How to Discuss Money With Kids

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What do you say when your child asks, "Are we rich?" or "Do you make more money than Daddy?" or the dreaded, "Why don't we have a fill-in-the-blank?" In his book, "The Opposite of Spoiled," New York Times columnist Ron Lieber offers tips for answering kids' questions about money and raising socially aware and fiscally smart adults. He'll also explain why he thinks allowance should never be tied to chores.

Interview Highlights

On When to Start Talking to Kids

"The child development Ph.Ds at children's television workshop, which produces Sesame Street, they looked at this several years ago before putting Elmo up to doing a financial literacy curriculum on the show and they found that 3-year-olds are ready to talk about the difference between wants and need, they understand that on a very basic level.

"I think a good time to start might be the moment that the tooth fairy arrives for the first time. You know kids wake up and find a couple bucks under their pillow, or some gold dollar coins or some money from a different country, and at that point they often want some more. They sense that money can do some things for them, that they probably don't have enough to get the things that they want, so maybe that's the point at which, at age 6 or 7, you start them on an allowance of $3 or $5 or $7 a week."

On Spend, Give, Save Jars


Ron Lieber, "Your Money" columnist for The New York Times


"The thing that I like about the three jars, about the save jar, the spend jar, and the give jar, is that they kind of mirror and mimic the foundational basics of grown-up budgeting. If we have a relatively healthy financial life ourselves as grownups, we're spending maybe 80 percent of what we take in and hopefully we're saving 10 percent or 15 percent if we can, maybe a little bit more if we've got a couple kids coming up on college, and then we give some away, too. Maybe its 2.5 percent, for the average American, or maybe 10 percent if we're Mormon, or maybe 50 percent if you're an entrepreneur or wealthy person and you've signed the giving pledge to give away 50 percent of your net worth before you die. Whatever it is, hopefully you've got a little bit left over.

"So the three jars? Those mirror what grownups do, and you can say to your kids you've got to give away 10 percent of what we give to you in allowance or you've gotta give away a third of it. Wherever you stand, you can sort of make those same rules for your children as they begin to collect some allowance money from you."

On Separating Allowance from Chores

"I think allowance is a tool for learning. And I think money is for practice. It's like art supplies or books or musical instruments -- other things that you want your kids to get good at because it's just good for their brains, good for their training. In the adult-making business here, these are the things that we do and provide if we possibly can afford them. We consider them needs, not wants, and I think of allowance the same way.

"Parents worry about the chore side of this, and I actually think kids should do way more chores than they currently do. [Kids] are capable of way more than we think they are, but they should do them for free. Because they are members of the household, just like the grownups, and the grownups do not get compensated for their chores. And if you're worried about leverage, about making sure that the kids actually do their chores, I think taking away their valued privileges is a much better way to go if you want to exact leverage or punishment."

On Talking to Kids About Debt

"What we can say is that we do not actually know why the neighbors have a much nicer car than we do, even though we live in roughly the same size house. We do not know why they are able to take such nice vacations. It might be because they inherited a bunch of money from a relative. It might be because they won the lottery and just haven't told anybody. And it might be because they're borrowing a lot, but we can't know that for sure, and so I'm not sure we want to kind of cast dispersions or doubts on other people and where their money is from unless we know for certain how they got it. But I certainly think kids should know that just because a family is spending more than yours it doesn't necessarily mean that they're richer, but that we can't really know for sure."