Five Money Conversations to Have With Your Kids

It’s a concern of so many modern parents in this world of instant gratification – how do you buck the trend and raise a child that is NOT entitled? Financial gurus Scott and Bethany Palmer, who go by the moniker “The Money Couple,” have just published a handbook for parents of kids ages 5 to 18 to help with just that. The book, The 5 Money Conversations to Have with Your Kids at Every Age and Stage, focuses on navigating the (often complex) money relationships between parents and children. Using the kind of daily situations every family encounters such as kids asking for things at the checkout lane, participating in (expensive!) extracurriculars, giving gifts at holidays and birthdays and planning for college, the Palmers dole out particular advice depending on what primary and secondary “Money Personalities” you and your child possess (see sidebar).

I spoke with “The Money Couple“ about their new book and their philosophy, with specific emphasis on the under 12 set. It’s particularly powerful to engender a healthy relationship with money at this tender age, the Palmers say, because it’s a time when our kids “still love us, their friends aren’t cooler yet, and we’ve got them.” What follows is an excerpted, edited version of the conversation.

TK: How did you come to write this book?

Bethany Palmer: We are financial advisors by trade. For over 20 years, we were just seeing so many couples disagree about money and that was bothering us. [We decided] we have got to be a part of the solution. Because of that, we actually developed an easy way for couples to understand their [money] differences – the five Money Personalities. Every person has two [money personalities] and most couples are married to their opposite. How challenging! [We thought] if you’re married to your opposite in terms of money, what about your kids? We’ve got to have a guide for parents to have with their kids from [the time they are] young children to leaving home.

TK: Tell us more about these five Money Personalities at the heart of your approach.

BP: Most people can diagnose their primary Money Personality pretty easily, but the second one is a challenge.

Scott Palmer: We have had 60,000 people take [the Money Personality] quiz online and have only had one person question the result. When you figure out your Money Personalities, everything falls in line. A lot of us have Money Personalities that bump into each other, and then we throw kids in the mix and it really gets all over the place!

Understanding our kids‘ Money Personalities is so important, especially when talking about entitlement. A lot of what happens with entitled kids is that they are not as entitled as you think they are – they are probably a spender [personality], especially if you as a parent are a saver.

BP: And spenders can be some of the best gift givers and give to charity. Their natural vent is to spend money, not necessarily on themselves. As parents, if you know your kid is a spender, you need to tap into that personality for the greater good. Many children are shamed for the way they were made. We can be hurting our children more than we know just by not understanding their two Money Personalities and speaking to them!

TK: What are your thoughts on giving children an allowance?

SP: Giving kids an allowance is not teaching them to be entitled. It’s teaching them how to use basic money to the tune of $3 per week instead of $25,000 when you send them to college. At age 5 $3 is a ton of cash. [We recommend] 1/3 to save, 1/3 to spend and 1/3 to give. At about the age of 10 or 11, that’s when you transfer from allowance to “now you are work for hire.” At that age [children] understand the value of money, currency and how much things cost. We never paid our kids money for doing chores around the house  —  the family that works together stays together. But…we put a price tag on certain activities [like vacuuming mom’s car] and it’s amazing to watch around Christmastime!

TK: Should parents tell their children how much money they earn or have in the bank?

BP: Oftentimes parents want to be their kids’ friends. Opening up about money is a pretty private area of life. Kids kind of feel or assume they should know every part of your life. Sex and money are probably the two areas they don’t need to know about. However, if you have had a challenge with money, for example too much credit card debt, there’s nothing wrong with telling children about [that] challenge.

TK: Should parents begin money discussions about college with children at this early stage?

SP: We are already talking to our kids about college, [introducing] the expectation that “mom and I are saving for your college; you need to make sure you’re a part of this.” Eighty percent of our college grads are moving back home [after graduation]. Here’s the reality, my kids know that is not an option already. They know they are going to get a job. You can’t over communicate. You need to talk to kids to move them forward.

TK: What is the biggest money challenge you see facing parents of young children?

SP:  Not having children be entitled! We live in a society that kind of has an unspoken rule that says “give your kids everything, whether you can afford it or not; put it on the credit card.” It’s OK to say NO. The strongest word a parent can use is “no.” Our reality is that so often we want to give what’s best for our kids, and it’s quicker and easier than ever [to do so].

TK: What is the takeaway message of your book for parents of children under 12?

SP: Five to 12 is the greatest age to get these kids moving, to have your kid start thinking about these basics of money communication, and it’s really an amazingly great opportunity to start the communication. You can start communicating about money and resources and it doesn‘t become a scary thing. Because it’s a scary subject for adults, we put that on our kids, and it doesn’t have to be. Enjoy this stage of life with them.

What’s Your Child’s Money Personality?

The 5 Money Personalities (as excerpted from ”The 5 Money Conversations to Have with Your Kids at Every Age and Stage” with permission from the authors)

• Saver: The Saver loves to save money and gets a huge thrill out of getting a good deal. Whether he has loads of money or barely a penny to his name, the Saver is always looking for ways to spend less. Savers love to save money and also get pure enjoyment out of helping others save money too.
• Spender: It’s no surprise that the Spender is all about the enjoyment that comes from spending money. It doesn’t matter if she’s spending on herself or giving to others. It doesn’t have to be a lot — the thrill of buying a new car isn’t all that different from the thrill of buying a pack of gum. Okay, maybe it’s a little different, but for a Spender, buying is buying, and it’s awesome.
• Risk Taker: These are the entrepreneurs, the visionaries, the ones willing to put every dime they have into a high-risk venture. They are as likely to end up billionaires as they are to end up bankrupt. But it’s their love of adventure, a new deal, or the unknown – not their bank accounts – that drives them.
• Security Seeker: Security Seekers are always looking ahead and thinking about the plan for the future. The strong sense of planning gives them the secure feeling they need.
• Flyer: This is the most unusual Money Personality of all. Flyers fly by the seat of their pants when it comes to money, because they always put relationships over their money decisions. Money barely registers as something that needs to be considered. They rarely talk about money, think about money, or care about money.