I’ve read Raising Financially Confident Kids before but its been a while, so I decided to take it out of the library again to review. If you’re a mom (or dad) looking for tips and tricks on getting your kids to learn about and appreciate money, you’ll find a few gems in this one. One warning, although many of the lessons are timeless, the book was originally published in 1998. You can tell in certain parts it’s in desperate need of a modern update.

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Like many interesting personal finance books, in Raising Financially Confident Kids the author has a story about what drove her and her family down the path of wanting to teach their kids about money. The author, Mary, had a financially unhappy childhood. She used to dream and fantasize about being rich, and daydream about all the things she would buy to make her happy. In college she started spending beyond her means. This ramped up with her marriage and even more so after they had kids. She wanted others to envy her and for her kids to have all the material things in the world-it was her chance to relive her childhood and fix things for her kids. Eventually she noticed her kids becoming spoiled and entitled. The more they had, the more they wanted.

Side note – this part of the story reminded me of The Tightwad Gazette and Amy Dacyczyn’s concept of creative deprivation. On rare trips to the mall, she would buy her six kids small ice cream cones, and was proud of how much they enjoyed them. She made the observation that some parents would see the happiness and buy their kids even more cones more often. Then the kids would get somewhat bored of just cones, so they would need to be upgraded to banana splits, and so on. The treat would stop being special and instead be an expectation or an entitlement. Her philosophy was, if the kids started to become bored, to decrease the frequency of the treat so it would continue to be special.

After starting to work to dig out of their own debt, their attention turned to their spoiled, entitled children. How could they teach their kids about money is a way that would make them successful adult money managers, and avoid the mistakes that they had made?

The Plan

The author’s husbands family had a legend about “Uncle Harvey”, a relative who gave his kids all the money for all expenses (besides food and shelter) at the start of every year. It was then the kids responsibility to budget and save enough for everything – haircuts, clothes, shoes, gifts, activities, everything. The author was a bit intimidated by the thought of doing this at the start of every year, so she and her husband used this concept as the basis for a slightly different plan.

They tracked all the money they’d been spending on their kids and kids activities (of course being shocked at the amount) and decided to give their kids a monthly salary for all optional expenses. They had to save 10%, give 10%, and could decide to save or spend the rest. There was a list of expenses that the kids would be responsible for, and that list would grow as they got older until the kids had to manage all their expenses by the time they were older teens. They would issue their kids tickets for misbehavior, and those tickets would have fines attached to them.

Execution

The first month with the first child, it was a predictable disaster. The kid went to the toy store and spent every dollar on a toy, then had nothing the rest of the month. The parents bit their lips and let the experiment play out-and lo and behold, the next month the kid decided to save everything and spend much more wisely. Having to sit out on birthday parties, activities, etc. for a month had taught him a lesson that all the lectures in the world wouldn’t – that money can get you anything you want, but not everything you want (as Paula Pant from Afford Anything might say), and you need to choose wisely how you spend your limited resources.

Eventually they found out the Uncle Harvey story was a family myth, but by the time that happened they had successfully implemented their plan and raised two independent, financially responsible adults.

Other Financial Topic to Teach your Kids

In addition to the story and the approach to having their kids run their own finances, Mary talks about a lot of other topics:

• Basic money values around giving, saving, spending, and borrowing
• Evils of credit cards – she’s very anti-credit card because of the financial trouble her family got into. Remember this was written well before the CARD act of 2009, so some things she discusses wouldn’t apply anymore
• Marketing to kids, and ways to help your kids see through the advertising pitches. Apparently marketers have found five key motivators that influence kids – power, freedom, fun, belonging, and mastery
• Live a frugal, understated life. Limit shopping and TV viewing. Rethink Christmas and birthdays, and educate grandparents and other gift-givers on the danger of spoiling kids.
• Show your kids through the way you live your life that good financial decisions are just what families do. It’s not a deprivation or a bad thing-it’s smart
• Share both good and bad money stories you’ve heard at work, online, on TV, or on the radio. Talk with your kids about the story and what the person in the story did right-or wrong. Use it as a teachable moment (I’ve done this even before the book – when I see an interesting article, especially about younger people, I talk to my kids about it. My 13-year-old especially is starting to get interested in the topic)

What you might not like

When I say she’s anti-credit card, I meant that she’s very, very anti-credit card. She goes as far as to refer to unsecured debt as “Explosive” (vs. safe, secured debt). At one point she talks about how debt enslaves you, and quotes King Solomon (“The poor are ruled by the rich, and those who borrow are slaves to the money lenders”) to help make her case. So if you don’t agree with a strong anti-debt message you might not care for those parts of the book.

Also, the book is basically two books in one. One part is about their family’s money plan and how they implemented it, which is a great story. Starting in Chapter 6 it’s more just straightforward information and tips for things to teach your kids about money.  So you can skip one section or the other, depending on what interests you most. I found it helpful to read both sections myself.

Overall Impression

I thought this was a pretty good book, and it’s definitely a good reminder to have money conversations with your kids. I’m not going to implement the “salary” system right now but I will make my kids responsible for certain expenses when they get older. Fortunately, I have a few more years to figure out exactly how I want this to work. More to come in the future! If money is something you don’t usually talk about with your kids, pick this book out from the library and give it a read. You’ll be inspired to start having some key money conversations, and maybe you’ll want to implement the salary system- all good things for your family’s financial future.