By J. Andrew Curliss
The News & Observer (Raleigh, N.C.)
Parents across the country say in survey after survey that one of their top parenting worries is teaching their kids about how to handle money.
Rachel Lindop, a mother of three in Fort Mill, S.C., said that talking about family finances has been “a worse taboo than sex,” and studies actually support that. For Joe Sebik, a teacher and father of two who lives in New Hill, N.C., the concern is how to arm his kids with ways to navigate a “consumerist” culture.
Both are awaiting the arrival of a new book, “Smart Money Smart Kids,” by author and money-oriented radio show host Dave Ramsey and his daughter, Rachel Cruze. The book is focused on helping parents raise “the next generation to win with money.”
In an interview, Ramsey and Cruze said parents should not feel overwhelmed or ill-prepared to instill crucial money habits in their children. Much of what’s needed is common sense and, if followed, will lead to lasting results into adulthood, they say.
Their concepts include making sure children work for money, avoid debt, save and spend their cash wisely, and that they share or give to their church or charities.
They advocate avoiding student loans for college and, in the book, offer ideas for a debt-free degree.
They also write about how to foster “contentment” instead of entitlement in children.
Parents who think they haven’t done well with money can still make a difference in their children, said Ramsey, who drew an audience of more than 2,500 to hear him speak on handling money last week in North Carolina.
“There are no perfect parents,” he said. “How do you teach your kid about marriage when your marriage isn’t perfect? How do you teach your kid about grades when your grades weren’t perfect? You not being perfect does not disqualify you from being a great mom or dad.”
Ramsey and Cruze join other authors, school administrators, nonprofit organizations, a range of businesses and even billionaire Warren Buffett in increasingly concerted efforts to provide children as young as kindergarten with more and better personal finance and money handling information and skills.
Seventeen states now require personal finance to be taught in high school. Six states, Colorado, Delaware, Georgia, Michigan, Missouri and Texas, now mandate testing on the subject, according to a survey by the Council for Economic Education.
“What we know is that we must start younger, you really need to start in elementary school in teaching financial concepts,” said William Cheeks, eastern regional director for the Jump Start Coalition, which focuses on financial literacy and has published a guide on raising “money smart” kids.
Buffett, chairman and CEO of Berkshire Hathaway and one of the world’s richest men, is on board. He has been working with Amy Heyward, president of kid-focused Genius Brands International, on a series of animated episodes with money messages that have been made into a curriculum-based program for use in schools. It’s targeted at 6- to 11-year-olds.
The program, “Secret Millionaires Club,” features kids navigating problems and adventures with money and business. They are shown on the Hub Network (formerly Discovery Kids) and are available as shorter webisodes online, where parent guides with tips are free. Buffett voices himself and appears in each of the 26 completed episodes.
Buffett sprinkles his philosophy throughout the shows. Examples: Debt can be a racket; save your money; never cut corners; show discipline. More episodes are in the works, Heyward said.
Heyward said she was having breakfast with Buffett a few years ago and he recounted that one of his granddaughters had turned 18, received a flurry of credit card applications, signed up for one and then “rang up a bill.”
Buffett thought it was “crazy” that his own family “was falling for it,” she said.
“It led to this discussion about financial literacy and just understanding how it all works,” Heyward said. “It’s really not a part of many kids’ upbringing. … Really, you develop your habits early in life and his feeling, which we shared, was to teach kids and help them understand kind of how the world works, how the business of life works and develop healthy habits from an early age.”
The program sprang from that.
Drawing from interviews with Ramsey and Cruze, Heyward and other experts who are focused on helping kids with money, as well as reports and research, here are four key tips for helping children with money.
1. Work equals money. It is vitally important that children realize work is the way to obtain money. Parents should connect chores to “allowance” or “commission” payments, many say. In the bestseller “Money Doesn’t Grow on Trees,” author and former banker Neale S. Godfrey writes that tying chores or other household work to money can result in “heated debate” but that children must learn the connection.
“Not only will the child someday work for money, but earning an allowance will underscore the fact that you, the parent, work hard for your money, too,” she writes.
Work is a necessary skill for life, Ramsey writes, and should be taught just the same as brushing teeth.
Many experts say an “allowance” tied to work can begin for children as young as 3.
2. Save, spend, give. A range of experts recommend helping your children think of their own money in three ways: for saving, spending and giving.
Within those, the important role of a parent is to coach and assist children in saving with a purpose and spending the money wisely. Many suggest children save 10 to 20 percent of a week’s allowance for the long-term future, and that they donate about the same. The rest can be spent, and letting kids make mistakes with purchases, within reason, is fine.
Some of the “spending” money should be earmarked for a bigger purchase that takes time.
“Patience is perhaps the hardest part,” write Steve and Annette Economides in “The MoneySmart Family System.” They recommend
“spending smart” through a process of planning, research, waiting and then buying.
They and others stress giving, too. It inoculates children against greed and teaches them to not be selfish.
Cheeks said children who don’t learn to save early on in life can end up in debt and have difficulty with money later in life.
3. Budgeting. Parents who use a regular monthly budget that “tells your money what to do,” are setting a great example for children, according to Ramsey and Cruze.
In “Smart Money Smart Kids,” Ramsey writes about how a wide range of money topics are covered in a nine-week course his company helps teach at churches and civic groups across the country. Of all the topics, Ramsey says, “the most important one is the budget lesson.”
It isn’t fun setting up a budget, he says, but “we’ve found that the budget is the single most-important factor among people who win with money.”
Cruze said that splitting up the money for saving, giving and spending is a good “budgeting” exercise for kids. As they reach teen years, they can begin to take more responsibility for more of the money that would be spent for their purposes. A written spending plan is crucial for managing the money.
She recommends teens get a checking account at about 14 years old. It can be a scary step for parents, but it’s an important one because children can then learn about banking and managing more money while still at home under parental supervision.
4. Wants, needs and contentment. Sandy Wheat is the executive director of the N.C. Council on Economic Education and has led the state’s Jump Start Coalition.
“The main thing that we can teach our very, very young children is the concept of delayed gratification,” she said. “If they’re not learning that at the very, very young ages, even preschool ages, they will have a more difficult time later in life being more disciplined about their money and saving for things.”
The Jump Start Coalition encourages parents to help children understand the difference between wants and needs. Appreciating the difference between a luxury and necessity “is essential for developing good money management skills,” the coalition says.
Ramsey writes: “If you want to raise money-smart kids, you have to raise kids who are content.”
He said parents should lead children toward feelings of gratitude and resist as much as possible cultural messages that suggest people are “defined” by their stuff.
Marketing and advertising foster discontent, he said, as children believe they need things that they really don’t. Erosive is the “endless comparison game,” fed by TV shows, Facebook use and focusing on “what everyone else has.”
To fight discontent, Ramsey and Cruze say, parents can take actions to squash it and find ways to show their children how blessed they really are.
“You want to take them down the road of humility to gratitude to contentment,” Ramsey said, “instead of self-centeredness, which leads to arrogance, which leads to entitlement. It is a money principle because it revolves around the issue of money in the sense that it’s where our discontentment shows up, in the acquisition of stuff to make us happy.”
PERSONAL FINANCE IN THE SCHOOLS:
The Council for Economic Education this year tracked a growing trend among states in requiring personal finance education in the schools. These 17 states now require high school students to take a personal finance course, up from one state in 2002: