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Suze Orman Money Matters

Suze Orman, Money Matters

Be Money-Smart -- Your Kids Are Watching

by Suze Orman

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Posted on Thursday, August 23, 2007, 12:00AM

The back-to-school season seems like the perfect opportunity for every parent to get a grip on what lessons they're teaching their kids about money.

I know plenty of parents who wouldn't earn more than a C- for their efforts. Sure, they mean well, but that doesn't mean they're doing a good job in raising money-smart kids.

School Failure Is Your Opportunity

What's really sad is that this isn't a topic that you can rely on the schools to teach: It's rare for any personal finance or money-management courses to be taught in schools. That makes it all the more important for Mom and Dad to make sure they teach their children well.

The big problem is that parents seem to be blind to the negative and sometimes confusing money messages they send their children. I'm not talking about mangling factual lessons about how interest works or what debt is. That's the easy stuff.

What's hard to understand is how the power you give money in your life and your family's life has a huge impact on how your kids learn to relate to finances. You're kidding yourself if you think that learning about money is just a matter of a few basic math principles; your children pick up far more subtle and powerful messages by watching and listening to you.

With that in mind, here are four dangerous money messages parents unconsciously send to their kids:

1. Be happy to go to work.

After a great weekend spent at home, Monday rolls around and you need to head back to work. Transitions for little ones are hard, and the prospect of losing you to work for the day can create sadness that sometimes builds into a mini-meltdown.

So what happens next is really interesting. You tell your kids some version of the following: "Oh, honey, I hate that I need to leave you, but I have to go to work so I can make money." True as that may be, from the child's perspective they now know what to hate: work and money.

Sure, you can think that as they age they'll grow to appreciate the need (and desire) to work. But I think it's still very important to be ultra-conscious of how you introduce work and money to your kids, and the role you give it in your family dynamic.

2. Don't bank on your kids' money.

The worst way to teach kids about money is to force them to put all of theirs from gifts, allowance, etc., into a bank savings account that you then tell them they're not allowed to touch. This is a classic case of good intentions gone bad: You've now made the bank a bad guy in their minds -- it's where money goes so they can't ever use it.

No 5-year-old can project out to the age of 18, so it makes no sense to tell them that their money is for when they're older. I do think it's imperative that a lot of their money in fact be saved, but you also need to let them spend some of it, too. They have to have a relationship with their money to learn how to be responsible with it.

Be careful with piggybank separation, too. You remove their immediate connection to money when you suggest that they stash what's in their piggybank in a real bank. I think it's healthy to encourage them to have some in their piggybank as well -- it's an important connection for them to have with money.

It's also practical: When they announce that they want some toy or gizmo, they have some cash handy to contribute to the purchase. Outside of birthdays and special occasions, having your child use some of their own money -- however small -- for a purchase is vitally important. It pushes them to embark on a decision-making process: "Do I really want this enough to part with some of the money in my piggybank?" That's much better parenting than bankrolling their every whim.

3. Allowances aren't a birthright.

I hate allowances, or at least the way allowances seem to work in 99 percent of families. As far as I'm concerned, the "you get an allowance just for being you" type should be banished.

Whenever I ask children why they get an allowance, I typically get that kid-specific shoulder shrug before they tell me, "I dunno, just because" or "Because my older brother gets one." Or I get an incredulous look that says, "Lady, are you nuts? It's my birthright to get an allowance."

Not only is such an allowance the wrong message to send your kids, it's a lost opportunity to teach them the true value of money -- and the value of earning money. So, rather than an allowance, try "kidspensation," where your kids earn money in exchange for something they did that you both agreed had value for them and the family.

The key is that it has to be something they did. Kidspensation shouldn't be used as payment for good behavior; that's not something you reward with money, it's simply what you expect from them. And don't set up kidspensation as a set amount; it should vary each week based on what your children achieved.

Have an ongoing conversation throughout the week about chores and jobs they can take on, and negotiate the terms as you go. Or you can set up a time to sit down with them at the end of each week so they can make their case for what they deserve based on their output.

This exercise teaches them many important things -- how to talk about money, for one. It also starts to teach them negotiating skills, and it introduces the concept of work for pay. Please don't make this a somber, "tough" experience, though -- again, money shouldn't be the bad guy here. This can be fun for everyone.

4. No piggybank raiding allowed.

Every kid's piggybank is where their lessons with money begin. They love their piggybank and they love the money that's in it.

So what do you do? The pizza guy comes to the door and you don't have enough money, so without asking you go right to your son's piggybank to get the money you need and tell him you'll pay him back. Then what typically happens is you forget to pay it back for a week or two, or possibly forever.

You may have forgotten, but I can assure you your son hasn't -- it broke his heart. So keep your hands out of your kids' piggybanks. You need to plan ahead and never catch yourself running short on funds, because if you don't, what sort of lesson is that?

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47 Comments

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  • Yahoo! Finance User - Thursday, September 6, 2007, 11:43PM ET  Report Abuse

    • Overall: 4/5

    Great article, this is where it starts at home. If the parents teach the kids the right way how to use money, it will help them their entire lives. They don't get it from the schools.

  • Yahoo! Finance User - Tuesday, September 4, 2007, 4:50PM ET  Report Abuse

    • Overall: 3/5

    i like the tips that Suze gave for this article. like most (if not, everyone) i had no idea how to handle money when i was a kid. i paid for it big time when i got my first credit card and got a little 'swipe happy'. i have no kids yet, but i'll keep these in mind when the time comes.

  • Yahoo! Finance User - Tuesday, September 4, 2007, 9:26AM ET  Report Abuse

    • Overall: 5/5

    This is terrific advice. My parents had a similar plan and, as a result, me and my two siblings are all very successful with money. We have enough to live on, invest, save and best of all, GIVE back. More kids should learn these things from their parents. The schools are not going to teach it.

  • Yahoo! Finance User - Sunday, September 2, 2007, 11:56PM ET  Report Abuse

    • Overall: 1/5

    This article seems pretty trivial considering everything that’s going on in the economy right now. Should you give your kid an allowance? Yes give your kid US dollars as an allowance and they will learn how fast the dollar shrinks into a quarter. I think it's a little more important to think about the actual currency that's about to crash. Your kids will thank you one day if you get out of the US dollar and buy foreign currencies and gold. Hey! If you sell the dollar you may be able to give your kids an allowance one day. Common Suze you don't even hold US currency yourself. Let's start talking about important financial issues instead of fluff. Best wishes, Your conscience

  • Yahoo! Finance User - Friday, August 31, 2007, 7:42PM ET  Report Abuse

    • Overall: 4/5

    I agree with comments #1 and #2. I know someone who wasn't allowed to spend any of his money as a kid like in comment #2 and finally resorted to stealing something very small because he thought it was the only way to get something fun as a kid! As for #3, I don't have kids, but I don't think getting paid for chores is a great idea. Chores are a fact of life. Finally, commenting on #4, I saw some other book or article where the author gave her kids the money she would normally spend on them for clothes, school supplies, etc.. Her son used the money to buy a toy. When winter came around, he couldn't afford a coat so she made him buy one at Goodwill with the few dollars he had left. I thought that was a great lesson! This kid was older. She didn't give the kids big chunks of money like this until they were older. As for #4, My mom always paid interest to me as a kid when I loaned to her from my piggy-bank. I think loaning to your kids might be ok, but better would be if the kids loan to each other instead. You don't want your kids to feel like they are responsible for holding the house together that young. When they are old, it is probably ok.

  • Yahoo! Finance User - Thursday, August 30, 2007, 2:23PM ET  Report Abuse

    • Overall: 1/5

    I agree with Mr. Mojo! What's the point of having a comment option if Yahoo is just going to delete what they want? My comment as deleted from a few days back--and it didn't say anything that would require it having to be removed!

  • Yahoo! Finance User - Tuesday, August 28, 2007, 4:32PM ET  Report Abuse

    • Overall: 1/5

    i didn't much like the article, but I like less the lame censors at Yahoo who are deleting comments unfavorable to Orman. There were one or two that were overly personal but, based on a prior visit, I noticed several other delted one-stars that were just critical. Nice going Yahoo--why ask for comments if you don't want them?

  • Yahoo! Finance User - Tuesday, August 28, 2007, 10:39AM ET  Report Abuse

    • Overall: 3/5

    Suze's advice is very good for a quick overview and simple examples. If this is too boring/basic for you, why do you read her articles? She helps the beginner create a plan and for that she is wonderful. If you need more in depth knowledge, get yourself a financial adviser and cheer up a little. By the way, Suze's sexual preference (religion, favorite football team, hair color, etc) is irrelevant when it comes to managing money.

  • Yahoo! Finance User - Tuesday, August 28, 2007, 1:24AM ET  Report Abuse

    • Overall: 5/5

    My wife and I really do value what information you convey on tv (we watch you a lot on PBS) and the internet. Please keep up the good work!

  • Yahoo! Finance User - Monday, August 27, 2007, 11:37PM ET  Report Abuse

    • Overall: 4/5

    Piggybank raiding is allowed in my family. The children get a IOU for the dollars used. They also receive interest payment on the borrowed money. ( min,,,interest paid is $1.00.) They enjoy loaning money. They also learn the power of interest.

  • Yahoo! Finance User - Monday, August 27, 2007, 9:43PM ET  Report Abuse

    • Overall: 4/5

    The article seems to offer solid advice. I have no complaints about it. What puzzles and somewhat annoys me, though, are the bizarre and ignorant responses. None of Orman's advice is obvious, judging from the way most parents govern their own finances and allowance dispensing.

  • Yahoo! Finance User - Monday, August 27, 2007, 8:35PM ET  Report Abuse

    • Overall: 1/5

    This Sucks

  • Yahoo! Finance User - Monday, August 27, 2007, 8:26PM ET  Report Abuse

    • Overall: 4/5

    Simple small steps which is quite useful if you wanna give a try.

  • Yahoo! Finance User - Monday, August 27, 2007, 7:52PM ET  Report Abuse

    • Overall: 1/5

    Wow. Does she get paid for this or it just rainmaking for her other enterprises where she makes money for stating the obvious?

  • Yahoo! Finance User - Monday, August 27, 2007, 6:47PM ET  Report Abuse

    • Overall: 3/5

    Couple things: 0) If you depend on public schools as the only source for teaching your child, your child is in trouble. 1) Other than saying "I love work more than I love you," I wonder what Suze proposes. I see no mention, and the truth is I would much rather spend the time with my chilren. I could even teach them more. 2) Agree, at some point children need their own money to blow however they please as long as it doesn't tax your morals or tolerance. 3) Funny how many people think their children should work for a couple bucks a week but spend $100 or more a month on clothes, toys, disneyland and so forth. I don't see the difference in how you pamper your child. In fact, I prefer providing my kids some cash and let them save for (and pay for) a day ticket to disneyland or even wally world. I give them an allowance and chores. If they don't want to do the chores, I offer to let them pay me to do it (with their allowance money of course). I think the anti-allowance people have it dead wrong. 4) When your kids ask to borrow money, let them (to a point) and have them pay it back with a token amount of interest. Then, if you want to borrow from them, they can offer you the same deal. That will teach them about money management.

  • Yahoo! Finance User - Monday, August 27, 2007, 6:08PM ET  Report Abuse

    • Overall: 1/5

    Suze orman it not legit

  • Yahoo! Finance User - Monday, August 27, 2007, 4:46PM ET  Report Abuse

    • Overall: 4/5

    As a dad of a 4 year old boy, and as a person who is not a great saver, I feel Suze is correct about giving allowance for something earned and not expected. When my son was learning to "potty" we gave him a Thomas train after his first one. Then gave him a train after his next 5, then another after his next 8. (It took him about 2 months for these 2 phases) He understood that it is good to "work" for something. We now give him a "good-boy" coin for learning to write and identify his letters and numbers. With 10 coins, he can now buy one toy (under $15). Learning to work and save for something good is something I wish I learned as a child, as I am always looking for more "financial learning" techniques I can impart on my children so they are far more disciplined than their parents ever were. Note: I will never pay for them doing chores. They are suppose to help clean around the house! I look forward to more suggestions!!!

  • Yahoo! Finance User - Monday, August 27, 2007, 3:45PM ET  Report Abuse

    • Overall: 5/5

    suzie is right. i grew up with no allowances. everything i needed and most of what i want was given to me by my parents. i saw them handled theselves raising up the family, sent three kids to college. they both love their work and watched their expenses.being good role models in their lives they brought us up well and prepared us to our future lives. money is not everything but money is important to be happy and feel secure thru one's life.money management is learned as one grows up,starting as what Suzie said piggybanks to doing some chores and using some of their money as they shop.for toys. keep up the good work Suzie!

  • Yahoo! Finance User - Monday, August 27, 2007, 3:42PM ET  Report Abuse

    • Overall: 1/5

    One poster stated that Dave Ramsey was some kind of genius. Excuse me, that guy is just another right-wing ranting talk show host who is never critical of corporate welfare or foreign military adventurism, and talks to his audience as if they are dolts. So if you love Dave Ramsey, perhaps you really are a dolt who needs a lecture on what an evil sinner you are. Unnnnnbelievable. There's a reason why they call 'em "religious nut cases" and it's certainly nothing to do with values. Ok, back to this article. It blew.a

  • Yahoo! Finance User - Monday, August 27, 2007, 3:36PM ET  Report Abuse

    • Overall: 4/5

    typically find this woman over the top nuts - but I likes this one....

  • Yahoo! Finance User - Monday, August 27, 2007, 3:27PM ET  Report Abuse

    • Overall: 1/5

    SInce when stating the obvious earns you the status of an expert? Very poor article.

  • Yahoo! Finance User - Monday, August 27, 2007, 3:07PM ET  Report Abuse

    • Overall: 1/5

    Shallow and poorly reasoned not to mention off base. Suze has no background in psychology, child rearing (she has no kids) nor any credentials in financial planning. Some good resources to read instead Mind over Money and Personal Finance for Dummies by Eric Tyson

  • Yahoo! Finance User - Monday, August 27, 2007, 1:55PM ET  Report Abuse

    • Overall: 5/5

    Suze is dead on.

  • Yahoo! Finance User - Monday, August 27, 2007, 1:52PM ET  Report Abuse

    • Overall: 1/5

    Master of the Obvious... be a good example to your kids! Wow Suzie, thanks. Btw, who takes money from a kid's piggy bank to buy pizza? Come on Suze. You were a broker right? And now you play an expert on TV? Do you think people are idiots? Oh wait, you do. That's why you are have been trying to convince people that their FICO score is more important than their net worth. Turn OFF Suzie and listen to Dave Ramsey if you have to get your financial advice this way.

  • Yahoo! Finance User - Monday, August 27, 2007, 1:34PM ET  Report Abuse

    • Overall: 1/5

    No. This article is crap. It starts off well talking about the subtle associations kids make based on their parents reactions to money, but then leads into terrible examples. The advice given is obvious and the whole article is written at a low level.

  • Yahoo! Finance User - Monday, August 27, 2007, 12:32PM ET  Report Abuse

    • Overall: 5/5

    I'm shocked by all of the negative feed back as I consider this solid advice for people who don't have a strong back ground in money mgt, or for people who lavish their children with everything for what ever reason. I sponsor a "401k" program with my kids, neices and nephews where I match their investments. They invest in what they want and I match in what I think is good for them. It is never a lot, normally under $100.00 ea per year and that coupled with a fun gift from 5 Below will make them a lot of money as they get older (ages 8, 4, 3 and 2). It is completely voluntary and I know that they are having fun with their money as well. There are a ton of lessons to be learned as well. The kids are young, so we'll see if my experiment works! There are a lot of jeuvenile direct purchase programs. Check them out if you are interested...

  • Yahoo! Finance User - Monday, August 27, 2007, 11:53AM ET  Report Abuse

    • Overall: 5/5

    Excellent information to encourage kids to have better relationships with money.

  • Yahoo! Finance User - Monday, August 27, 2007, 11:40AM ET  Report Abuse

    • Overall: 4/5

    I guess I was raised in a different world. I got no allowance nor did I get paid for chores. If I needed money I had to beg my dad for it. That really taught me the value of money or at least the great distaste of begging. Could not wait to get on my own and now worth over a million. The idea that we can condition our kids to turn out some way is a way of objectifying them, isn't it. Maybe as one commenter said, we should be helping them understand this world they are entering into and how it expects you to self yourself for money.

  • Yahoo! Finance User - Monday, August 27, 2007, 11:37AM ET  Report Abuse

    • Overall: 1/5

    Personally I hate all this "money can only be earned" lessons for kids. I got an allowance for nothing and then as an adult went happily to work - I didn't seriously think that I would get an "allowance" for the rest of my life. Lighten up with kids - let them be kids for God's sake.

  • Yahoo! Finance User - Monday, August 27, 2007, 11:25AM ET  Report Abuse

    • Overall: 2/5

    Where did I go wrong? I did all the above. One daughter has her first nickel and one (both successful) , can't spend it fast enough.

Showing comments 6-35 of 47<< PreviousNext >>
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