Lately I’ve been paying my 6-year-old to do everything. Perhaps “bribing” is a better word. Made the bed? Here’s a dollar! Fetched your baby brother a diaper? That’s surely worth two bucks or so. I wanted to teach him that hard work deserves a reward (and, let’s face it, I wanted him to be able to buy Ninja Turtles with his “own” money), but after talking to author Beth Kobliner, I’m pretty sure I’m turning him into a kid who does good things because it’s semi-lucrative.
Kobliner is the author of the new “Make Your Kid A Money Genius (Even If You’re Not),” which is full of counterintuitive tips for well-meaning parents who might be too quick to open up stock accounts or dole out generous allowances. She’s a mom (and was a member of President Obama’s Advisory Council on Financial Capability), so she knows what she’s talking about. Here are her top four money-management tips.
Don’t give your kid an allowance
But he got an A in advanced-placement calculus and cleans his room every other Saturday! Too bad.
“I’ve rarely met a parent who said, ‘I give an allowance to my child every month, and it’s worked out so well!'” Kobliner says. “Most parents I meet say, ‘We started it, and now it’s April, and the system has fallen apart.'”
According to Kobliner’s parsing of more than two dozen research studies, doling out an allowance doesn’t actually make kids more responsible.
“It can actually make them less responsible, because they feel entitled,” she says, because kids end up ascribing good deeds to an extrinsic value instead of considering them part of being a team player.
Oh, and “don’t tie money to chores. They’ll negotiate on everything!” Kobliner warns. Sounds familiar.
If you do want to reward your children somehow, hitch the money to an event, like a birthday or spending money for a vacation, and be consistent about it.
Give ’em cash
If you’re offering up spending money, say, for a trip to the mall, don’t hand over a credit card. Instead, give your child a wad of cash.
“People spend twice as much when they use credit cards,” Kobliner warns. “It doesn’t feel like money; it feels like play money. When you use cash, there’s something called ‘the pain of paying.’ There’s a finite amount.” When the cash runs out, so does your child’s shopping spree.
Think twice before rewarding good grades with money
According to Kobliner’s research, nearly half of all American parents with kids in school bribe them to do better in class. But research shows that it just doesn’t work. Harvard economist Roland Fryer studied 40,000 public-school students in several cities and found that cash payments didn’t improve math or reading scores at all. (There was a tiny uptick in GPAs.)
“A bribe can send a strong signal to your child that you don’t think he has what it takes to motivate himself,” she warns. “It takes away an internal incentive to do well, and an internal incentive really does matter for your ability to succeed long-term.”
Talk about saving for college by ninth grade
So often kids are focused on getting into the “right” college, with little clue about how much it will actually cost. Maybe you’re fortunate and won’t need to finance your child’s education with loans. More than two-thirds of kids aren’t so lucky, and with student-loan debt at an all-time high, it’s important to involve your child in the process as soon as he or she starts high school. Kobliner recommends visiting studentaid.gov to learn more about types of aid and repayment plans. Also, give your child a dose of reality: A student shouldn’t borrow more than he or she is likely to make during his or her first year out of college. Check out the Bureau of Labor Statistics to find average salaries in various professions and the U.S. Department of Education’s College Scorecard to see how much graduates from particular schools earn. Most of all, start the conversation ahead of time to avoid shock, disappointment or confusion when it’s time to apply to schools.
Visit Kobliner’s site for more tips. Meanwhile, I’ll be over here raiding my son’s piggy bank.