pros and cons of spending money will likely save for long-term goals and resist impulse purchases. As a result, money-smart kids become adults who prioritize saving and investing.

As a reminder, Money Scripts® is a concept created by financial psychologists Brad and Ted Klontz. They are unconscious, trans-generational beliefs about money developed in childhood and drive adult financial behaviors.

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The First Money Script: Money Focus.

Money Focused individuals believe that having more money is the key to happiness and the solution to their problems. They believe that one can never have enough money yet find that pursuing money never satisfies them. Overall, Money Focus is more a curse than a blessing. As a result, a parent should seek to rebalance their children’s money psyche.

The Money Focus signs in your kids:

  1. They use repeated purchases to make them happy (immediate gratification).

2. Thus, these children over-allocate to spend in a Save, Share, Spend exercise.

3. They’re incredibly frustrated by not getting what they want RIGHT NOW.

Lessons: We want our children to enjoy – up to a point:

• Parents should moderate and work with children ongoing to understand the long-term detrimental effect of overspending.

• Shift their focus on what’s important: relationships, saving for a rainy day, and less expensive activities such as arts & crafts and other creative endeavors as an outlet.

•Last, coach about the dangers of excess credit and how you handle credit responsibly with fiscal restraint. Please share your personal experiences with them about times you misused credit and the detrimental long-term effects.

The Second Money Script: Money Vigilance.

The Money Vigilant crew is alert, watchful, and concerned about their financial health. As a result, they believe it’s important to save for the future. We classify this group as the supersavers. They are sensitive to the connection between hard work and financial reward. Therefore, those with higher Money Vigilance scores have higher levels of financial health.

In addition, It’s no surprise my dominant money script is vigilance, but too much of a good thing isn’t healthy for money-smart kids or adults.

The Money Vigilant signs in your children:

  1. Feelings of anxiety before, when, or after they spend. They’ll ponder, regret a purchase and suffer from buyer’s remorse.

2. They allocate more or all to save in a Save, Share, Spend exercise.

3. Saving money is a priority. Thus, they’ll miss out on social activities to do so.

Lesson: We want our children to be vigilant but have moderate behavior.

•Coach kids to understand balance. For example, have them maintain a “fun money” budget. If they budget for fun, the kids will feel better about spending instead of saving money first, THEN pulling from their savings to spend.

•Have them help with the budget for a fun experience such as a family vacation.

•And teach them the value of using credit wisely and responsibly. In other words, credit in the right hands is a powerful tool. Show your kids how to compare loan interest rates and explain when credit makes sense.

The Third Money Script: Money Status.

Ultimately, the Money Status seekers link their self-worth with their net worth. As a result, they prioritize outward displays of wealth and are at risk of overspending. Therefore, many believe the universe will handle their financial needs if they live a virtuous life. These kids are money-smart when their purchases speak for them!

Signs in your children:

  1. They use purchases to make themselves happy and show off to others.

2. And allocate more or all to spend in a Save, Share, Spend exercise.

3. They’re extremely brand influenced.

Candidly, Money Status came up as my secondary money script. My score is low but prominent enough for me to pay attention. I recall, as a child, how brand-influenced I was. I wouldn’t go near generic Fruit Loops! As an adult, I don’t show off. However, I am still influenced by specific brands and tend to be brand loyal. I now recognize and course-correct my behavior. See? Even adults can flip their money scripts!

Lesson: Teach our kids to enjoy themselves more holistically.

•Parents should moderate and work with children to understand the detrimental effect of overspending.

•As a result, focusing on relationships, saving for a rainy day, and creative activities is effective.

•Last, complete the ‘wait a week’ exercise regularly! It works.

In other words, help your kids hesitate about new purchases. For example, have them wait seven days before spending. Within that period, ask them to make their case. What’s the reason for the urgency? Why must they have a particular item or service now? How will the purchase change their lives? Even after that, don’t hesitate to say no. In other words, it is about setting boundaries. More about the ‘wait a week’ exercise in Part Three.

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The Fourth Money Script: Money Avoidance. These money-smart kids can be more money scared!

Have you read about the drama starlet who makes six figures an episode but lives in a tiny, rat-infested apartment? In other words, she’s a money avoider.

Money Avoiders believe they do not deserve money and/or feel guilty about their money. Therefore, they suspect that wealthy people are greedy or corrupt and that there is virtue in living with less.

Signs in your kids:

  1. They vocalize negative thoughts about money and tend to overspend or give money away.

2. They allocate more to share in a Save, Share, Spend exercise.

Lesson: We seek our kids to be benevolent with rules and boundaries.

•Parents should moderate and work with children to understand the benefits of personal financial security.

•Thus, vocalize positive messages about saving for a rainy day and explain how you do it. Show them how to balance charitable intent with financial security.

•Help them understand financial statements, terms, and benefits.

In conclusion, your action steps should be easy, conversational, and consistent. Your steps don’t need to be perfect or formal. They need to flow from your conversations, actions, and verbal cues.

In Raising Money-Smart Kids: Part Three, and the last of the series, I’ll provide unique exercises designed to get your points across along with money conversation starters.

Talk with an Advisor & Planner Today!


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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