I gave a talk last night to a terrific group of parents at an area school. I really liked a few of the questions they raised as they illuminated some interesting points, and I felt it warranted a post. Think of this as a kind of informal FAQ.
“My child won’t spend anything. How should I handle that?”
Hold your hands up high, and thank whichever lord you follow (or don’t). You’ve hit the jackpot! Ok, the discussion was a little more nuanced than that. When you have a child on the “inclined to save” to “money hoarder” continuum, I suggest sticking with a weekly allowance that gives him a consistent opportunity to make money choices. Sure, he may not be conflicted like his younger, profligate sibling, but getting used to making those choices, even if it’s to divert all the Spend Smart money to the Save jar, is still an important part of the process. Of course, this is also a perfect opportunity to capitalize on the “interest” (Sorry, I had to go there!) in saving to open up a bank account. I’ve seen some credit unions like our great, new Money Mammals partner, F&A Federal, that have amazing dividend (That’s credit union speak for interest.) rates for the first $500 – $1000 deposited. It also might be time to consider starting a Grow Jar to get that money working for him. Keep in mind that your child will likely find something on which he’ll want to spend his money, and he’ll have a head start towards that goal.
“My child is giving her money away. What should I do?”
Well, obviously, make sure that you’re first in line. I wish my kid would give me money. And … back to the nuance. I think this question roused the most interest. Once we felt comfortable that this child’s behavior was purposeful, not reckless and legitimately motivated by doing good deeds, I suggested (And for the most part, folks agreed.) that her behavior was ok. This was a particularly relevant question/discussion because part of my talk featured some of the research from Elizabeth Dunn and Michael Norton’s book, Happy Money. Consider the following excerpts from this excellent book (about which I blogged previously):
“Spending money on others can increase your happiness even more than spending cash on yourself, but you have to be willing to make yourself a little poorer to reap these benefits.”
“[Research suggests that] spending as little as $5 to help someone else can increase your own happiness.”
“The average ratio of personal to prosocial spending was more than 10 to 1 [in a sample of 600+ Americans]. But the amount of money individuals devoted to themselves was unrelated to their overall happiness. What did predict happiness? The amount of money they gave away.”
So bascially, this kid kind of gets it. She’s using money as a tool to maximize her own happiness. Because of her intentionality and the potential that it might put a smile on her face, far be it from me/us to advise her differently. Good for her!
I’d love to hear other folks’ thoughts on this one as well.
“Is it ok to withhold an allowance as punishment for something?”
This was a pretty easy one to answer. Remember, the purpose of an allowance is to give your child real-world experience with money so that he can learn to become money-smart and “money comfortable.” If your child is being irresponsible with money, then it is certainly ok to give him a warning and say that you may have to stop the allowance, at least temporarily, until you see him become more responsible. Just like I suggest that chores and allowance be decoupled, so too should punishment and allowance. If your child is simply misbehaving, and it has nothing to do with his allowance, then you should keep it that way – nothing to do with his allowance. I totally get the motivation behind this idea because I’ve thought about the same thing with my kids. It’s a potentially powerful stick, but it would go against our overall philosophy about what an allowance is all about AND it would associate unnecessary negative feelings towards money. There are other methods of punishment (e.g. We love 1-2-3 Magic.) and, in my view, the less negativity associated with money, the better.
I hope you find these questions and answers helpful as you continue your quests to raise money-smart kids.
Creator & Chief Mammal