How to Raise Unspoiled, Financially Wise Children

We have the incredible privilege of raising our children into adults. With that end goal in mind, what steps do we need to take to ensure that they also become financially wise?

Our motives are pure – we simply want our children to be happy. But when left unchecked, we try to give them world and they start believing they deserve it. We turn into our kids’ personal ATM.

That’s why I’m so excited to share Ruth’s teachable moment in our ongoing series “Teaching Your Children About Money” today.  

She shares multiple real-life examples about when her daughters wanted things they had or hadn’t saved up for, and what Ruth did to guide them through.

Ruth is a mother of three daughters, a blogger at Prudence Debtfree and Fruclassity and a freelance writer living in Canada.  

We haven’t met in person (yet) but I look up to her already for her wisdom and experience in the world of personal finance.

Enjoy.

DH = Dear Husband

DD2 = Dear Second Daughter

DD3 = Dear Third Daughter

Please tell us a little about yourself and your family.

DH and I have three children, aged 26, 20, and 16 – all daughters. The eldest is completely independent now.

Our second daughter is halfway through her university years, and our youngest is in high school. I’m a teacher, and my husband has been running a home-based business for the past 6 years.

We got in . . . No – we realized we already were in financial trouble after DH lost his job in the high-tech bust of the early millennium.

He went through six years of under/unemployment before launching what has been a successful home business. Our years of lower income combined with a huge business loan meant that we were in debt big time.

In May of 2012, after reading Dave Ramsey’s The Total Money Makeover, we started our journey out of debt.

Three years later, we have paid off all of our $21,000 in consumer debt, all of our $81,000 in business debt, as well as $29,000 through regular mortgage payments.

As per Ramsey’s “Baby steps”, we’re now saving up an emergency fund. Next, it will be time to kill off the mortgage!

What teachable moment regarding your children and money would you like to share?

We are eager for our children not to have to suffer the financial distress that we endured after the unexpected happened. We were not ready for DH’s job loss. No emergency fund. Lots of debt.

No sense that what was “normal” in society – that is, living beyond our means through indebtedness – was a big problem.

We learned those lessons late, and we wanted to teach them to our children before they had to learn the hard way too.

But how do you teach teenagers? They know everything already.

Our second daughter, DD2, was very strong-willed, and it was especially tough to maintain frugal boundaries with her.

Especially for me. I’m not naturally tough as a mom (DH, on the other hand, has no problem being a tough dad); I’m a natural molly-coddler.

But I recognized my need to assert boundaries – for the good of DD2 as well as everyone else – and I’m so glad I did.

DD2 allowed me to write about her transformation – which really was “our” transformation – in two posts at Fruclassity (a site I run along with Laurie from The Frugal Farmer).

Today, I’m going to share a little side lesson that both DD2 and DD3 learned through the boundaries DH and I have imposed as part of our own debt reduction efforts.

Both DD2 and DD3 loved going to concerts. When a big name came to town, there was an excitement and anticipation that built up.

And when friends started saying, “Do you want to go? My dad is going to book tickets. Do you want him to book one for you too?” – the pressure came to bear.

It used to be that DD2 would ask us to pay for the tickets. “No,” would be our answer. She received an allowance and had the opportunity to work part-time, so it was up to her to save for concerts.

There would be anger and bitterness and guilt to contend with – “Jenna’s parents paid for her tickets! Why don’t you pay for mine?” – but we stuck to our resolve, and with time, the dramatic outbursts stopped.

DD3, was less inclined to conflict than her older sister, and our history of concert-going management played out differently with her. Just when we started our journey out of debt, DD3 heard that Justin Bieber would be coming to town.

She was thirteen years old and madly in love with Bieber – who at the time had not yet gone off the deep end.

Apparently, she asked us months in advance if she could go to his concert, and we just said “No” – probably a knee-jerk response based upon our new resolve to be frugal.

She dropped it, pined silently, and when the day of the concert came, she was miserable – and we capitulated.

In hindsight, we realized that we should have let her choose. She had the money saved after all, and on second thought, we wished we had walked her through it better.

Sure, buy the ticket, but then put more in your savings each month to pay yourself back. By the time the concert happens, you’ll be exactly where you should be.

It was too late for that though. So on the night of the concert, in a wave of remorse, I drove DD3 to the Justin Bieber concert, paid a scalper double the price for two of the worst possible seats, and knew I had done the right thing.

It was a great evening, and DD3 was thrilled. Would I do it again? Of course not! But we stumble in our determination to change, and that was a stumble from which we learned.

Fast forward to last year, and DD3 wanted to go with her friends to see The Black Keys.

By this time, our policy was well established. She didn’t have the money to pay for the tickets, and we refused to lend her any.

She maintained a wounded silence for a few hours, and while the molly-coddler in me still wanted to say, “Here, Honey. Let me treat you!” – I held it in check and stood firm.

Within hours of her disappointment, DD3 was talking about how she’d have to budget her money for upcoming plans, and it was a confirmation for me that we’d done the right thing.

This summer, Kanye West came to town, and I knew that both DD2 and DD3 had plans to go and see him. When the day of the concert came, DD3 – who had of course paid for her ticket – was getting ready to go. DD2 wasn’t.

“Aren’t you going to the concert?” I asked. “No,” she said, “I couldn’t afford it with everything else I have going on.” She wasn’t happy about it especially since her younger sister was able to go.

“I don’t feel sorry for you,” I said.

“Well you should,” DD2 responded – not with the dramatic bitterness of the old days, but as a straightforward statement.

“I’m proud of you,” I explained. “You’ve made a winning choice.” That was an explanation that seemed to sit well with her.

What was the most rewarding part of the experience for you?

The most rewarding part of the experience for me was to get confirmation that we had done the right thing.

DD3 has never asked us to pay for anything like concert tickets since she missed seeing the Black Keys.

Since that time, she has often said “No” to friends who had plans to go out and spend money on movies, concerts, or meals out.

And in the case of DD2, it was a privilege to witness her maturity from being an entitled teen to a wise young woman who, instead of making a scene to get her way, quietly decided that it was best to give up on something she wanted for the sake of her longer-term goals.

What was the most challenging part of the experience for you?

As a softie, it was difficult for me to hold steady with the boundaries I knew were for the good. It was hard for me not to cave to DD2’s fighting attitude.

It was hard for me not to cave to DD3’s quiet disappointment. I wanted to make everything peaceful and happy by saying, “It’s OK! Take all of the money you want!”

Of course, that kind of capitulation would have led to horrible character development in our kids.

If you are a parent who struggles with the question of where to draw the line with your children when it comes to finances, you’re not alone.

There is so much pressure to express our parental love through purchases. There is family pressure and peer pressure to do what “everyone else” is doing.

Take the time to decide upon where your boundaries are. Give your children the opportunity to make their own choices – whether it’s through an allowance, money for chores, or a part-time job in the case of teens – and give them the opportunity to recognize the limits to their power of choice.

Don’t bail them out when they blow it. There might be disappointment, even anger. But hold your ground, and wait for the result: a mature, unspoiled, wise young adult. Your child. All grown up.

To read more about Ruth’s journey out of debt as she raises money-smart kids, check out her blogs Prudence Debtfree and Fruclassity.

This article is part of an ongoing series called “Teaching Your Children About Money”.  If you have a teachable moment to share, please feel free to tell me about it at lauraharris(at)piggybankdreams(dot)com.

Join the Discussion: What scenario in Ruth’s story resonated with you the most?