Money has at least one thing in common with sex. In many American families, neither is talked about openly, if at all.
And when the subject of money does come up at home, financial experts say it’s more often a negative discussion about not having enough of it instead of a positive discussion about budgeting to be able to keep more of it.
“We’ve all been raised to think that money is a private matter, sort of like sex,” said Carol C. Pankros, a financial planner in Palatine. “There’s some discretion you need to use with kids. I don’t think I’d say how much I make and have saved, but they should know your philosophy. I encourage verbalness with kids about money.”
So does Libertyville financial planner Elaine L. Collins. “In many families, money is just not discussed, even within a couple,” Collins said. With the children, the orientation toward money too frequently is that, “It’s here, it’s all around, all you have to do is ask for it. There’s something that’s okay about that, but it’s not okay when it becomes an entitlement issue.”
In part because it is considered a private matter and a value-laden one, and also because the schools have so many other things to teach, kids pick up most of their knowledge about personal finance in their homes.
For parents who haven’t managed money well themselves, teaching their children to do better can be a daunting task.
Help, though, is getting increasingly easy to find. Book stores have a number of new titles on their shelves geared to parents who want to teach good money habits to their children.
The No. 1 question, and the No. 1 money problem facing families, experts say, is the doling out of allowances. There are two prevailing views.
Sharon Danes, an associate professor of family social sciences at the University of Minnesota, calls one view earned income allowance. That’s when children are given some household responsibilities, and when they complete their tasks, they get “paid” with allowances. The other, called entitlement income, is when children get allowances just because they are members of the family; there is no tie to chores.
Danes said she has searched the child development literature for research comparing the two systems and hasn’t found anything indicating one way is more effective than another.
“There are disadvantages if you go to extremes with either one of the views,” said Danes, who doesn’t suggest one over the other to parents. “What I support is that parents decide between themselves which is the most important view or combination of views for them. It’s important for them to have a united front.”
Once the parents make a decision, they should discuss it with the child. “Include the child in the decision about how much, what day (it will be given out), what expenses it will cover. The message should be that this is something we do as a family.”
Katy McElroy, a family therapist with Family Counseling Clinic Inc., which has offices in Barrington, Buffalo Grove, Grayslake and other suburbs, remembers working with the family of a preteen boy who was misbehaving at home and school and refusing to do his chores at home. When the parents threatened to withhold his allowance, his response was, “Who cares?” The boy was making all the money he needed on a paper route.
It was only after the parents told him they wouldn’t allow him to have the paper route if he didn’t start behaving better that the boy changed his ways.
“Parents have to agree (on whatever the boundaries are) and not allow themselves to feel caught in a bind or blackmailed,” she said.
McElroy’s 13- and 15-year-old children get $6.50 and $7.50, respectively, per week, and allowance is “our way of saying this is your share because you’ve done a good job (in school and around the house).”
The combined view of allowance that Danes spoke of has been gaining increased acceptance. It involves giving kids an allowance not tied to chores, then letting them earn more money by doing other household jobs. It’s a method supported by Collins.
Parents get into a bind, she said, by paying kids for making beds or taking out the trash. By making chores a paid job instead of a family responsibility, parents give youngsters the opportunity to decide at some time they’re not going to do the chores and they’ll give up the money. She suggests giving kids unconditional allowances, then letting them earn more money by going above and beyond the usual duties “to teach them about working and earning.”
James McNeal, professor of marketing at Texas A&M University, has studied kids and cash for 30 years. He said the amount of money given to kids in the last six or seven years has increased enormously, in part because “parents are worried about their kids having it as good as other children … (and) parents are focusing on giving the child money as a vehicle (to happiness).”
The children aren’t getting more allowance, though, McNeal said. Instead, their income has gone up because of money earned working around the house. Also, the amount of money received from relatives, particularly grandparents, has grown rapidly.
Once they get the money, kids are better savers than their parents, McNeal said. One frequently endorsed method of encouraging more saving is to employ a three-jar method. One jar is for spending money, another is for savings (either to be put in the bank or to go toward a long-term goal) and the third jar is for sharing, like giving to charity.
Pankros recommends the three-jar method to her clients with children. She also favors teaching children about money by making them responsible for it. Her 16-year-old daughter gets a “hefty” allowance each month, and with it she must buy her own clothes for the year.
“She’s thriftier than she’d ever be with my money,” Pankros said. “She’s learned to really budget. It’s nice.”
Courtney Willegal, a 12-year-old from Waukegan, uses a three-jar method in her house, splitting her allowance evenly into jars labeled “horse,” “college” and “spending.” Courtney is an equestrian who uses the “horse” jar to indulge her hobby. She has chores she must do around the house, but she doesn’t lose allowance for not doing them.
“I know they’re just part of my job around the house,” she said. “Most of my friends get allowances, too. It varies from kid to kid and house to house” as to what they do to get the allowance.
One of the best ways to teach good money management is to set a good example, Collins said, and to convey to children the family’s financial goals and values.
“So if the family is saving toward college,” she said, “and the kids say we need new roller skates because everyone has this kind, then give them the idea that (saving for college) is what we’re doing. As adults, we’re putting aside money, and it’s not something we’re angry about, it’s just something we have to do to reach our goal.”
While there’s no way to change the materialistic nature of young children (child development experts say it’s a natural developmental stage), parents should realize the difference between children wanting something and really needing it. They also can make their children better consumers by comparison shopping with them and talking about the commercials they see on television.
“We do children a disservice with every kids’ show selling something to the child,” McElroy said. “There wasn’t this onslaught (when I was a child). Parents have to be more together than my parents had to be, so they can say no and give clear values. `This is what we can afford; this we can’t.’ Or, `If you want it, you have to figure out some way to earn it.’ “
