Top 10 Tips for Effective Financial Parenting

This week we are featuring family wealth/financial parenting experts Jayne Pearl and Richard Morris.  Together, they help families navigate through the dysfunction that comes with having wealth.  Part of this process entails teaching families how to analyze and understand their money values, something every family should do!

They offer the following 10 Tips for Effective Financial Parenting:

Teach Skills

1. Base allowance not just on age or survey averages, but on financial responsibility—a combination of discretionary (wants) and nondiscretionary (needs).
2. Help your children identify goals (that are meaningful to them, and that are age appropriate and reachable in relatively short periods of time) that they can save up for.
3. Make sure your children understand how to use credit cards responsibly (charging only what they can pay in full each month, what it costs over time if they do carry a balance, how their actions affect their credit scores, and how their credit scores impact their ability to get a job, rent an apartment, and what they will pay for auto insurance).
4. Help your children become resilient by letting them make mistakes without your bailing them out, so they can feel the consequences and learn problem-solving skills that will help them avoid making the same mistakes.

Promote Values

5. Provide incentives for your kids to save instead of forcing them to save (challenge or matching grants, for instance).
6. Look for opportunities to help your children learn how to delay gratification (those who do have much lower rates of problem behaviors such as drug use, alcoholism, teen pregnancy and dropping out of high school, and score an average of 210 points higher on their SATs).
7. Find ways, if you have more than one child, for them to work together: for instance, challenging them find ways to cut back on household expenses (with rewards of a percent of the saving, perhaps), making decisions about charitable giving together, investing a chunk of money that the family will use in several years for a special vacation, or joining a family investment club.
8. Help your children develop a healthy skepticism about advertisements by watching television with them and pointing out deceptive ad tactics (small print scrolling quickly across the screen, fast-talking announcers listing negative disclosures, and camera tricks), and recalling things they or you saw advertised that you purchased only to be disappointed that it was not as good as the ad led you to believe.

Provide Open Dialogue

9. Share stories about your own experiences with money as a child (what you got for allowance, how you spent or saved it, mistakes you made), and as an adult (such as how you learned about financial management such as balancing a checkbook).
10. Make money a topic of discussions at the dinner table: what lessons you have learned from the “Great Recession,” mistakes you have made with money, misconceptions you had grown up with, and what your smartest financial moves have been.

For more information about Jayne and Richard’s work, visit their web site:

© copyright 2011 Jayne A. Pearl and Richard A. Morris


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