Financial Parenting and “Good Enough” Practices

Helping Families Thrive by Joline Godfrey

joline1

Parents who aspire to be effective financial mentors to their kids are likely to encounter two obstacles that can feel insurmountable: time and talent. Let’s face it – some days it’s a triumph just getting kids out the door with their clothes on and teeth brushed. Extra time to offer a financial mentoring session is pretty elusive. And since most parents got short-changed them selves when it came to getting good financial mentoring, passing it on is not a walk in the park.

I can share a lot about best practices in financial education in families, and am always happy to do so with any family that’s interested. But lately I’ve been thinking about good enough practices – financial mentoring that makes impact without making parents feel inadequate or leaving kids financially illiterate.

Good enough practices aim to build a consciousness that lingers in a young person’s daily life, while creating a platform they can enhance on their own… or use as a base when the need becomes urgent. (For example, independent travel where financial awareness may equal safety; or college where it will pave the way to independence).

With this in mind, I’ve been working on two good enough practices: how to manage an allowance and how to raise a generous child. I’ll be introducing these methods at a workshop on Bainbridge Island on January 19, 2017 but in the meantime, here’s a preview of my thinking. As ever, I welcome comments and feedback.

The ‘Good Enough’ Allowance

Starting an allowance is easy; sustaining it is hard. Kids will outsmart you. Every time you think you’ve set a rational rule for making it work, they’ll present you with a new situation that will challenge whatever you thought you had handled. Or you’ll forget, or procrastinate. Hard enough to keep your own finances sorted – now you have to do it for your kids too? It’s easy to say, “We’ll catch up next week,” but then you transmit the message that the allowance isn’t REALLY important, but rather a passing fancy you’ve decided to burden them with.

And finally, kids have cash flow problems just like we do: no birthday gifts to budget for this month, but four next; or no school break this month so less time to spend cash; but the big ski trip over winter break is coming up with all kinds of ways to spend!! And when you ask, “What did you do with the money from last month?” you’ll get a puzzled stare.

How then to teach kids how to manage money so it doesn’t burn a hole in their pocket OR get stashed in secrets hideaways while you steadily dole out cash?  We begin by facing the reality that your kids already have an allowance, and you’re managing it!  Every time you pay for their iTunes or Pokemon subscription, each time you put their movie ticket or a music lesson on your credit card, you’re giving them money – it’s just invisible to them… and all too apparent to you!

There are good reasons to start an allowance. One is to help kids develop the capacity to handle real financial information responsibly. Parents may fear letting their kids know much about family finance because they don’t trust their children to be discreet, or to grasp financial details in context. Both are fair concerns.

But a thoughtful allowance ­– even a good enough one – gives kids practice. By making the small transactions of their lives visible – and consequential – you provide a chance to master cash flow, decision-making, leadership – the ability to discern wants and needs – and to demonstrate maturation and judgment in regard to transparency. If a 12-year-old can handle $100 a month, budgeting for entertainment, snack money and iTunes purchases, in three months he may be ready to manage $300 and take charge of more decisions, like clothing purchases or handling transportation costs. It’s a lot safer – and more useful – for kids to learn from a $300 mistake at 12 than a $3,000 mistake at 20.

BTW, this is a longer conversation, but giving a 12-year-old responsibility for $100/month is not the same as giving them $100 in cash. Parents often stop breathing when they hear the numbers I suggest. But add it up: you probably spend more on invisible expenditures for kids than either of you are aware. You don’t have to give them cash to give them decision-making power – just show them receipts or credit card statements (with your personal expenses blacked out). Make what they spend more transparent so they can see the patterns of their spending, as well as the limits of that spending. Reality can be very effective with children; truth works.

Fundamentally, launching an allowance is a choice to shift from giving kids invisible money to letting them in on real life. Young adults often quietly ask me if they should be spending $1,500 a month on their first apartment of $5,000? Is it reasonable to lease a Mercedes or should they buy a used car? These are not stupid kids. Generally they’re young adults who have no experience or context for appreciating what things cost, or what’s reasonable in the context of a family budget and values. If parents pick up the tab for everything, how can their children know the cost of anything?

Most everyone intuits that the allowance is a teaching tool. What is often forgotten though is that the best allowances are developmentally appropriate – tuned to a child’s readiness more finely than to their actual age. Your four-year-old, for example, doesn’t need to know the size of the mortgage or the family income; it’s enough they begin to recognize coins and acquire a financial vocabulary: save, share, spend carefully. But if your 16-year-old is eager to start driving she needs to know the real cost of responsibility: not just the cost of gas, but how much it costs to maintain, clean, pay registration fees, get the oil changed, and pay the parking ticket. If your 14-year-old pleads for a horse and you’re ready to provide it, have him sign the checks for the stable, vet bills, food and lessons. Helping kids understand that a purchase is accompanied by maintenance and opportunity costs is one of the big values of giving kids an allowance. In the good enough practice, an allowance is a vehicle for conversation, not accounting 101.

That said, good enough still requires mindfulness. When parents tell me they’re using the “three bucket” approach (give, spend, save), I try not to sigh. It’s a convenient formula to remember, but by the time a precocious child is ten, they confuse kids who discover almost immediately that those tidy buckets don’t accommodate their already complex lives. (That next videogame costs way more than a year’s worth of allowances, and why did dad pay for the movies last week and now he says I have to pay for myself?).  And families who make up formulas that have nothing to do with reality also confuse their kids. (If it’s a dollar for every year of age, does that mean I get $20 a week when I’m 20?)

A good enough allowance program also requires clarity about your goals. Do you want a kid who can balance his/her checking account down to the penny or one who understands that living within one’s means is a family value? Do you need your children to demonstrate they’ve saved enough to buy their own smart phone or that they understand the hidden costs of that phone? An allowance is a means of communicating the family’s financial values: do you stress living within your means or is ‘carpe diem’ the operative message? You can’t expect kids to be frugal if your actions aren’t aligned with your words.

A good enough allowance includes clear messaging of financial values, transparency about what things cost, and conversation about choices. If Sam wants those new VR goggles, spend a little time talking about what they cost, the relative value of different brands, and how much money he needs to contribute to the purchase. How will he earn his share? How long will he wait? Will you pick up a bigger share of the cost of he manages his impatience for four more months?  Does Jeanie want to attend Comicon next year? Review the actual costs of such a trip with her: from travel to registration, food, and merchandise. Have her do the math and add up the actual costs of the trip.

A good enough allowance is more about meaningful conversation than strict adherence to a monthly balance sheet. Don’t get me wrong, there’s a place for that balance sheet too! You just don’t have to beat yourself–or your kids–up over it right away if you are engaging in real conversations about how choices impact family life. And this is true no matter the wealth factor in the family. “Just because you can, doesn’t mean you should.” is a mantra as relevant to a child growing up in abundance as to the kids whose parents struggle to make ends meet.

A ‘good enough’ approach to nurturing generosity

If the good enough allowance is about awareness and conversation, the good enough approach to nurturing generosity is about inspiration and possibility. Handing today’s more worldly (if not wiser) child an amount of cash with encouragement to “give it to a cause you care about” teaches that solving problems is easy – I just give away money someone else gives to me. Talk about unintended consequences!

More effective –and fun – is real inspiration: bringing young people face to face with real needs and role models in a way they are moved to take action on their own. Experiences and mastery of action helps kids develop identity and solidify values, forging clarity about what matters. Inspiring young people is not about giving them choices (do you want to give money to the zoo, the humane society or toys for tots?) and letting them send a check. It’s about helping them discover what moves them, makes them joyful or energized enough to spend time walking the dogs at the humane society, collecting toys from neighbors for those tots, or forging an agreement with you to forgo movies for a month in exchange for buying a warm blanket to drop off at the homeless shelter. Inspiration is, to a certain extent, empowerment. It’s the process of showing kids the warts and worries of the world and letting them know they have a shot at removing those warts and taking care of the worries… then letting them do it.

Finding ways to inspire children is not quick. It is the patient, persistent process of noticing opportunities to demonstrate generosity in your own life and sharing those with kids. And when time is in short supply and it’s not clear what will spark a child’s generosity, exposing them to a wide range of catalysts can be informative, even when they fail to inspire. The ideas below are easy – before you set up a donor-advised fund, or hand the kids another $100 to ‘give away,’ try these tactics to inspire. Though nothing may take right away, it will be the steady accumulation of conversation, messages and ideas that, one day, will jolt an action that may seem completely disconnected – but will be traceable to the time you put into inspiring kids in active ways.

We begin by hijacking the screens they are already into. This is a way to share screen time with them. What is generosity after all if not about sharing? Here are a few screen experiences I like. I hope you will send me other examples I can share with families.

But sparking a conversation – and maybe inspiration – about generosity can take more than 18 minutes. Use movie time as another tactic, and don’t worry if you’ve seen the films listed below before. Watching a film with a specific conversation in mind offers a fresh viewing. Here are six, and of course there are hundreds more in the archives!

  • Pay it Forward, with Kevin Spacey. A teacher gives a young boy a chance to make the world a better place.
  • Millions, film by Danny Boyle. Brothers discover millions of dollars and have to decide what to do.
  • A Bug’s Life . A misfit ant has what it takes to save his community.
  • Life is Beautiful. The selfless good humor of a dad saves his son.
  • Radio. A coach takes a developmentally disabled young man under his wing.

Each of these films spark questions like:

  • What do these characters have in common with you? How are they different?
  • What qualities did you admire–or not, in the characters in the movie?
  • Do you think people can make a difference? Is that something that’s important to you?
  • What would you like to see our family do to be generous with one another, with our friends, and in the community?

And when you and your kids are ready, going to the next level of engagement will be more meaningful. The nature of generosity has evolved over the last decade. Charity – or handing out free fish – is viewed with less enthusiasm than new forms of philanthropic enterprise: teaching others how to fish. Crowd-funding, impact investing, social entrepreneurship and strategic philanthropy are all tools families employ to have impact on what appear to be intractable issues (hunger, drought, disease, housing, education, etc.). To be generous is not enough; now one needs to be generous and knowledgeable, generous with wisdom and commitment, and generous and strategic.

I am not an advocate of stand-alone philanthropic education. If children don’t develop skills to manage a thorough due diligence process, they’ll have a hard time ferreting out a truly worthy or effective cause from one that is less impactful. If they don’t learn the basics of financial sustainability they will have a harder time discerning which non-profit is using its resources most effectively. And if they don’t understand how to read a balance sheet, they may not be able to detect whether the organization they support is worthy of their investment. For all these reasons I’m an advocate for financial fluency that is as relevant to learning how to invest as to giving money away. But one organization that sets the standard for teaching young people about generosity is Youth Philanthropy Connect. When you’re ready for more than good enough nurturing for generosity, check out this organization.

As my close friends know, I’m a sci-fi chick. I’ve been reading science fiction since I was a kid as it has always been a way for me to look down the long tunnel of possible futures. So I recently binge-watched the National Geographic series, Mars, produced by Brian Grazer and Ron Howard (I recommend it). As compelling as the series is (a seamless integration of science and science fiction) the quote that stays with me came near the end: “Colonizing Mars is probably impossible,” one astronaut says to another. And as he walks away he adds, “But what good would we be if we didn’t try?” That quote sums up much of my view of life: what good would I be if I didn’t try?

When it comes to kids and financial literacy, as well as their generosity of spirit and giving, what good would we be if we didn’t try to nurture that knowledge and those qualities in them?