Money talk healthy for kids

Starting early teaches the value of money.

To raise unspoiled children, discuss financial issues openly, says new book

No parent wants to knowingly raise a spoiled child. Yet invariably, when you listen to conversations about the younger generation of today, you hear words such as spoiled, entitled and ungrateful.

There is no universal definition of a spoiled child but there are some common traits we all recognise. Spoiled children tend to be the ones with lots of material possessions and few rules or consequences to limit their behaviour, with parents who lavish them with affection and attention.

Interestingly, the notion of the spoiled child is not new, nor the result of the age of consumerism in which we now live. Writings by prominent authors over the past 150 years show every generation has had similar thoughts about the youth of their times. But while the idea of spoiled children might have existed for a long time, guidelines for how to avoid raising them are thin on the ground. A new book by New York Times columnist Ron Lieber aims to fill the gap by exploring techniques for raising the opposite of a spoiled child - one who grows up to be thrifty and generous, with all the good values associated with unspoiled children.

The Opposite of Spoiled: Raising Kids who are Grounded, Generous and Smart about Money covers money-related aspects of parenting such as allowances (pocket money), when and how to talk to children about money and the "three fundamental pillars of financial decision-making" - whether to spend, to save or to give.

Lieber says one of the most important aspects parents must master is the money conversation. If we want our children to have a healthy relationship with money and an attitude that aligns with our own, we need to talk to them openly and from an early age. He says even very young children have an awareness of money and if we want them to have the right mindset and emotional connection with money and what it means, we need to get over our shyness or discomfort and give them straight answers.

Often, parents fear discussing money with their children because it may create some kind of money obsession, or lead to comparisons with others and perceptions of the family's social standing.

In some situations, talking about money is a necessity because the family have so little of it that difficult choices have to be made. Even then, parents tend to want to shelter children from knowing the reality of the financial situation.

Talking to children openly about money will encourage them to grow into adulthood with perspective - of what is "enough", what represents value and what is the dividing line between wants and needs.

Lieber says his research found the best way to respond when kids ask about money is to ask: "Why do you ask?" If a child asks: "Are we rich?" they may not be asking about your salary or the value of your home. They might simply have learned of another family making a purchase and be wondering if you can afford one too. Knowing a child's actual concern and where it comes from can give parents a better chance of responding appropriately.

Lieber also suggests giving children money to manage on their own. This way they will learn the value of self-control, patience and delayed gratification, resulting in a less spoiled child. He cites a New Zealand study that found children who had poor self-control were less likely as adults to save money, have a retirement account, or own homes than those who had learned self-control when young.

He is not a fan of giving children pocket money as a reward for chores. He suggests chores should just come as part of being in the family and that money given to children be treated as a teaching opportunity, the lessons from which can be carried through into adulthood.

Kids will be kids and not all of Lieber's tips will be foolproof, but for parents looking to avoid raising "that spoiled kid", this book provides some helpful and commonsense tips.

• This column is presented in association with Fisher Funds.