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The one financial parenting rule I’ll break — and two I won’t

For parents, there’s almost no topic that produces more self-doubt than dealing with kids and money. My specialty is teaching people how to manage their finances and invest, and I get a lot of questions from parents agonizing how they can raise money-savvy kids.

There’s no one right answer. Your own family’s values, financial circumstances, and spending and savings style drive the bus. Just like all other parenting practices, we all bend some of the rules once in a while, but there are other rules around the house that really need to be sacrosanct. Some of that wiggle room might stem from personality differences among your kids — one might be a shopaholic and one overly frugal.

One of the most repeated rules you hear from money gurus is to never indulge your kids when they beg for something, and I definitely agree. Caving in to a 3-year-old who is whining at the grocery check-out for candy will just reward bad behavior.

But I confess that sometimes I’m willing to spend money stupidly on the kids in my life, even when it’s not a birthday or holiday gift. If I’m that aunt that goes overboard whenever I’m on a special outing and I spot something really cool for my nieces, especially if it’s a unique experience or a souvenir of our time together, I’m gong to play the role of that indulgent aunt and spoil them.

The key to this wonderful little bubble I live in is that these kids don’t expect or demand it, and I make it a point to talk about how lucky we are that we can afford these little splurges.

Still, there are two areas where — in my opinion — parents need to stand firm and be consistent.

Set up your kids for financial success

I can’t stress this enough, you are your child’s most important teacher. One thing I’ve learned from my time on the board of California’s Jump$tart, an organization that teaches kids financial literacy, is that even grade school children benefit from being exposed to money concepts early. By discussing your family money situation honestly in an age-appropriate way with your children, you are helping them understand money.

I know that so many parents want to protect their children from unnecessary stress and that they hope they won’t ever have to struggle, so they avoid openly talking about how bills get paid or share any family money pressures. But kids who have no idea how parents earn money and what it costs to live are just going to struggle in a more serious way when it’s their turn to pay some bills. These kids are much more likely to get into debt.

So, when you sit down to pay your bills, invite your child to ask about what you’re doing. Or when you are grocery shopping, talk about how your shopping list ties to your overall budget and why this impacts how you shop. Even if you don’t use a list—just talk about the mental math you do every time you walk into Whole Foods.

Secondly, do not give your child an allowance in exchange for basic chores like making their beds or clearing the table. These are part of their responsibilities as members of the family.

You’re not entitled to an allowance until you earn it

Offer an allowance for initiative, those tasks that go above and beyond the everyday chores. Your daughter may be the one responsible for taking the trash from the kitchen to the garage, and that would be one of her expected duties. But when she offers to pull the cans out of the garage and all the way to the curb on garbage day, that would be an extra bit of initiative that qualifies for allowance. Making her own bed or emptying the dishwasher doesn’t qualify. Offering to do something nice — like walking a neighbor’s dog when the weather’s bad — is going above and beyond.

Handling allowances this way teaches kids what it’s like in the real world, and being consistent will prepare them for the day when they take their first real job. Maybe even more importantly, this approach encourages and rewards a child for ‘stepping up.’ This is the one rule I would never want a parent to break because it’s simple and it works.

What are your non-negotiables in dealing with your kids and money?

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