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Carrie Schwab Pomerantz Money-Smart Families

Carrie Schwab Pomerantz, Money-Smart Families

Raising Kids in a Consumerist World

by Carrie Schwab Pomerantz

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Excellent (118 Ratings)
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Posted on Tuesday, April 17, 2007, 12:00AM

The focus of my two previous Yahoo! Finance columns has been on the practical skills your child will need when he or she leaves home, and why you should encourage your older children to begin the process of building long-term savings.

These are the kinds of things I've been trying to teach my own three children, and I believe they're vital for every kid. But there's another aspect of money that's less tangible but no less important: the virtue of values.

The Importance of Financial Values

Call me old-fashioned, but lessons like the work ethic, financial responsibility, delayed gratification, and charity are, to my mind, just as vital as knowing about balancing your checkbook, portfolio diversification, and the ins and outs of 401(k) plans.

In an affluent society that seems more determined than ever to get more -- more wealth, more possessions, and more of the status that seems to come with those commodities -- values and virtues are more important than ever. Teaching your kids the ABCs of money management is crucial, but sharing your good money values can help make your hard work stick.

I probably don't need to convince you that values are important. Instead, my goal is to help you see how financial values can be taught, and that -- whether you're conscious of it or not -- you're passing your own values to your children through your words, behavior, and actions.

The Example You Set

I'm a big believer in giving kids direct, hands-on experience with money. Give them an allowance. Teach them to save. When they're old enough, encourage them to work part-time. All these lessons will help your kids learn to use, accumulate, and earn money.

But remember this: They're also learning by example -- your example. They watch you spend money every single day. They hear how you talk about work and investing. The way you deal with personal finance may be the single biggest factor in shaping their attitudes toward money. This does not, of course, mean you have to change the way you spend, earn, save, or invest. But it does mean you need to be aware of the example you set.

And as a parent, you're the ideal teacher for all kinds of lessons about finances and the values associated with them. It starts with the little things, like encouraging them to save part of their allowance. But every day is filled with opportunities to impart practical and philosophical lessons about money and values.

Hands-on Lessons

Small children can help comparison shop in the supermarket, for example; they'll learn something useful and realize you're prudent with money. Older children can help when you pay the bills; again, they'll be learning something practical, and it'll be an opportunity to teach them about day-to-day financial responsibility. Sharing this can teach them the importance of paying off credit card bills monthly.

Tax time can be a chance to explore the financial realities of being a citizen in the community. When you make donations to the institutions you support, you can teach your children about the importance of charity and the idea of giving something back. But this shouldn't only be about monetary donations; invite them to participate in the next walk-a-thon or fundraiser, or to volunteer time for a favorite charity.

Perhaps you review your 401(k) statement or investment portfolio on a quarterly basis; that's another terrific teaching opportunity. Even watching television can be a source of knowledge and values: Kids are extremely susceptible to the desires and manipulations of advertising, and you can help them see through the hype and teach them that their happiness isn't dependent on the next big thing.

Family-Finance Dynamics

Kids like being part of the bigger family picture, but they'll also be learning a subtler lesson about financial values. They'll realize you take personal finance seriously, and that money is a resource to be used wisely and well.

You might even pick out certain financial challenges that highlight specific lessons, such as making tradeoffs ("If we ate out a few times less per month, we could take a better vacation this summer" or "I'm going to buy a used car instead of a new one and put the extra money into your 529 college saving plans"). This will teach them about the pleasures of delayed gratification.

In one sense, every financial transaction you make can be a lesson for your kids, at least the ones they witness or experience. If you're cavalier with money, they'll pick up on that; if you're prudent, they'll pick up on that, too.

Spheres of Influence

Of course, you're not the only point on their moral compass. Your kids also get messages about values from a host of other sources: their peers, relatives, and other adults as well as the pervasive and very powerful media. You'll never be the sole influence on your kids, especially as they enter the teenage years and their drive toward independence begins to accelerate.

Indeed, it would be foolish and counterproductive to try to shield them from values different from your own. A good part of growing up is learning how to make judgments about what's right. But of all the forces affecting your children's development, you're surely the most powerful one.

When my son was 16, one of his friends got a new BMW as a birthday present. But when he told me about it, he said, "You know, Mom, I would be embarrassed if you bought me a car like that. It's just not right." His sense that such an extravagance was "just not right" was, I believe, based on an idea my husband and I have tried hard to instill in all of our children: that you have to work for what you want.

Every parent, no matter how much money they have, has to make choices about what to give their children and what to make them work or save for, and I realize that different people will come down on different points on that spectrum. But just because you can afford something doesn't necessarily mean you should buy it.

Who You Want Them to Be

I'm certainly not suggesting that deprivation is a good thing, but teaching your children sense of accomplishment that accompanies working and saving for a substantial goal is clearly valuable -- and will serve them better in the long run.

I want my kids to plan for big purchases, to put their own resourcefulness, as savers and earners, to work. I'm more than willing to help them, but they have to show some initiative, put forth some effort, and demonstrate that they're willing to make short-term sacrifices for long-term goals. That, of course, is part of the essence of adult life and adult responsibility, and it's what I was taught as a young girl.

I believe the primary goal of parents is to foster independence, self-reliance, and confidence. Thinking about the values behind your financial decisions and articulating those values to your children will go a long way toward helping your kids mature into the kind of adults you want them to be.

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26 Comments

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  • Yahoo! Finance User - Wednesday, April 18, 2007, 7:50PM ET  Report Abuse

    • Overall: 3/5

    Good Article. I agree with the comment about working. I worked my way through school and learned more valuable lessons with a part time job than in college frankly. I also learned about money early getting my own checking account with my part time job money and eventually credit card in college that I used responsibly and built my credit up. Good points and enjoyed the article. If you want a student credit card or other really good low interest rate offers check out a credit card comparison site called www.CreditCardRadio.com

  • Yahoo! Finance User - Wednesday, April 18, 2007, 5:10PM ET  Report Abuse

    • Overall: 5/5

    I completely disagree with not encouraging high school students to work part time. I worked one of those "crummy" jobs for four years during high school and college, and it taught me more about management, human interaction and the human race in general than my Ivy League MBA (which I still managed to obtain after working a "crummy" job in high school and college). Working part time also did not stop me from participating in other activities and taking AP courses. When kids earn their own money, they learn to budget their own money and understand how expensive it is to be materialistic. I love the article, and I hope more parents follow its advice.

  • Yahoo! Finance User - Wednesday, April 18, 2007, 3:07PM ET  Report Abuse

    • Overall: 2/5

    Yawwwnnn. Hard to focus. Her points are good, but reads like a lecture by a boring economics teacher. Creative writing classes might help.

  • yattaboy - Wednesday, April 18, 2007, 3:01PM ET  Report Abuse

    • Overall: 5/5

    I think the article makes several articulate points. Many friends and colleagues I know do not have the composure or understanding of their own selves to see many of these points, or how to make them to their children. Personal introspection is not a quality most of us do well. I cannot understand why anyone would rate this 1 star. Many of those who did so make excellent points that I usually agreed with, but their objections are not incongruent with the article's points. It seems to be a case of "Carrie's article didn't teach lessons the way I'd teach my own kids, so it must be bad". If the article didn't teach entrepreneurship, or didn't target big-box consumerism, etc., that doesn't mean there's no virtue to teaching children to have a good work ethic, or to learn how to comparison shop. Even those who hate shopping must buy food, soap, clothing, etc. Why not learn how to do that without the constant pecking away of advertising on billboards, TV, radio, packaging, etc? The country is a spectrum of 300 million men, women and children. Reading comments to this article represents it -- some say the article "bullcrap" (I'm quoting). One person thought it useless for a child to work at all, versus violin lessons. One thought a practical car was an acceptable gift to a teen, versus a BMW. Some adult readers of this article cannot afford their own "practical car". I grew up working multiple jobs as a kid -- but I also took violin lessons. My dad taught me about the stock market, saving, and working. My mom took me to church, school, and showed compassion, even when I perhaps didn't deserve it, which taught me forgiveness. In high school I canvassed the neighborhood for 3,000 cans of food for the food bank, a charitable cause that has stayed with me throughout adulthood. I was never given a car. The most expensive gift my parents ever gave me was a one-time $3K handout for college, which was quite a burden to them. As an adult, I learned to save, work very long hours for employers, do chores I didn't want to do, and have a cooling-off period when I visit an electronics store. But I also started three of my own businesses. I taught myself drums and piano, go on vacation, and hike, bike and run on local trails and get back to nature. There is nothing in this article that contradicts such attributes of living a "good life", and several things that support it. Everyone is different. If you made $3million on your home in California, you may very well be able to buy each of your kids a 328i. Who knows, that may be a hardship if all their friends are driving Mercedes SL500's. The idea is to teach some of the right things so that your kids can then point themselves in the general direction of what's right for them and hopefully society.

  • Yahoo! Finance User - Wednesday, April 18, 2007, 1:44PM ET  Report Abuse

    • Overall: 5/5

    "...lessons like the work ethic, financial responsibility, delayed gratification, and charity " - to talk about this in 2007 takes courage. These lessons are hard learned, and too many parents protect their children from the pain of the lesson. Thanks for this great article.

  • Yahoo! Finance User - Wednesday, April 18, 2007, 12:59PM ET  Report Abuse

    • Overall: 5/5

    My nephew actually asked for a junker instead of a luxury car because that -- to him -- was way cooler than a BMW. However, the insurance costs for a teenager driving a junker was outrageous, so he got a nice sensible car that he helped to pay for. Great article and great advice.

  • Yahoo! Finance User - Wednesday, April 18, 2007, 12:25PM ET  Report Abuse

    • Overall: 5/5

    Sentimentum - how do you stop the downward spiral? One family at a time. Might I suggest you start with yours?

  • Yahoo! Finance User - Wednesday, April 18, 2007, 11:48AM ET  Report Abuse

    • Overall: 5/5

    Excellent Advice! I do all of these things with my son who is now 13yrs old. He had no sense of value when it came to cash. He would use a $20 bill to pay for a $5 item and not wait for the change! Yet, he would guard his skateboard and bike with his life. That's when I realized I needed to teach him the vaue of a dollar. Now, instead of "giving" him an allowance, he has to "earn" his allowance by doing chores. If he wants a new game, parts for his skateboard, or even surfing lessons he has to earn them by saving his allowance and by being on his best behaviour at home and school. This also includes completing homework assignments. I also take him with me to purchase items to donate to charity and then we deliver them. This way he is aware that it is important to give instead of always receiving. He now has an appreciation for every $ he earns and spends and the enjoyment factor when he purchases something or goes somewhere skyrockets!

  • A - Wednesday, April 18, 2007, 11:26AM ET  Report Abuse

    • Overall: 5/5

    Some excellent suggestions! Great minds think alike.

  • Scott - Wednesday, April 18, 2007, 11:21AM ET  Report Abuse

    • Overall: 4/5

    We have a national crisis of debt in our country. Teaching the next generation delayed gratification will help us out of this crisis.

  • Yahoo! Finance User - Wednesday, April 18, 2007, 11:08AM ET  Report Abuse

    • Overall: 5/5

    This article offers some good ways to educate your kids about finances. It also addresses the issue of "buying crap you don't need" and charity.

  • wolf - Wednesday, April 18, 2007, 11:01AM ET  Report Abuse

    • Overall: 2/5

    I dont agree with the giving of allowance or having your kid work part time. What does giving your kid money for nothing accomplish? They will get plenty of opportunity to save money when they get a birthday check from grandma or a couple of $'s from the tooth fairy. Why would you want a HS kid to have a part time job at mcdonalds? Would you not rather have your kid study for an AP course or engaging socially with friends, practicing the piano or violin, or playing on a sports team.I could think of about 400 ways that i would rather spend my time than working some crumby job - most people will have to do that most of their adult life. With the right example by parents, you dont need to waste your time working a part time job, unless your family really needs the money. If you dedicate more of your time to study or a worthwhile pursuit so when you grow up you will never have to settle for a min wage job. Then again if you are a neglectful parent, it is probably best to have your kid take a part time job to keep them out of trouble.

  • Yahoo! Finance User - Wednesday, April 18, 2007, 10:58AM ET  Report Abuse

    • Overall: 5/5

    Excellent!

  • Yahoo! Finance User - Wednesday, April 18, 2007, 10:47AM ET  Report Abuse

    • Overall: 1/5

    I rated this 'poor' because I think it misses the point. There is now a complete focus on money in the USA. Money, and that's it. We have an economy based on the exploitation of other countries, and we live beyond our means. I'm not a financial liberal, and I know we need money flow to get rich people to 'unhoard'. That's fine. But with your prattle about 'work ethic', you fall into the trap set for you by the huge asset-gatherers. Where is your focus? Sholdn't it be more on 'we have to work to make money to help our family' rather than 'we work to make money to buy useless crap'? 'Work ethic' is just another self-serving way to avoid family and advance yourself above all, and when you preach it you are feeding the monster. I'd rather see you focusing more on how work and money should fit into your life, not how your life fits into work and money. It's hard for me to get this across. Somewhere, somehow, writer's like you need to be pushing the word 'balance'!!! Oh, what the heck, I can't change America. We are on a path to a huge implosion, a grid-lock of debt where both as a country and as individuals we work like slaves (debt-slaves) to pay off the national and persoanl debts. I've been as guilty as anyone, worknig 60-plus hour weeks to 'protect my job'. Somewhere, it has finally hit that those 60 hour weeks have resulted in not a whole lot that really matters, and a lot of regrets for time missed doing something for family and community. See what I mean about balance?

  • Yahoo! Finance User - Wednesday, April 18, 2007, 10:13AM ET  Report Abuse

    • Overall: 3/5

    Good Article! Thanks.

  • kajlig - Wednesday, April 18, 2007, 9:46AM ET  Report Abuse

    • Overall: 3/5

    I am fully agreed with author for financial values. But million dolor questions are, are we financially educated enough. Lot of people are not able to control their spending and stuck with credit card debt , What you can expect from them , More or less it depends upon the family how they value to money and in most of the cases kids learn from parents. No Financial institution can teach you how to spend or save money or what is the best utilization of money, all these are very relative terms. So, how to save is big deal or How to invest smartly is big deal?

  • Yahoo! Finance User - Wednesday, April 18, 2007, 9:31AM ET  Report Abuse

    • Overall: 3/5

    Finacial education is non existent in most households and non existent in public schools. Why? Is it because money is a touchy subject more so then sex. Its almost a runing ticker on your value in life...almost. Or it could be that most people dont want to admit just how financially unsound they really are. Maybe finance is something everyone needs to learn on there own. Its a great question of the 21th century. How do i prosper in this world when im still learning how to survive? Or it could be that we want others to fail so we feel better about our successes. Is the value of a dollar its currency or does it have symbolic value? But if shineing a light on individual finance improves individual finances and leads to frugality which leads to lower sales deflation and a large repriceing of not just the markets but of all products and services. Individual finance is a dual edge sword. Teach your children well.

  • Yahoo! Finance User - Wednesday, April 18, 2007, 9:04AM ET  Report Abuse

    • Overall: 4/5

    Sathya Sai Baba (4:33am) sure is a negative Nancy.

  • Yahoo! Finance User - Wednesday, April 18, 2007, 4:33AM ET  Report Abuse

    • Overall: 5/5

    ".... Unfortunately, today, because the parents themselves have no purity of character, are lacking in spiritual qualities and do not lead regulated lives, evil practices and wickedness are springing up all over the world. Because of the malefic effects of the Kali Age, parents tend to be quarrelsome and the children of today take after their parents. The tree is based on the seed and the seed determines the nature of the tree. For the evil ways and the bad behaviour of children today, the parents alone are to be blamed. Few parents choose to tell their children how important it is to speak the truth, to act righteously and to earn a good name and, as a result, many children today are a disgrace to their parents and to their country. For all the ills with which the nation is afflicted today, parents and teachers are responsible. Teachers do not punish the students for their lapses of behaviour, and because the students are not punished for their mistakes, they behave as they please. Teachers are responsible for the sins of their students. They do not teach the students the right path. They transmit only book knowledge, and do not teach right knowledge, wise living and higher values. If there are no morals and no human values, then Man becomes a demon. Parents are concerned solely about the material welfare of their children and have no concern for their spiritual well-being. It is not wealth that is important. Character is primary. Parents do not teach their children the importance of cultivating good qualities. They do not try to control their children when they go astray; rather, they condone the lapses of their children and often encourage them in their bad ways. It is because of such parents that many children today take to wrong courses of action. Parents today are afraid of correcting the mistakes of the children or of chastising them, but they have the right to warn and to correct their children....." --- Sathya Sai Baba

  • Yahoo! Finance User - Wednesday, April 18, 2007, 3:31AM ET  Report Abuse

    • Overall: 5/5

    Not enough parents heed this advice and pass on this information to their children. If more did so, the credit mess the country is in would be significantly less.

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April is National Financial Literacy Month

Promoting financial fitness is one of Carrie Schwab Pomerantz's passions, particularly when it comes to helping families give their kids the head start they need to thrive as adults. Visit Schwab MoneyWise for additional resources.

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