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Teaching Kids How to Deal with Money and Peers

Manage money expectations and teach your children how to become financially responsible.

Raising Financially Fit Kids, Revised , by Joline Godfrey, is a combination parenting and personal finance book that helps parents teach their children key money skills–such as saving, spending, budgeting, investing, building credit, and donating–that they’ll need to become financially secure adults.

Money Monster: Peers

“But Mooooommm, everyone has one.”

“What’s wrong with it? Everyone wears it this way.”

“Come on, the whole class is going to . . .”

These classic whines recur in various forms, generation after generation. The power of peers to influence kids—for better and worse—is a reality to deal with when it comes to money issues. Judith Rich Harris, author of The Nurture Assumption, maintains that genes predispose children to develop a certain kind of personality, “but the environment can change them . . . not the environment their parents provide—but the outside-the-home environment, the environment they share with their peers.” According to Harris, that effect starts as early as three years of age and can show up in nursery school.

When The Nurture Assumption was first published, it was greeted with skepticism—flying in the face, as it did, of the conventional wisdom that kids were most influenced by nature (genes) or nurture (parents). Harris may not be the last word on what most influences children, but it is hard to argue about the effect of your children’s friends on their behavior and attitudes. I was reminded of this fact by a parent who told me the following story:

Five-year-old Kari lost a tooth and, on the instruction of her grandmother, put it under her pillow. “The tooth fairy collects those things,” the grandmother said, “and will give you something special in return.” The next morning Kari looked under her pillow and, sure enough, there was a fresh $5 bill.

That afternoon Kari was playing with her friend Lesley and announced that the tooth fairy had brought her $5 the previous night. Lesley had recently lost a tooth too, but her tooth fairy had left her only $1. Lesley could already discern that she had gotten a lesser deal than Kari and ran to her mom to demand why. Taken aback, the mom couldn’t come up with a good explanation, but the next time Lesley lost a tooth, the tooth fairy had gotten the message and increased her contribution. Clearly, tooth fairies in the neighborhood realized they were dealing with some valuable teeth!

Down the street, four-year-old Linda’s mom began to hear about the acts of the tooth fairy and decided things were getting out of hand when a fairy could set an inflated price on a baby tooth hardly big enough to see. After a call to Kari’s grandmother and a little heart-to-heart with Lesley’s mom and a few other parents, they all agreed to contract with just one tooth fairy—the one who gave only $1 for a tooth.

Moral of the story for kids: don’t blab if you’re lucky enough to get a generous tooth fairy! Moral of the story for parents: share the financial apprenticeship stage with other parents, discussing standards and values and dilemmas.

Parental isolation contributes to the power of peers—and financial anarchy among kids. When parents aren’t talking to one another, kids rule. And rites of passage have become more elaborate and extravagant (bar and bat mitzvahs, sweet sixteen parties, proms, and first cars), with the most outrageous being turned into prime-time reality TV. Unfortunately, parents often succumb to what’s easy, leaving kids in charge. And worldly though today’s kids may be, they are not necessarily wise.

Kids do not have the monopoly on social media. Parents can connect through school networks, personal networks, and Facebook to break out of the parental isolation that is so harmful to their kids. Whether talking to parents on your son’s soccer team or checking in with parents in your daughter’s sixth-grade class, you defuse the power of your kids’ peer expectations by agreeing on a few basic behaviors you will enforce en masse as parental peers. Being the first parent to speak up and say “I can’t (or don’t want to) spend $3,000 on my son’s prom expenses or $50,000 on my daughter’s bat mitzvah or $25,000 on a new car” may be tough, and not all parents will appreciate your efforts. But it just may be a strategy for creating a more evolved financial consciousness among your child and his friends.

Another strategy to employ is to embrace the power of peers—co-opting, rather than fighting it. Want to get a point across about saving or spending money? Create a group experience in which your children and their peers get the message together. For example, if the after-school gathering spot is a fast-food hangout and your daughter is worried she’ll be left out if she doesn’t show up, no amount of sermonizing on how she is wasting money on empty calories will be effective in changing her behavior. Rather, try an activity that teaches budgeting through a Scavenger Hunt for your daughter and her friends or setting up a lunch for your son and his buddies with a friend who has started a company and is willing to talk about what it took to start the business. Here is one way to engage your kids’ friends without alienating your children.

Mall Scavenger Hunt

Like it or not, going to the mall is twenty-first-century recreation. Shopping is entertainment. And exhorting kids to not consume excessively is less effective than helping them make that decision on their own. This Mall Scavenger Hunt is designed to help them become conscious about how and where they spend money. It requires a little setup time, but the payoff is worth it.

Ask your son or daughter and their best friend to invite six to twelve kids for a Mall Scavenger Hunt. On the day of the party, organize the kids into teams of three or four each and hand each team a digital camera (if they don’t have a smartphone; the idea is to have instant results), the Scavenger Hunt list, and $500 of play money (raid those old board games you haven’t played in years, or purchase stacks of fake cash at a local toy store).

The aim of this hunt is to be the team that brings home photos of the most imaginative solutions for the least cost. Once they have instructions, drive or send them (depending on their age) to the local mall or your town’s main street. Give each group ninety minutes to collect photos of the items on the list and agree to meet at a specific time (points are deducted if a team is late). Have them display their photos and defend their solutions to earn points.

You can repeat this once a month, working up to a grand tournament. Skills and innovation will increase over time.

Financial Film Festival

Like the Mall Scavenger Hunt, the purpose of a Financial Film Festival is to engage kids and their peers in an informed conversation about money, values, and dreams. Set it up as an after-school or weekend event: one movie each month, with popcorn and a money mentor team member to discuss the movie with the kids.

Questions worth posing for the films include:
• What does this story have to do with money?
• What financial values do the characters portray?
• How do the characters reflect or stand at odds with your own values?
• What touched you in the story? What made you sad, angry, envious, joyful . . . ?
• What lessons about money and people can you take from the film?
• How does the film connect to current events? To history? To the future?
• What do you wish you could tell the characters to do?

Money Book Club

What you are trying to do is instill a consciousness of financial responsibility. A Money Book Club is one way to achieve that. Invite five or six parent/child teams (if you like, this can be structured as a father/son or mother/daughter event) to meet once a month or once a quarter to discuss a book with themes related to money, finance, economics, and values. You don’t have to use dry economic texts—there are a lot of riveting books that will do the trick: from Michael Lewis’s Moneyball to Kathryn Stockett’s The Help. Both fiction and nonfiction are powerful ways to engage the brain and sentiment of the next generation. (See the sidebar for more reading suggestions.) Local authors are often happy to speak to book clubs, so if there’s someone you’d like to interview in person, go ahead and call, email, or write.

The Charity Café

Altruism emerges early in kids. Channeling their urge to “do good” is easy with the Charity Café. Invite six friends for a night at the Charity Café. The idea is to have kids redirect money they would normally spend on a fast-food meal to something that will “make a difference.” With twelve kids giving $5 or $10 each, they’ll have up to $120 to give away at each meeting. Over time they will choose to save and give more in one place.

Set up the kitchen or living room with five or six big posters (see the chart for some charity ideas): one for animals, one for the environment, one for health-related issues, one for homeless children, and one or two blank posters kids can fill in themselves.

When the kids arrive, have them put their contributions in a Charity Café bowl and fix themselves a sandwich. Serve something simple (peanut butter and jelly or make-it-yourself subs), so more time and attention is spent on charity than on food. Invite the kids to take a look at the posters and think about which of the listed charities they would like to see their money donated to that evening.

Then get the party started. Organize the group into three teams of four kids each. Give each team fifteen minutes to designate two charities they want to support. Once the teams have chosen, have them describe how and why they made their selections. Give the full group time to discuss each team’s choices and then ask them to vote again as a whole.

Once the choices have been narrowed to the two top vote-getters, suggest that the kids do a web search (or call the organization and talk with them, or visit the library) to get more information on each of the groups they’ve selected. Let them know this is a normal part of the due diligence process. It’s a concept they should address early in their effort to practice charitable giving. Then have them do one last vote to select the charity that will receive that night’s contribution.

Finally, give each of the original teams an assignment: one team to take or send the money to the group selected, another team to select new charities to consider at the next Café meeting, and a third group to find and invite a philanthropist to talk at the next meeting (you can help them with this by providing suggestions and telephone numbers, or have the kids ask their parents to recommend a family friend who might be able to fill this role). The older the kids in the group, the faster you can cede control and management of the Charity Café to the kids themselves.
If the group gels and the kids stay involved, you’ll find they will become increasingly sophisticated about their choices. For now, think of the Charity Café as just one way to engage children by engaging their peers.