Striking a Balance with Kids and Money

The truth is somewhere in between.

That phrase comes to mind a lot while parenting. (If you’ve ever sorted out the claims of two bickering children, you know what I mean.)

It also comes to mind when teaching kids about money.

Spending. Saving.

Limits. Leniency.

It isn’t just one or the other. It’s about balance, and that theme shines strongly in the Spending chapter from the new book Smart Money Smart Kids. (Why am I reading the new book by Dave Ramsey and his daughter Rachel Cruze? See the first post in this series here.) In fact, I was pleasantly surprised to see the theme of balance so prominently represented throughout the book. Why? Let’s be honest, Dave Ramsey has a reputation for being, well,... harsh. But Dave has a real soft spot when it comes to kids. As he puts it:

Parents who expect perfection in every decision and allow too much pain are as over the top as “helicopter parents” who hover over their children and never allow them to feel the pain that comes from dumb decisions. Sharon and I tried to strike a balance.

That’s a message I can really get behind.

The tendency is to think of spending less as always better than spending more and that having a child who is a natural saver is better than having a child who is a natural spender. Clearly, spending too much is a problem, but so is spending too little. That’s not being frugal. That’s being stingy. Stingy is not fun. Stingy is not generous. There’s a happy medium between spending and saving.

Clearly, children must learn that there are limits and consequences for exceeding them. That said, there are times when a little slack (or “grace” as Dave calls it) is in order too. Your kids aren’t robots, and they aren’t adults yet either. There’s a happy medium between limits and leniency. Or, as Rachel says:

Too many rules is legalistic, but too much grace is enabling.

The book is filled with excellent Ramsey family stories that will help you sort out when to hold the line with your kids as you teach them about money and when to give it a little slack. The Opryland story in Chapter 3 and the PlayStation tax story in Chapter 4 are perfect examples of each.

Speaking of slack, there’s one area where the book doesn’t allow much: setting a good example as a parent. Rachel declares:

The most important thing to do when it comes to teaching your children how to be wise spenders is to be a wise spender yourself.

And Dave drives the point home:

Your example is everything when teaching your children about money.

I agree with the sentiment, but I think a modicum of slack is in order here too. There’s no doubt it’s crucial for parents to strive to model the financial behavior they wish their kids to adopt. Makes total sense. Kids are indeed sponges sopping up all that you do. But you aren’t a robot either. You’re going to make financial mistakes. When you do, I think admitting and candidly discussing those mistakes with your kids (in age-appropriate terms) is a powerful opportunity. Here’s a classic example: “Kids, I was late paying this bill last month. Doh! Can you guess how much the late fee was?” That can be an opener for a very educational, tangible, and memorable discussion. Don’t let your financial foibles dissuade you from teaching your kids good money habits. You don’t have to be perfect to be an effective money mentor to your kids — just honest.

When it comes to mistakes, I couldn’t agree more with Rachel when she says:

I firmly believe that a lot of people make huge, expensive mistakes as adults simply because they were never allowed to make small, inexpensive mistakes when they were kids.

That’s really what FamZoo is all about — giving your kids financial training wheels and letting them crash once in a while. I’d just add that carefully explaining some of your adult-sized financial fiascos with your kids might help them out as well.

Learn by watching. Learn by doing.

Learn from other’s mistakes. Learn from your own mistakes.

The truth is somewhere in between. Strike the balance.

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P.S. Whether you’re a Dave devotee or not, I’m confident you’ll get a lot out of reading the book he has put together with his daughter. I certainly did. You can get the book here.

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Click here to go to the next post in the review series: 4 Big Things Your Teen Can Save For

The full series:

• Teaching Kids Good Money Habits the Ramsey Way: Introduction
• Setting a Good Money Example for Your Kids: Sufficient? Necessary?
• Connecting the Dots Between Money and Work for Your Kids
• Striking a Balance with Kids and Money
• 4 Big Things Your Teen Can Save For

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