NYC-PIA SEMINAR April 18, 2023: Bobbi Rebell and Laurie Freeman, PhD, on “Launching Financial Grownups”

By Melanie Wells

Many people find it awkward to talk about money, but author and financial expert Bobbi Rebell assured NYC-Parents in Action’s Online Seminar Series audience that the way to help children become financially mature is through good decision-making and regular, honest conversation.

Moderator Laurie Freeman, PhD, introduced Bobbi Rebell, certified financial planner, journalist, author of Launching Financial Grownups and parent of three, for a conversation on how to manage expectations and guide your kids toward financial independence. Laurie asked Bobbi to set the stage with a hint of what it means to “launch financial grown-ups”:

Bobbi Rebell: The “money scripts” we create for our kids affect their relationships with money, from younger years on, and as they move to adulthood. We want to help them achieve their dreams in life and this is a way to start.

Laurie Freeman: We want to address parents of kids of all ages, so, in first establishing kids’ relationship with money, what about allowances?

BR: It matters how we present them; allowances can be a great tool but can also backfire. So, think backwards before you begin: why are you implementing an allowance? Did your child ask for one? If so, find out, through conversation, what prompted this – ask, “what do you want to do with the money?” Ask if there’s  a goal they wish to accomplish.

And then ask yourself: Are you ready to implement limits you need to set? For example, if you ask your children to perform tasks in exchange for an allowance, will you be prepared if they don’t cooperate? Let’s say the allowance is earned by making the bed daily, but your child doesn’t want to make the bed, and in fact is not very motivated by money, so the bed is left messy. What will you do then? Consider these things in advance. Be sure to communicate the rules not only to your child but to the whole family, including grandparents who may hand your child money even after you’ve put limits on how to earn it.

Allowances can be a great tool but can also backfire. So, think backwards before you begin: why are you implementing an allowance? Did your child ask for one? If so, find out, through conversation, what prompted this – ask, “what do you want to do with the money?” Ask if there’s  a goal they wish to accomplish.

LF: How can parents address economic differences between families?

BR: Kids may get it wrong when they see a discrepancy. Perhaps a friend has a higher allowance because he is expected to pay for all his activities after school, or to pay for all birthday gifts for friends. If you give you kids less than their peers receive, DO explain why. Make the case, but let your kids advocate for themselves if they disagree. You can suggest ways for them to earn a higher figure if that’s what they want or feel they need.

LF:  Our kids see different socio economic backgrounds in our schools – different ways of spending over spring break, for example.

BR: Some studies show that what makes you happy is to have the same as, or more than, others. You can check in with other parents about spending and allowances, and then consider how to approach conversations with your child, so your child will have your values.

And on the matter of values, there’s no simple answer. It’s complicated, and kids will face such complexities all through life. Do communicate your values and hope your kids will share them, but know that they may want something different as they grow up. In these conversations it’s important to LISTEN to children, hear what they have to say. Ask them questions: how does it make them feel when they see friends with nicer homes, or with homes that are not as nice as their own? Or different  levels of vacation spending? What they feel may not be what we as adults project on to them, so ask, and then listen.

Do communicate your values and hope your kids will share them, but know that they may want something different as they grow up. In these conversations it’s important to LISTEN to children, hear what they have to say.

LF: I love the message to listen to your kids, to find out who they are. Our values can communicate who we are, too, as parents.

BR: It’s also important to teach kids not to be judgmental. People may choose different paths. The person driving a fancy car may have very little money, but is in heavy debt to have that car. Parents can use social media to teach this – tell your children they may see things on social media that appear one way but really are not. This is something your child needs to learn. We can embrace the digital world because it’s here. Don’t ignore it, rather, use it as a teaching tool. And know that the things you see may not really make you happy, and can even, in some instances, make kids feel bad about themselves.

LF: Can you give an example?

BR: Ask your child what makes them want something they want? It may not even be about the material object, but about feelings. With young kids, the child wants a toy, plays with it for four minutes then moves on and loses interest. There can be the excitement around a thing, but it’s not really about the thing itself.

One way to talk about spending for something your child wants is to integrate decisions into daily life. For example, If you have a break between after school  activities you can tell your child, “We have X dollars to spend, so how would you like to spend the money?” Offer options: Do you want to get an Uber so we arrive sooner to your activity and have more time there? Or would you prefer a snack to have now? Let them make some choices so they feel empowered. Then you can ask later, why did you make that choice? Are you happy with it?

LF: I like the idea for young children that you offer a range of choices. Another question:
If there is an allowance for a high schooler, should your child pay for some of his clothes?

BR: Be very clear about your decisions and discuss them. Don’t undermine yourself by buying their clothes after you’ve agreed they should pay for their clothes. Stick to the decision. Set kids up for success, perhaps starting with lower amounts or shorter time periods to get to a financial goal they’ve set. You want them to develop life skills of responsibility around money.

Some parents want to pay for more in order to retain control. They may want to pay for clothes because they’re not ready to let children make all the choices. Let kids know what your values are. Another learning opportunity: If they regret a purchase (for example, money was lost due to a poor choice) parents may get upset, but maybe it’s better to see it as a great teaching moment to  help them make better decisions in the future.

LF: So parents should give kids chances to make mistakes and then discuss what they learned?

BR: Yes. And sometimes parents can help out if a child doesn’t have enough money to reach a goal. For example, if a kid has saved up for an item but doesn’t have enough for the tax, parents might step in to pay the tax, but should point out how to plan for it next time. Make sure the child understands the real-world moment involved.

LF: I like the idea of flexibility in that situation, rather than harshness.

BR: We want kids to see money as something they can use as they live their lives. Work backwards, setting up steps to help them reach goals. You don’t want to artificially create success, but instead, set them up to be able to achieve it.

We want kids to see money as something they can use as they live their lives. Work backwards, setting up steps to help them reach goals. You don’t want to artificially create success, but instead, set them up to be able to achieve it.

LF: What about stocks and investing – for parents interested in that, what do you suggest?

BR: Educate your children about how they work, acquaint them with basic concepts. Use Ron Lieber’s suggestion, establishing Save, Spend and Give jars. Kids can understand that the “save” part goes to investing, and involves delayed gratification. Help them understand that savings can actually grow and bring passive income over time. Help them understand how growth works. If you have a college savings investment, explain it to them. And as for your own finances, even if you’re usually opaque about them, it’s okay to share a little bit of information when you think they’re ready. Kids have a natural curiosity about what people have. Have a conversation where you explain relative amounts, too – that there is always someone with more, someone with less. Impart your values during these conversations.

LF: Kids may have anxiety focused on money, sometimes from financial constraints at home, or sometimes not. What about that?
BR: We forget our kids hear a lot more than we think. Stress can come from either end – having more or having less. Older generations knew less about our parents’ money than kids do now.  You can discuss this with your child and discuss feelings around where your child stands financially with respect to his peers. Most important, give kids a feeling of financial security. Let them know that even if you may not have a lot, they will be okay.

LF: What apps (financial tools) do you recommend?
BR: I don’t endorse any particular apps, and have no affiliations, but I personally have used Greenlight. Some app recommendations may come from sources with a financial stake in a recommendation, so be aware of your source of information.

LF: Can you help parents understand how Greenlight app works If they want to try it?
BR: It offers a way to link to your bank account, so you can give your kids allowance digitally. You can put the money on a card, and then know what your child is buying and discuss it later. You can ask, why did you buy this, or choose that? Make your child aware of the cost of each item. Discuss how long he may need to work to earn something. It’s a good idea to let kids learn to establish credit, too. Start small, but be sure to have conversations about how they’re spending. Set expectations, then discuss their choices. Try not to be judgmental; if they make mistakes, they should feel able to discuss it with you comfortably.

Also, be aware of sibling relationships. You’re a family, talk about the family “ecosystem,” if a sibling is being judgmental. You can keep each child’s learning and mistakes separate if needed.

LF: I love the idea of planting the sibling idea that “were all on the same team.”  What about rewarding academic grades with either things or money?
BR: I think it’s important not to judge parents, so if that approach works and is aligned with the family’s values, then it’s fine for them to do it. It’s important for every family to do what’s right for that family and its values. The right solution is what’s right for them.

LF: So, we can think about not judging parents on how they set allowances – or reward or not reward grades. If you know your child, you have a good sense of what motivates them.

BR: Yes, and you have to be careful; if you tell a child that an A earns $5, is a B+ worth $4? Think about how you value things. What if your child doesn’t care about a monetary reward and says why bother to earn the A? It can backfire, just as an allowance can, if a child doesn’t care about the money. You want good grades to have intrinsic value, too.

LF: It sounds like you’re saying be careful about attaching monetary value to academic success because you want good feelings to come from effort and achievement, not just from a reward.

BR: And with allowances, you might just give it because you want kids to have spending money, not because they did chores at home. It’s important to communicate your opinions to your kids, and, to hear their opinions too and see what they think. Don’t be too quick to judge their plans – hear them out. Let some things play out on THEIR terms so they learn from them.

Similarly, with career choices, you can support them even if you don’t agree, knowing if things go wrong it’ll help them learn and grow. Kids will change over time, so let things play out. Give them room to figure out how they want to live their lives. If it doesn’t work out, don’t be too quick to write a check – let them figure it out.

LF: What about credit cards as kids go off to college?

BR: Glad you asked about that – credit cards are super important. Let them know how credit cards and finance charges work. Maybe choose a card with perks and explain how that works, too.  Discuss spending limits and who is actually paying that credit card bill. Are you subsidizing? Is it a form of allowance? Are they going to pay the bill? With what money – is it from a job? Discuss and be clear about expectations.

LF: A parent asked about “strings attached” or subsidizing only if certain rules are met. What about control?
BR: We as parents are hanging on financially longer than we used to. A lot of it is coming from us; we’re offering money before it’s requested. Maybe we need to step back and let them earn. Or, subsidize some expenses, but have strings attached. Nothing wrong with doing that. If you want to give a gift to pay off student debt, then make that the rule. If they want to choose how to spend it, they can earn their own. Or if you’re letting an older kid live at home rent free, it’s okay to expect that they will pay for other items. We should let them make financial decisions, but if we’re subsidizing, we get a vote.

We as parents are hanging on financially longer than we used to. A lot of it is coming from us; we’re offering money before it’s requested. Maybe we need to step back and let them earn.

LF: What about jobs for high schoolers?
BR: Life guarding is in high demand, and they can subsidize income with teaching swimming. Retail help – plenty of jobs available there.  Camp counselors. Caddies at golf courses. Teaching sports. Assisting with younger classes offered where the older kids are in more advanced classes, or have taken lessons in the past.

BR: I would also encourage finding a path for the money you give your child. Teach them about Roth IRA’s, and that they can establish ways for money to grow. It’s good to teach them how taxes work. And on the subject of taxes, use a paycheck to explain FICA tax – tell a story through the paycheck. Explain how we help others through payment of taxes.

LF: Feels like you’re talking about finances as part of our values, and how it works in our own family in particular, and more generally, in society. And how that can be imparted to your child through good open conversation.

BR: We’re the ultimate stakeholders in our children’s lives!

I would also encourage finding a path for the money you give your child. Teach them about Roth IRA’s, and that they can establish ways for money to grow. It’s good to teach them how taxes work.

Laurie thanked Bobbi for a rich, substantive conversation, and Bobbi expressed warm thanks to NYC-PIA for having her as guest speaker in the Online Parent Seminar Series. And our viewers enjoyed the opportunity to gain a “wealth” of solid tips on launching financial grown-ups!