Joline

The Allowance Take Two

An allowance is a good idea—it’s as useful a practice tool for first trust distributions to twentysomethings as for allocations to ‘tweens. But I know that if it feels too complicated and labor intensive to administer it may be abandoned before any effective learning takes place.

In Raising Financially Fit Kids, I shared principles meant to make the process accessible for parents and kids alike. For example:

• The allowance is a practice tool, not a salary or an entitlement.
• You don’t pay for contributing to the well being of the family by sharing chores (setting the table, feeding the dog, cleaning their own room, etc.). It’s a means of practicing “how to manage income” not just a mechanism for spending money.
• An allowance should not be so generous there is no incentive or interest in earning more. If you would pay a third party to do that chore (wash the dog, polish the silver—or your shoes, organize those old CDs, etc), offer them up as entrepreneurial opportunities to add to the child’s weekly income.
• Windfalls are income—not just “free money.” That gift from grandma, income from a tax return or the distribution check needs to be factored into the budget, not treated as a green light for simply spending.

Nevertheless, many families still struggle with making the process work.

Recently we drafted Tuck, a loving chocolate lab as another allowance coach. In some of our newest material, this exuberant dog introduces basic financial concepts using his bones as currency and his jobs—as rescue dog, newspaper carrier, guard dog, etc. as examples of how to manage his resources well. Tuck’s values (he protects his family and shares with other dogs), his love of food and play, and his sense of responsibility to others (he gives regularly to the Lab Rescue Ranch) have turned him into my new favorite allowance trainer.

So, if you’re ready to start—or “reboot’” a new allowance process, look forward to more of Tuck in the new year.

A version of this article appeared in the October/November 2011 edition of our client publication.

Why I Skipped Halloween

The lights were off at my house on Halloween. I was the Grinch of the holiday. Refusing to deck the steps with pumpkins and scary effigies and withholding all those candy corns was one of the saner decisions I’ve made in awhile. It was Fourth of July just a few minutes ago—and then, seemingly a nano-second later, Halloween was on my doorstep.

Time has gotten out of hand. It’s  not reality TV, it’s Reality Life: Full, over scheduled, with too little time to reflect and breathe. I see it in my friends. And the schedule we keep at IMI inflicts it on my colleagues. The families I work with  lead wonderfully interesting, but densely packed lives and children are scheduled within an inch of every 24 hour cycle. I had to cancel Halloween to gain a little space to think about Thanksgiving!

This brainstorm only came to me on Oct. 31. But in 2012, I’m taking my strategy further. There will be no Valentine’s Day cards from me; president’s birthdays will go by unmarked (I do respect them, I just don’t need to light candles for them); and once again I will let Halloween pass me by. The only days I’ll celebrate with vigor are the Fourth of July (who can resist fireworks and food outdoors?), Thanksgiving (the least commercial, best community building holiday), and Christmas (childhood fantasies die hard).

As the holidays approach and you’re feeling your own sense of time compression, you might remember my strategy and see what you can let go of.  Claiming time could be one of the best movements started in a while.

What About the Tooth Fairy?

I am the Tooth Fairy Foe. I don’t often admit to it, as the Tooth Fairy has a serious PR team that has done a great job of selling a heartwarming image of a tiny elfin thing exchanging cash for those endearing little pearls from sweet Sam or Abagail’s tiny mouth. Friends and strangers alike are aghast when I challenge the little dear.

But, please. The Tooth Fairy is an insidious little trouble maker. She innocently delivers the message to impressionable children that money is magic and then we’re surprised when they’re shocked to find the green stuff doesn’t grow on trees! (And yes, I feel sexist, but, really, who but these people imagines the Tooth Fairy as a guy?).

When working with families who have small children, I feel compelled to raise the red flag on the Fairy. It’s not that I want to kill childhood magic (I grew up on the Wonderful World of Disney and I’m as much a sucker for fairies and elves as the next child), but as the Tooth Fairy has negotiated for ever higher sums of money to be left under the pillow, I’ve grown suspicious. Do you REALLY think that young thing you tuck into bed doesn’t know the score?

This first came up a few years ago when a very cool mom related a Tooth Fairy tale in her neighborhood. Her daughter’s teeth had been coming out in the requisite way and for each tooth the gentle fairy left a $1 (higher than the coins of my day, but I understand inflation). Somewhere around the loss of the 4th or 5th tooth, the little girl went to a birthday party and in the course the chatter, somehow it came out that one of the children at the party had a Tooth Fairy who was leaving behind $5 for every tooth.

“Well,” the mom told me. “My daughter came home and wanted to know why HER Tooth Fairy was so cheap?”

“I didn’t think much about it,” she said. “But when the next tooth came out I slipped a $5 bill under the pillow and my daughter seemed pretty happy the next morning. And all WOULD have been fine until not too long after that she was on a play date with a friend and he confided he’d just gotten $20 from the Tooth Fairy the night before! Well, that was enough. I called his mother and asked what she was doing? Tooth Fairy inflation was getting out of hand and the one-upmanship among parents and fairies in the neighborhood had to stop somewhere!”

That was a brave mother. Setting limits on the Tooth Fairy was a good thing and rare—we don’t like to challenge other parents. But when peer culture starts to invade the sensibility of families, it’s time to be clear—and the Tooth Fairy offers such great possibilities that it’s a shame to squander her on easy cash transactions. So what are your alternatives?

Here are some ideas to inspire. I know there are many ideas out there and I hope you will share them with one another here in your comments.

1. Leave a note: “Dear Abigail, Your tooth makes a great scooter for little fairies, thanks! In exchange for letting us have this, you get to have dessert before vegetables one night this week!”
2. Fairies are impish things. Take the tooth and sprinkle a little gold glitter (found in any drugstore) or confetti around the child’s pillow. Note: “Good morning, Sam! We voted at Fairy Council last night that you’d get a very special day. Sprinkle fairy dust somewhere outside and do one nice thing for someone today. Wait to see what happens–magic often follows generosity.”
3. Use notes to create a Tooth Fairy Treasure Hunt. 1) Under the pillow: “Look under your bed. Signed, The Tooth Fairy.” 2) In a small box under the bed place a stone painted with another instruction: “Look on page 60 of your last Harry Potter book. Signed, The Tooth Fairy.” 3) Slip a note into the book that says: “Check your jacket pocket. Signed, TF.” 4) In the pocket put a Reese’s Peanut Butter cup with a note that says: “Just one small peanut butter cup. Too much candy isn’t good for those new teeth you’ll now be growing! Signed, TF.” (Obviously you can get as elaborate as you like with the hunt, but ending with a little sensible fairy advice is the key.
4. For children on the verge of disbelief, another pillow note: “Dear Sam, I notice you’re done with the teeth thing. It’s been fun. Take care of your new teeth (they’re important). I’m off to encourage little kids to trade their teeth for a few good deeds. Have a good life. Your friend, The Tooth Fairy.”

The idea is to begin to switch cash for teeth to good deeds and adventures for teeth. Use the Tooth Fairy as an inspiration for adventure and creativity, not just a broker for magic money. And if you do decide to leave a few dollars for one of the teeth, make sure the Tooth Fairy suggests the money be saved or used to make a difference somewhere. The Tooth Fairy can be a great teacher, not just a magic way for a kid to make a quick buck.

In Defense of Spoiled Brats: How to Raise Next Gen Leaders

Children of the wealthy have been caught in the headlights recently. The Atlantic recently reported on The Secret Fears of the Super Rich, a study originating out of Boston College’s Center on Wealth and Philanthropy that points out the high level of anxiety parents have about transferring capital to their children. They don’t want to take away the incentive to work or otherwise burden their kids. The NYT’s Bucks Editor comments on a thoughtful Paul Sullivan column with the headline: Keeping Affluent Kids from Turning into Brats, and the respected consultant Lisa Grey recently asked in her blog, Does Wealth Really Spoil Heirs?

From Silver Spoon Kids to The Price of Privilege, families—and experts—are vigilant to the tendency of kids to “spoil,” like apples or strawberries that grow soft and mushy if not kept properly chilled. I am not naive about the impact of wealth on the social and psychological lives of children. I see the same things all the experts see and families worry about.

But I see them differently.

Wealth does not spoil children. It does not make them decay and grow rotten. But like a strawberry left too long unattended on the kitchen counter, children who do not receive thoughtful coaching, consistent mentoring, world class instruction, and copious support to use family wealth (and by this I refer to the human capital of the family—TRUE wealth—as much as the financial capital) are indeed vulnerable to the dangers that accompany financial amateurism.

It is self-evident that one does not send a child onto a tennis court with a racket and no prior instruction to play world class competitors like Roger Federer or Serena Williams. And you don’t have to be a Tiger Mom to know you don’t send a kid onto a recital stage to perform without providing a great instrument, proper teaching, and ample practice.

But when it comes to the so-called “spoiled brat”—there is a sense that wealth or the oblivious child, is the problem. And instead of providing world class instruction, families react in fear, withholding or limiting the scale of their gifts, potentially robbing the next generation of the possibility of becoming the next visionary philanthropist, the next world class artist. Kids who receive training commensurate with the resources of the family have the potential to develop the skills and capacity of leadership, bold vision, and deep compassion.

I am a Maine girl, born and bred. Frugality and a strong work ethic are the human capital I inherited from my grandparents and my mother (she was an early, minor version of a Tiger Mom). I have a romantic ideal of the power of “overcoming odds,” and “pulling oneself up by one’s own bootstraps,” etc. But if you really listen to kids who grow up in the context and culture of their family’s wealth, you know they have their own hardships to deal with. Yes, I know the violins are playing and few people have much sympathy. I’m just saying: kids who have wealth need education to accompany it. They can do great things if they are not left to “spoil.”

I boringly remind colleagues and clients, endlessly, that every family has good intentions to raise financially thoughtful kids. Great families are intentional about providing continuous financial coaching, mentoring, skill building and knowledge.  Children who will inherit capital are—whether you like it or not—world class beneficiaries by default. And they require—and deserve—the same thoughtful support we would give if we identified an early facility with golf, a great voice, or an ability to play chess.

Preparation for the responsibilities of wealth is not an amateur sport—it is serious work. I know, save your outraged tweets. I  hear the rebuttal now: “I want my child to be a kid! I don’t want them to just think about money!”  Families who raise kids with great values communicate that life is not just about the money by the behavior they model. They provide good solid boundaries for their kids and at least as much instruction for financial skills as they do a tennis swing. Wealth corrupts—and children spoil—when they are left without guidance and support and tools.

What We Must Do

I’m a proud Boomer—proud of the technological marvels we helped to usher in; proud of how, as young people, we helped foster awareness of environmental issues and minority rights; and proud of our cultural contributions (I’ll take my Led Zeppelin LPs over Lady Gaga MP3s, thank you). But those contributions will mean little if we leave behind a debt load that makes it impossible for the next generation to fulfill our youthful visions, let alone our more restrained hopes for a promising future for our children and our children’s children.

Between federal, state, and personal deficits, we owe trillions of dollars to the next generation. Back in an October Atlantic piece titled “The Least We Can Do”, columnist Michael Kinsley urged Boomers to “pass on to the next generation an America that’s free from debt … as an age cohort [we],” he says, “should just grab the check and say, ‘This one’s on us.’”

Kinsley has a plan. Collecting just 20 percent of an estimated $41 trillion that is expected to pass from parents and grandparents to children and grandchildren before 2052 would generate $8 trillion, he says. Of course, this means people will be taxed twice, “but that’s the idea. That’s what you do because you didn’t have to fight in World War II.”

I’m doubtful about the mechanics of Kinsley’s solution (which he admits are uncertain), and when he writes that this would be a sacrifice for which we could say, “You’re welcome. Just don’t let it happen again,” he misses the point. Paying down debts—by whatever implausible means for whatever well-intentioned reason—doesn’t prevent them from accruing again.

A change in culture can be the antidote that keeps on giving. As parents and grandparents, Boomers can leave behind an ethic of sustainability that will actually make a difference for generations. Children (including adult children) raised with values of financial respect and capacity, children who are raised to acquire more than “stuff”, who understand financial responsibility as a family value in a deep way, make ethical choices that have lasting impact.

I know this because I have the rare opportunity to see families in which this works—really works.

Every family has good intentions about raising kids with sound financial values. GREAT Families are intentional. As “savers”, Boomers, Generation X, and the Greatest Generation, haven’t shown much intention.

Since the mid-‘80s, personal savings rates have plummeted, reaching less than 2 percent of disposable income in rosy 2005. The recession made us slightly better—in the second quarter of last year, we were back up to around 6 percent, a level not seen since NBC was still airing new episodes of Cheers—but we have a long way to go.

Kinsley’s solution may be radically unworkable, but his vision is bold, his intention is right— and he is at least laying down the gauntlet to get serious about what our legacy to the next generation should be. What I do know from our clients is that sharing—and LIVING sound financial values works.

Ensuring that they are raised in a culture of savings is not the least we can do, it is what we must do. The ripples we make by setting a good example and being intentional about the values we transmit will last for generations.

A Journey to Somewhere

I ended 2010 by going to see “The Tourist.” The reviews were awful, but Angelina Jolie and Johnny Depp did their best to channel Grace Kelly and Cary Grant in a romp around Venice and it was a great holiday indulgence.

I won’t get another chance for such carefree hours for a long time. And in part that’s because I started the new year with a very different movie: “Race to Nowhere”, produced and co-directed by filmmaker, and not incidentally, mother, Vicki Abeles.

The film, which has been praised by The New York Times, Oprah, the Washington Post, and school groups nationwide, casts a harsh light on the nature of education students endure as routine. Though the focus of the film is on private schools, the message, that teaching geared to standardized tests is doing too little to give kids real learning experiences and too much to heighten stress, is as much an indictment of the public school system as the private.

Abeles is a gifted storyteller and from the opening shot of students swarming up and down the staircase of some anonymous high school, the lyrics to “Nobody Knows Me At All” playing eerily as backdrop, she pulls you into the problem: “I can’t remember the last time I had a chance to go out in the backyard and just run around,” one adolescent girl tells us, looking straight into the camera. “School is just so much pressure that every day I would wake up dreading it,” says a teenage boy sitting at a desk in his bedroom.  “I’ve sat doing my homework and just started crying,” says another.

The first minutes of the film are tricky. The viewer will either feel compassion for these beleaguered children (“My mom checked me into a stress center,” says one young woman, in tears) or impatience. “Buck up! School is hard; we’re competing globally,” some viewers will be tempted to respond. And early on Ann Appert, a school trustee from an upscale community in Northern California states the obvious: “Some of the pressure is real: if you want the same opportunities your parents had you’ll have to do more: you have to have better grades, more activities. It’s the pressure of the demographics.”

But Abeles tells us, “I started to see the toll that the schedule and the stress was taking on them [her three children]…our oldest daughter looks like all is well, but she doesn’t have time to sleep at night or to hang out with friends…”  And then she drops a bomb: a 13-year-old girl in the community committed suicide due, we find out, to her inability to be perfect, to get a particular math score.

Abeles is not an over-anxious mother. She is a smart woman with a drive to pursue hard questions. “I wanted to understand what was going on,” she tells us.  ”I started talking to parents, students, experts. I visited schools across the country. I was determined to find out how we had gotten to a place where our family had so little time together and kids were physically sick and a 13-year-old girl had taken her life.”

The film documents her quest to get those answers.   She takes us behind the symptoms and illuminates a mad, AP test-driven culture that makes kids sick, teachers despair, and overwhelms family culture, without doing anything to make kids more competitive in the global marketplace. “Race to Nowhere” is an important film but I was slow to get the connection between the story Vicki tells and what we do at Independent Means. The connection is important.

Solutions to the challenges of 21^st century life won’t be found on multiple choice tests or by cheating to attain top grades. “The point of education is to learn, not to memorize,” says one teacher, as though that were not self evident—and of course in today’s system it is not.  At Independent Means, we don’t grade the kids we work with. We don’t ask what their grades at school are. It doesn’t matter. We meet them at whatever their level is, create a learning environment and proceed from there. Mastery, discovery, and insight are our goals, not a number or a grade average. Whatever their level, we work with it; whatever their interests, we identify them and use them as learning tools. We call this NORMAL.

I forget this is not the standard nature of education. Rarely do kids see their mission and purpose clearly when they are young, but helping them explore possibility and knowing that learning can be satisfying when connected to purpose is critical. Building an environment and relationships within which they can learn is vital.

Encouraging inquiry, play, curiosity, and passion is at the heart of real education and as important to building great communities as to building great families. At Independent Means, we don’t use standardized tests to assess progress. We don’t pit one kid against another.  And we don’t define success as doing better in the mastery of skills and experiences as a brother or sister. Instead we listen to children’s goals and dreams. We can SEE them learn when they are having fun, when they are engaged and engrossed. When they are in that state of “flow” so brilliantly described by Mihaly Csikszentmihalyi.

Abeles is not an advocate for easier schools. She is an advocate for learning that enhances and encourages the kind of creativity that will be required to solve 21^st century problems. She is an advocate for schools in which young people flourish, rather than collapse in the face of misguided policies and an homogenizing culture. She is a loving parent who wants the best for children. That should not be such a radical idea in a country famous for innovation and creativity.

At the end of the film, Blue Man Group founder Matt Goldman asks, Why can’t happiness be a metric, as much as math or reading scores?”  Goldman’s very successful company is built on principles of play and discovery. And, he announces, “It’s a crazy idea, but we’re starting the Blue School for children. The school’s mission is to cultivate creative, joyful, and compassionate inquirers who use courageous and innovative thinking to build a harmonious and sustainable world.

Now THAT’S a journey to somewhere.

Find (or request) a screening of Race to Nowhere near you.
Learn more about Blue School.
Or learn more about our approach to financial education.

What to Say When They Say “…But It’s My Money!”

Some time ago, a woman named Laura approached me about a situation concerning her son, James. She told me that he has an after-school job, but he spends the money he makes as soon as he gets it. Laura said that when she encourages him to save, he says, “It’s my money, Mom … I can do what I want with it!”

How can Laura help her son become more responsible? Well, “my money” is one of those phrases that often put parents on the defensive, shifting power from parent to teenager. In truth, unless your son is completely self-supporting, the money he earns is “practice money” or money that will give him a chance to demonstrate how responsible he can become.

Consider the following script. In this case, Mom is proactive. Instead of waiting for her son to tell her how he’ll use the money, she sets out her expectations and helps him understand the responsibilities that go with the privilege of earning money as a teenager:

Mom: James, tomorrow is payday for you. Is that right?
James: Yes, and I’ve got enough to buy a new cell phone. It’s totally cool.
Mom: That’s great, James. Do you mean you have enough after you’ve put away money for savings as well as a contribution to _________(church, charity, etc.)?
James: What do you mean? This is my money. I can do whatever I want with it!
Mom: James, it’s a privilege to be able to work—and you can keep on working as long as your grades are satisfactory and you demonstrate that you can manage money with good judgment. Let’s create a plan for you so you can buy some of the things that are important to you, while you also show us that you are responsible about saving, giving to the church and/or charity, and thinking about your future.
James: Do I have to?
Mom: Yes. You have to—and we can even have some fun doing it. What’s a good time for you? I’m free now, or we can do it later this afternoon.

In this scenario, Mom is clear about her expectations. She lays out the rules and sticks to her guns about what James can and can’t do with “his money.” James would rather indulge his immediate desire for a new phone, but he gets a much needed explanation of how responsibility is linked to the privilege of making money—and Mom sets out the action steps for planning that are immediate and real. These steps may help in a variety of situations—whether your teen currently has a job or is planning to work this summer.

Subsidizing Lifestyles vs. Investing In the Future

It was clear few of the women at the luxurious spa had small children. Curious, I asked what drew them to a talk entitled “Raising Financially Fit Children,” thinking grandkids might be the impetus. Overwhelmingly, though, their questions emerged from the dilemmas of subsidizing adult children.

It wasn’t that they couldn’t afford to help or didn’t love their children. They all recognized it’s vastly harder to buy a house or fund private school in the current economy. Still, they wondered, where was the limit? Unspoken was the haunting question: when will I be free to pursue my own needs?

Parents often subsidize adult children. Whether providing special gifts that exceed a young family’s budget or loaning money for a down payment, one of the great benefits of family is economic assistance. But there’s a difference between the strategic assistance of investing in a child’s future, and the ongoing subsidy of a lifestyle that cannot be sustained on its own. The former is a privilege of family. The latter results in unintended consequences that are well documented, such as undermining self-esteem, prolonging adolescence, and reinforcing habits of denial.

How do you tell the difference? No doubt your own instincts are giving you clues. Are you concerned your adult children are not making good financial decisions?

Do you see no end to subsidy? Do you worry about how they will manage inherited capital?

You know the difference between feeding a bad habit and supporting good sense.

To shift from sympathetic enabler to strategic partner can be wrenching, but it’s not impossible. From my experience, here are four essential steps to making the jump successfully.

1. Insist on a plan for transferring responsibility for their lifestyle choices back to them.
2. Establish an explicit timetable that will end financial reliance on you.
3. Define the parameters of any economic assistance you will give in the future.
4. Talk about why you’re changing course now. Share your values and concerns.
5. Be loving, but firm. You want to affect growth, not punishment.

Shift your intention to investing in their future, define how you are willing to do that, then, like the long-term benefits of compound interest, watch them reap the rewards.

What Do You Do When You Can Afford to Lose Money on Your Kids?

Last week, Ron Lieber wrote a great piece about the $2 million investment that Georgia’s gubernatorial candidate, Nathan Deal, put into his daughter and son-in-law’s business. The failure of that business, a subsequent loss of the investment, and bankruptcy, is making Deal’s run for governor of Georgia a lot more challenging than it needed to be. One commonsense conclusion Lieber draws from this tale of fatherly support is: don’t invest money you can’t afford to lose.

But what if you can? What if a few thousand, or a few million dollars in an entrepreneurial education is feasible—and seems like a good thing to do for a highly motivated kid? Let’s assume that amazing twentysomething you raised has a good idea, lots of energy, and great passion—maybe even some relevant experience. They pitch an idea. How do you respond? I know  families for whom the investment in a child or in-law has been a great experience. The kids make money; the family realizes a return and pride reigns in the family. The next generation is focused on wealth-building, not just living on legacy. How great is that?

With twentysomethings facing an unemployment rate around 15% (for 20 to 24-year-olds), starting a business may be a good alternative. Developing the next generation’s entrepreneurial muscle is exactly what families need to do. But whether you have a daughter poised to make a breakthrough in neurotechnology or a son with rock star ambitions, helping them make their dreams financially sustainable is as important as encouraging the dream itself.

So if you can afford to support the dreams of the next generation, how do you make it work? Children of means have an abundance of opportunity—philanthropic and commercial. Friends, relatives, and strangers who think your kids have large pots of “discretionary” funds will provide endless opportunities to “make a difference” or be “in on the ground floor”.

Last Sunday, Nick Kristof shined a light on what he calls the DIY Generation: young people who see problems around the world and decide to fix them with their own NGO, using their intelligence, their social networks—and their own (or their family’s) financial resources. Venture opportunities don’t just come from outside, many kids think up there own “investment opportunities.”

So Sally or Sam come to you with an idea for an enterprise, commercial or philanthropic. What do you do? How the “investment” in the first lemonade stand was handled is a clue to how families will handle investments in adult children. If you practiced what Lieber refers to as “radical honesty“  when they were seven, the practice will seem like normal family policy today. But if you bought all the ingredients for the lemonade and then purchased the finished product so your kids could make some money, a refusal to make an investment in an adult idea may feel like a betrayal.  (Don’t let that deter you now—they’ll get over it.)

For each family there is a specific set of responses regarding how to respond to an adult child’s request to invest in their business. But there are also a few universal guidelines:

• It’s self evident that making an investment in an adult child, no matter how accomplished they are, without doing due diligence is a bad model to set. If they actually are going to run a business, they will need to do due diligence in plenty of instances. This is the act of a good mentor—and may turn up information that could help their business success. Just do it and don’t write any checks until the process is complete.
• Treat them as the adults they are (even if their own self image is less than “adult” just yet). They want adult responsibility; give them the respect and obligations that accompany that. Ask the hard questions; insist on a serious, rigorous business plan. Give them the help they need to create a solid plan if necessary, but making an investment based on hopes and promises does no favor to the would-be entrepreneur. It’s a set-up for future failure.
• Think about family policy. What practices have worked in the past and what precedent might this set? Exceptions are fine, but where family policies are clear and explicit, next-gen entrepreneurs can be prepared for what they have to do to get a family investment.
• Avoid crisis investments with your offspring. However much you want to protect them from the harshness of business, early failure offers a bounty of opportunity to learn. Even if you can afford for them to lose a healthy sum of capital, the lesson is that you will subsidize them, not that they will gain strength by making hard decisions and learning from their experience. Often the imperatives of due diligence, healthy balance sheets, and financial sustainability, come in the second business, not the first. Don’t rob them of teachable moments by protecting them as though they are still children.

Many investors say they invest in people, not ideas. If your kids are not yet those people, help them become the person you will invest in. Say, “let me help you get ready”, not just “no” or, worse, “yes” with misgivings.

Tyrannical Kids

“Oh, Ted would never do that…”
“They’ll just make fun of me…”
“My kids beg money from their grandparents and then ignore the allowance plan we put in place…”
“They just laugh when we suggest they look for a job.”

It’s completely reasonable: We want our kids to be happy. We want harmony. But with so many other issues to take a stand on at home…when Zack or Annie or Jason resist parental efforts to establish financial limits, we back off. After all, he/she doesn’t really have to worry about money. Right? What’s the big deal? She’s young; he has plenty of time…

We don’t talk much about the tyranny of children. It’s embarrassing–comical in a dark way. But adults who are leaders in the community or effective executives at work–powerful outside the house–are often frustrated about feeling ineffective in their own homes, undone by small children and disrespectful teenagers. Rather than confront the bullying behavior of kids, we turn away or nervously laugh it off.

Tyrannical kids aren’t necessarily bad kids. They may get good grades, love their parents madly, have lots of friends, be popular and, in many respects, be delightful company. But this just makes it tougher to counter children’s manipulative bullying.

Children play out their resistance to parents’ requests for financial responsibility in any number of ways. But whether it’s ceaseless requests for more money, money spent in unapproved ways, pressure to get something because it’s a ‘must have’ item, moodiness in the face of any attempt to set limits, meltdowns when they feel a challenge to their financial lifestyle, rudeness or lack of gratitude for gifts and privileges, these behaviors are all ways children can and do dominate their parents.

Although surrender is tempting, there are consequences. Children who can but won’t handle an allowance will be ill prepared to handle a trust fund. Playing the heavy when it comes to financial behavior is no
less critical than making sure kids’ nutritional needs are well met. No responsible parent would let kids eat candy without restriction because that’s the task of being the grown up: to exercise judgment and set boundaries for children not yet able to do it for themselves. However, with regard to money–when plenty of families can satisfy the smallest and largest whims of their children–one dad plaintively asked, “I can afford to give my kids whatever they want. What’s wrong with that?”

What’s wrong with that is that children unaccustomed to the discipline of making thoughtful financial choices or living within limits connected to financial values fail to acquire skills that will help them become independent and self sufficient. Kids who are not required to seek meaning in something other than “what I wear, what I drive, what logos I display,” etc., often become dependent on externals to define “who they are.” They may spend years searching for the self-confidence and well-being that accompanies a healthy regard for something bigger than ourselves, something more important than the “stuff” on which we spend money.