The most important money lesson you should teach your kids
My son tells me I eavesdrop on random parent conversations too much. I just can’t help myself. It’s endlessly fascinating. Take this one.
Recently, a dad and his daughter entered a small shop where I was browsing. The girl, who looked maybe nine, immediately grabbed a bracelet from a display and asked if she could have it. “We haven’t even been here five minutes and you’re already asking to buy stuff,” he fumed. “But it’s just $8,” she pouted. A few minutes later, when the two of them left the store, the girl was holding a small bag.
Whether out of guilt or because he just didn’t want to be nagged, this dad had caved. (I’m fairly sure that bag didn’t contain a gift for Grandma.) While as parents we’ve all been there, that dad’s inability to say “no”—and mean it—could be setting his daughter up for credit problems when she’s out on her own.
Maybe you think this sounds extreme. Buying a kid an inexpensive gift is harmless, you protest. Besides, what could that have to do with her running up a huge Visa bill in her twenties?
Well, hear me out. Researchers have linked self-control—the trait that allows you to manage your impulses and delay getting what you want—with debt trouble. I’m talking here about rocky credit scores, missed or late bill payments, high credit card balances that carry from month to month.
By now, everyone has heard about the Marshmallow Test, in which psychologist Walter Mischel famously measured preschoolers’ self-control and found that kids who could master their impulses—meaning they were able to wait for a second puffy marshmallow before eating the first—ended up as more successful adults than those who gobbled up the first one. By “successful” I mean that they went further in school, scored an average of 210 points higher on the SAT, and so on.
But does self-control make your kid more financially successful, too? Last time I checked in with Mischel, he was still examining the data.
Fortunately, a group of researchers led by Duke University psychologist Terrie Moffitt was interested in that very thing. They tracked 1,000 kids in New Zealand from birth to age 32 and recorded their behavior—how they reacted when they were frustrated, how easily they got distracted, etc. When those kids reached adulthood, the ones who had low self-control when they were young had more health problems, were more likely to be single parents and have criminal records, and, yes, were more likely to struggle with credit problems.
Need more evidence that self-control is the key to staying out of the red? Research out of the UK has found that adults with low self-control are more likely to be overburdened with debt, use store credit cards (which often have exorbitant interest rates), and take out predatory payday loans.
OK, you get the point: self-control can help your kid avoid a world of financial pain. But what does that have to do with saying “no” when your kid asks for something random at the grocery store or grabs a toy off the shelf at Toys R Us when you’re shopping for a gift for his cousin?
At least one study showed that giving into a kid’s demands may result in your raising a materialistic kid. A 2015 study out of the University of Missouri and the University of Illinois at Chicago found that kids who receive lots of material rewards from their parents (bribes, tokens of affection, etc.) are likely to continue rewarding themselves when they grow up. Basically, it’s along the lines of what common sense would tell us: They’ve learned to define who they are by what they have. And other researchers have noted that people who put a lot of stock in material things are more open to borrowing money for luxury goods, use credit cards more, and carry high debts.
But studies and data aside, anyone who has tried to navigate the candy aisle in a supermarket or breeze by a toy store with a toddler in tow knows it’s tough.
Of course, “just say no” isn’t the only tool in your parenting kit to help your kid learn self-control. In my book Make Your Kid a Money Genius (Even If You’re Not), I offer numerous tips for helping your kid to resist temptation based on the findings of Mischel and other researchers. Here are just a few:
- Don’t go into a store without a game plan. If you are shopping for something specific (like groceries for dinner or a practical piece of clothing), tell your kid that before you go into the store. If your kid does ask for something, remind him of your real mission. “We are here to get milk and eggs. Let’s time ourselves and see how fast we can do it!”
- If your kid wants to buy something, tell him he can get it—with his own money. Odds are that girl who asked her father for that bracelet might have realized she didn’t want it that badly if he’d said, “Sure, you can get that, as long as you pay me back from your piggy bank when we get home.”
- Empower your kid to set his own goals. If your kid really wants something, help him figure out how much he needs to save to buy it himself, and then come up with a plan for how he can get there (allowance, odd jobs, birthday money, etc.). Then remind him of that savings goal the next time he wants to buy something.
Of course, there are times when it’s important to say “yes” to your kid, and learning to know the difference is part of parenthood. For most parents, that part is less troublesome. But perhaps it’ll make it that much easier to say “no” now that you know you’re not just being strict, you’re looking out for your child’s financial future.
This post was originally published on Forbes.com. © 2017 Beth Kobliner, All Rights Reserved.