By Pamela Awad
We know there are lots of rules – rules of etiquette, rules for writing, rules of the game, even rules for radicals – but did you know there are rules for making your child a money genius? Beth Kobliner does and she explained some of these rules one afternoon recently, while speaking at Parents in Action’s annual Mother’s Day Lunch.
Kobliner’s mission is to make kids financially savvy by helping parents make their kids smarter about money. While a member of President Obama’s Advising Council on Financial Capability, she created the website, MoneyAsYouGrow.org. On Sesame Street, she taught Elmo about saving, spending and sharing in the segment, “For Me, For You, For Later: Three Jars.” And in her new book, Make Your Kid a Money Genius (even if you’re not), she explains how “parents are the number one influence on our kids money behaviors.”
Brunette, sporting large black-framed eyeglasses, Kobliner, a mother of three, began by explaining it’s never too early to start talking to children about money. “By age three kids understand money basics, they understand exchange and they understand value…by age seven many of those money habits are set,” she said. This doesn’t mean “you’ve missed the boat if your kids are 13 or over,” she continued, “but it does mean that you have to focus on those teachable moments.” One of them is to “use cash for kids, up until the eleventh grade.” Remember your passbook savings account? They’re hardly in use today and most financial transactions are on-line or by credit/debit card, so kids rarely see cash being exchanged. With cash, Kobliner explained, “kids understand there are finite limits.” Children tend to be concrete thinkers and only when they’re older do they understand how each “swipe” signifies dollars spent. So while Eloise may have grown up saying, “charge it please,” most of us need to teach our children how to monitor credit card spending. To that end, Kobliner advises against giving children credit cards linked to your checking account or cosigning a credit card with your child. “Not only does [cosigning] leave you responsible for the amount, if he misses a payment it will lower your credit score,” she said. She also believes a first credit card shouldn’t be given to a child until she’s a junior or senior in college.
How well do you play the waiting game? How about your kids? Impulse control, or the ability to wait, is the trait Kobliner believes matters most when it comes to saving and spending money. She referred to the “Marshmallow Test,” the Stanford study on delayed gratification, first conducted in the 1960’s. The premise was simple: a group of 5 year–olds were given the choice to eat one marshmallow immediately or wait 15 minutes and get two marshmallows later. The children’s ability to delay eating the first treat was a predictor of how well they did later in life; those who waited had higher SAT scores, lower body masses and were better adapted socially. Kobliner explained how the children who waited had “the skill and technique to divert their attention,” traits that can be taught to children, “if you set a goal and have them work toward it.” Helping children understand it’s worth the wait may be worth its weight in gold – learning the skills associated with impulse control makes kids better savers and spenders. That applies to compound interest too, (the longer you wait for your money to compound, the faster it grows.)
Regarding allowance, Kobliner advises parents to do what works best for them. “The bottom line is, it doesn’t matter if you give your kid a formal allowance or not, to teach them to be good financial citizens,” she said. If you decide allowance is how you want to allocate money, Kobliner suggests parents follow a few rules:
Be clear – Discuss what this money is to be used for. For example, is allowance to be used for all Ubers or Ubers after midnight; for ordering in using Seamless; for or all meals out with friends or for clothes above the basics that you provide?
Be consistent – “Stick with what you say,” Kobliner warned. She advises parents to be realistic and factor in as many variables as they can think of when deciding the amount of allowance. This makes it easier to avoid inconsistencies.
Use cash and give control – Determine how much money you’re comfortable giving your kids but give them the freedom to control how they spend their money.
Don’t make allowance dependent upon household chores or grades. Making one’s bed or emptying the dishwasher is a fact of life. And there’s intrinsic value to working; kids need to learn to work hard because they care about doing well not because there will be a financial reward.
A child’s most important financial decision is college, another of Kobliner’s basic tenets, and she believes parents should start talking to kids about college by the end of the eighth grade. “A college degree has never been more valuable; it’s a great investment and the most important thing you can do to make a child a money genius,” she said. But “you don’t have to be a money genius to make your child one,” she continued, “modeling good behavior is a good idea,” and of course, talking to your kids is invaluable. Among her “money tips for talking”:
1) Keep money talks age appropriate.
2) Talk to your girls as well as your boys about money. (Studies have shown that even today parents talk to their sons about money more than their daughters.
3) Keep money fights behind closed doors.
4) If you’re philanthropic, talk to your kids about how you’re giving, why and to whom.
5) DON’T tell your kids how much you earn, what your net worth is, or how much you have in savings. Letting them know you “have enough” is enough.
6) DON’T let your kids know how much you pay the housekeeper, babysitter or nanny. That kind of knowledge negatively empowers a child and cedes the caregiver’s authority.
“Teach children and you teach the parents,” Kobliner said. A solid financial future is in everyone’s best interest.
You can find her on Twitter and Facebook @bethkobliner.
For more on Beth Kobliner’s book, please visit: www.bethkobliner.com/moneygenius.
Watch her video here:
PBS NewsHour with Paul Solman
ABC Good Morning America/Interview