Parents want to raise kids who are grounded, with a smart attitude toward money. It’s tough in this modern world, especially if you’re raising expat kids in the “bubble” in Shanghai. So how do you ensure kids don’t grow up spoiled?
According to Ron Lieber, New York Times financial columnist and author of “The Opposite of Spoiled,” the number-one money mistake parents make is never teaching kids to talk about money. It’s not surprising, as most adults were raised in a culture where money conversations were considered taboo. A recent survey found only 18 percent of parents spend time talking about money with their children. If parents don’t discuss it, it’s tough to know how to plan, and tougher still to teach youngsters. The end value of these discussions creates realistic views about money – not the fearful ideas, as many adults have grown into.
Lieber tells the story of Scott Parker from San Diego, California. This gentleman went to the bank one day and asked to withdraw his monthly pay in one dollar bills. Upon arriving home, he quietly stacked the bills on the kitchen table and certainly gained the whole family’s attention. He then proceeded to peel off bills in accordance with family expenditures. He counted out every expense, from taxes, insurance and mortgage payments to pizza and sports. Afterward, he said it seemed to make a strong impression. No kidding!
It’s doubtful that most kids think through the entire family money picture and how it all fits together. A key lesson to impart is that the family money supply isn’t boundless. No matter how affluent the family might seem, limitations remain on both required spending and, especially, on treats. There is no money tree growing at the back of the compound.
Lieber also feels it’s important for kids to experience your values in action. For example, all parents advocate generosity. Follow through with that by including them in discussions regarding charitable giving. Then, offer them the opportunity to make their own choices in this regard. Let them practice what you preach!
One of the key issues commonly displayed among spoiled children everywhere is that they aren’t used to facing consequences for their actions. To start, simply resist becoming a personal ATM machine for the kids. Give them a budget, whether through an allowance or some other system, and ensure it has a hard cap. This forces real life choices, and this is where money becomes a tool for teaching the consequences of their actions.
According to Carrie Jones, LCSW and Director of Counseling Services at Community Center Shanghai, “In some ways, there are also unique challenges for expat teens in Shanghai specifically; teens here tend to have more freedom and independence and opportunity to function at maturity levels well beyond their age than their counterparts back home. Many expat families are very financially successful/comfortable, so some teens aren’t used to having to budget or think much about spending. Image and materialism seem to be especially rampant here; there are unlimited shopping opportunities.”
If you teach kids to see the consequences of their actions, then after impulse-buying at the checkout counter, for example, they will realize there might not be enough for that game they really wanted. Holding firm through the resulting disappointment teaches a lesson everybody gets at some point in life: there’s not enough money for all of our wants. We must prioritize and choose. They will also understand that the occasional wrong choices are not the end of the world. Finally, another of life’s important lessons: quick indulgent choices usually carry larger consequences later on.
As Jim Yih of Retire Happy points out, the hardest thing to teach kids about the real world is the idea of delayed gratification. It’s so tough a concept that many adults have yet to learn the lesson. He observes that teaching financial responsibility is made tougher because each of his four boys learns differently. Lessons that work with one will bounce off another. It’s a dynamic process that evolves and changes along the way.
Lieber suggests preparing responses to the inevitable questions, such as “How much do you make?” “Are we rich?” and “How come they have a bigger house/car than we do?” Allowing your kids to ask without eliciting a negative reaction from you offers a solid, calm emotional grounding on the topic of money, which is an important basis for smart money management in the future.
Yih agrees with Lieber’s three main principles: It’s vital to talk openly about money with kids. It’s important to let them learn the hard way and make their own mistakes, and then equally importantly to let them face the consequences of those decisions.
Lieber also points out that, as parents, we are in the adult-making business. In fact, money can be used as a central tool for teaching kids not just about financial issues, but crucial life lessons as well.
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For more information on financial advice and taxes, contact: Brian@HutsonAssociates.biz.