This is part II of my interview with Ron Lieber, who’s new book The Opposite of Spoiled teaches parents how to teach their kids about money, and the other important life lessons that brings. You can read Part I here, where I ask about scam-proofing your children. Today, I ask Ron about the e-cash problem; we also discuss what to do when parents make money mistakes, and how to deal with the college vs. retirement issue.
Q. In a world where “money” is slowly disappearing, increasingly replaced by seemingly invisible payments with mobile phones and such, will it be harder to teach kids about money? Should parents try to use hard currency more often as a teaching tool? Surely educating your kids on money while they are young is no bad thing?
Thankfully, we’re not that close to that day just yet. The tooth fairy still brings green cash money. And I think kids should get their allowance in bills and coins for at least 3 or 4 years. It helps them learn to count, and there’s something visceral about watching the money pile up and holding it in your hands.
At the same time, you should try to explain the connection between your debit or credit card and your bank and your paycheck. Most parents don’t even bring a paystub home anymore and may never go to the bank. The whole thing is so utterly abstract that it took my daughter a few years to really understand how it was all working, it’s things like this that have led to millennial money mistakes, as they might not be interested in using things like credit or that they should pay close attention to their money.
Still, once it’s all clear, I have no problem with allowance apps like Allowance Manager and FamZoo that make it easier to track money virtually. It’s easier on the parents, and the kids can try spending on their own with prepaid debit cards that will keep them out of any real trouble with a bank.
Q. Many young kids view their parents as infallible, like gods. How do parents talk to their kids about money mistakes as they make them…particularly if there’s anger involved? As in, “How could you let the car salesman talk you into that, honey?”
Parental anger can be plenty useful in the right circumstance, but I would urge people not to get into money fights amongst themselves (or with ex-spouses) in front of their children and be wary of the kids overhearing any squabbles. We don’t want them to be scared of money or think that it’s a hard thing to get right; it’s already mysterious enough to them.
An honest family assessment of what’s on the credit or debit card statement, however, can lead to conversations about all sorts of mistaken purchases. And as kids get older and begin to confront the six-figure college choice, stories from parents can help a lot there too. How much paid work can a child expect to be able to do in college, and how much student loan debt is too much? And with so much equipment and so many books needed for their course, how can students be expected to start saving for their student loan when they’ve got textbooks and printers to buy? While students can compare printers for college at hereon.biz to find the best deals on appliances, the financial predicament that many college students find themselves in rarely adds up to anything other than trouble. It might be wise to show them a retirement statement too, especially if yours could have been so much larger if only you’d started saving in your 20s instead of your 30s. An older colleague of mine showed me hers once, and she had started at age 22. It made a big impression on me.
Q. At the other end of the age spectrum — plenty of financial advisers warn parents to prioritize their own retirement over their kids’ college. How do you explain that to a 16 or 17 year old who is applying for pricey schools and might accuse the parents of being selfish?
I’ve always found that advice a little misguided. The standard line is that you can borrow for college but not for retirement. Except that isn’t true; you can borrow for retirement via a reverse mortgage and huge numbers of people are going to have to because they won’t have enough money saved. That’s not a reason to skip saving for retirement, but we shouldn’t base our planning around outright falsehoods.
The best way to illustrate your priorities, however, is through storytelling. Perhaps there is a family member who needed a lot of financial or other support, where more savings would have made a difference. Their children may have had to sacrifice a great deal in money or time to care for that elder. If your goal as parents is to avoid ever being a burden to your children, say so. It may not be satisfactory to kids in the moment when their parents tell them that they can’t cut back on retirement saving entirely or at all to spare the child debt or the need to work a lot during college, but it may well be the right thing to do.
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