LUTZ BUSINESS INSIGHTS
The Opposite of Spoiled: A Book That Helps Parents Talk to Their Kids About Money
JOE HEFFLINGER, DIRECTOR & INVESTMENT ADVISER
Last year as I was driving my 2 daughters (ages 6 and 4) home from an event, we stopped next to someone driving a red Porsche. I pointed it out to the girls and they thought it was pretty awesome and both said they wanted one when they grow up (note to self: next time point them out an old Honda Accord instead). Obviously neither of them had any idea what a Porsche was and both were more interested in the fact that the car was red and a convertible. It sparked my curiosity though. “How much do you think one of those costs?” I asked. My oldest gave it some thought then guessed “$100?” My youngest countered with “a thousand million!” How exactly did they anticipate paying for these cars? My oldest said “with a credit card” while my youngest pondered it for a bit before replying “daddy!” meaning she thought yours truly would buy it for her.
The Struggles Parents Face
If you’re a parent, I’m sure you had similar interactions with your kids when they were around these ages, and other variations as they got older. This particular instance was more comical than anything (except for the credit card response, that was definitely cringe worthy). However, there are many other money-related questions that our kids can ask which can be quite perplexing for us as parents to try to answer. “Are we poor?” You may hear that one after they see one of their friends with the latest gadget or play at a friend’s house which is bigger than yours. “Are we rich? How much money do you make? Why does that man on the street asking for change not have any of his own money? Shouldn’t we give our second home to someone who doesn’t have one? Why don’t we have a second home?” The list goes on.
When it comes to talking to our kids about money, it can feel at times as though we’re wading through a field of land-mines, trying not to make a wrong step. Although I’m a financial planner and my wife is an accountant, I can assure you we sometimes fumble through these discussions just as much as others probably do. And, like many of you, we also sometimes struggle with how much is too much, meaning how do we as parents balance our desire to provide our daughters with the things they want (toys, clothes, gadgets, etc.), the things we want them to have (a good education, participation in various sports/other activities, family trips to broaden their horizons, etc.) against not wanting them to grow up with a sense of entitlement or ignorant of the struggles of others less fortunate.
Help is on the Way
It’s with this backdrop that I recently read the book “The Opposite of Spoiled: Raising Kids Who are Grounded, Generous, and Smart about Money.” Written last year by Ron Lieber, a notable personal finance columnist who now writes for The New York Times (and before that The Wall Street Journal), the book aspires to be a sort of reference guide to help parents navigate the murky waters of talking to their kids about money, along with ideas on how to instill in them some of the values which we hold most dear along the way.
Lieber conducted his research over several years, traveling the country to talk about these issues with parents of different backgrounds and means, and assembling and curating the different studies and other books written on these topics. He starts out by arguing there is an “epidemic of silence around money that persists within many families and otherwise close-knit communities.” He then points out that, while those less fortunate typically do include their kids in money conversations out of necessity, parents of means too often avoid the topic altogether. He offers several explanations as to why this may be (and why those reasons are often misguided) and why he feels that fostering a more open dialogue on these topics is beneficial for all involved.
What Makes a Kid “Spoiled?”
He then gets into the root problem that he attempts to address, namely the fear that most parents have of raising a spoiled child. Why is that? “Kids are not naturally spoiled; they’re born lovely and innocent. No, spoiling is something you do to them.” So, what does a spoiled child look like? “They tend to have four primary things in common, though they don’t all have to be present at once: (i) they have few chores or other responsibilities, (ii) there aren’t many rules that govern their behaviors or schedules, (iii) parents and others lavish them with time and assistance, and (iv) they have a lot of material possessions.” He quickly points out that it doesn’t cost much to spoil a child, and three of those four factors don’t cost a thing.
So what is the “Opposite of Spoiled?”
Lieber assembled a list of values and character traits that he feels come closest to defining the opposite of spoiled, and in doing so he realized that all of these attributes could be taught using money. His aim was to write a book that “will serve as a framework for child-rearing that produces grounded young adults with financial habits that reflect maturity beyond their years.” He encourages us as parents to use money as a teaching tool to instill in our children the values we want them to embrace. What are these traits that Lieber identified? Curiosity, patience, thrift, modesty, generosity, perseverance and perspective. While surely others could be added, any parent would be ecstatic to see their child develop with this type of character.
What Topics are Covered?
Lieber hopes his book can serve as a detailed blueprint for the most successful ways to handle the basics: the tooth fairy, allowance, chores, charity, savings, birthdays, holidays, cell phones, checking accounts, clothing, travel-teams, cars, part-time jobs and college. He provides suggestions on how to handles these issues at different ages, from the toddler years until they leave for college. He also goes over the common money questions you are likely to be asked by your kids at some point, and provides thoughtful ways to go about addressing each of them. Hint: responding with “why do you ask?” is always a great starting point, not only does it buy you more time to think through your answer but their reason for asking in the first place could lead to an even more fruitful discussion and opportunities for better teaching moments. Finally, he gives his input to help parents address that challenging question, “how much is enough?”
My Favorite Parts
The author tackles a number of different topics that no doubt will be of interest to most parents (whether you ultimately agree with his advice or not), but here are a few that resonated with me or at least caused me to give them additional thought:
- Separating allowance from chores – this goes against the grain as recent studies indicate most parents (over 85%!) tie allowance to chores. Lieber feels that chores should just be something that everyone does to keep a household running (and there are plenty of other privileges we can withhold if they fail to do them, other than withholding money). His advice in this area will make more sense when you understand his advice on how to handle allowances.
- Allowance – What age to start? How much? He addresses both. More interestingly, however, he advocates dividing it into three clear plastic containers: one each for spending, saving and giving. “Some is for spending soon, some we give to people who may need it more than we do, and some is to keep for when we need or want something later.” Great teaching moments abound as they learn to handle each category.
- Charity – explaining why and how we give to others. This was my favorite part of the book. There are countless examples and creative ideas presented that can help you engage your child and even make charitable giving (and what causes to support) a family decision.
- The “Fun Ratio” – helping our kids identify good values in the things they want (what will entertain them for the longest time at the lowest cost).
- An interesting discussion on why kids should favor having a job prior to leaving for college over spending every last waking moment on building up their college resume with academic/athletic/volunteer activities. Another against the grain idea, as studies show fewer teens these days get jobs (it had been fairly constant at about 45% between 1950 and 2000…but had fallen all the way to just 20% by 2013!).
- A discussion on why our children should have at least some “skin in the game” when it comes to funding college tuition.
A Great Resource for Parents (and Grandparents!)
Lieber’s book does a great job of addressing what can be a delicate subject, and the personal stories and humor he works in make it a great read. Given the breadth and volume of the topics that Lieber covers, not all of his advice will resonate you. And that’s ok! These are sensitive topics and how to address them are highly personal and subjective, and they will be guided in large part by your own personal values and what’s most important to you. But I highly recommend this book, even if only for the following reason: it will get you to start talking about this stuff!
After reading this book you will be in a much better position to start having more meaningful discussions about these issues, first with your spouse and then ultimately your children. And for you grandparents, the book could be an excellent gift for your adult children as they try to navigate these issues with your grandkids. Along the way, you will no doubt take pause and think through some of your own values. As Lieber so eloquently puts it, “there’s no shame in having more or having less, as long as you’re grateful for what you have, share it generously with others, and spend it wisely on the things that make you happiest. It’s true for our kids, but it’s true for us, too.”
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Lutz Financial is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Lutz Financial’s current written disclosure statement discussing our advisory services and fees is available upon request.
ABOUT THE AUTHOR
JOE HEFFLINGER, JD, CFP®, CAP® + DIRECTOR & INVESTMENT ADVISER
Joe Hefflinger is an Investment Adviser and Director at Lutz Financial. With 15+ years of relevant experience, he specializes in comprehensive financial planning and investment advisory services for professionals, business owners, and retirees. He lives in Omaha, NE, with his wife Kim, and daughters Lily and Jolie.
AREAS OF FOCUS
- Retirement Cash Flow Planning
- Insurance Planning
- Estate Planning
- Business Owner Exit Planning
- Charitable Planning
- Tax Planning
AFFILIATIONS AND CREDENTIALS
- National Association of Personal Financial Advisors, Member
- Financial Planning Association, Member
- Nebraska State Bar Association, Member
- Omaha Estate Planning Council, Member
- CERTIFIED FINANCIAL PLANNER™
- Chartered Advisor in Philanthropy®
- JD, Creighton University School of Law, Omaha, NE
- BS in Economics, Santa Clara University, Santa Clara, CA
- Partnership 4 Kids - Past Board Member
- Omaha Venture Group, Member
- Christ the King Sports Club, Member
- Why High Net-Worth Families Should Review Their Estate Plans Pre-Election
- Portfolio Management for Retirees During a Financial Crisis
- It's Time to Review Your Personal Umbrella Policy
- Will I Outlive My Assets?
- Planning for Health Care Costs in Retirement
- The Opposite of Spoiled: A Book That Helps Parents Talk to Their Kids About Money
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