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How Not to Spoil Your Kids With Money

By Joe Gross, CDFA®

We all share a common desire to raise our children with values like compassion, integrity, diligence, and a strong work ethic. However, for those who have built substantial wealth, it can be a delicate balancing act between providing their children with the life they’ve always wanted and unintentionally fostering a sense of entitlement. The reality is that growing up in affluence does not have to equate to a life of privilege. With the right approach, parents can instill the values of financial respect and responsibility in their children from a young age. In this article, we’ll share our top five tips for parents on how to avoid spoiling their kids with money and raise them to be responsible stewards of their wealth.

1. Emphasize Values Over Money

A critical part of preparing your children to handle wealth comes in how you talk about it when they’re young. Throughout childhood, make a point to emphasize your family values as much as possible. Let your kids know that a person’s worth is not tied to how much or how little money they make or what type of house their family lives in; rather, there are intrinsic traits like kindness, compassion, and empathy that matter more than someone’s net worth.  

Consider creating a family mission statement, or writing down your most important family values so that they can be frequently seen and referenced throughout childhood. This can be a great way to emphasize your family’s purpose, goals, and standards in a way that has nothing to do with money. Not only will this help to solidify the idea that your family represents much more than just a high net worth, but it will also help to inform how you spend your money and what types of monetary actions align with your family values. 

2. Encourage Generosity

An effective strategy for avoiding entitlement in your children is to encourage generosity in both time and money. Yes, contributing to charity is an important part of giving back, but simply donating money is often not enough to truly drive home the impact that supporting worthy causes can have. Instead, try taking your kids to volunteering events that align with your family mission statement, and talk about why what you are doing matters. Hands-on experiences and a shared time commitment between you and your kids can be a great way to illustrate the importance of being generous with your time. 

If all your kids know of generosity is cutting a check and attending a fancy gala, it can be easy for them to think that donating money equals cool experiences for themselves as opposed to life-changing impacts on other people. 

3. Instill a Strong Work Ethic

You’ve likely heard over and over the importance of learning the value of a dollar, and the best way to do that is to earn that dollar yourself. There really is no substitute for putting in the hard work yourself to give you a greater appreciation for what money truly represents. And your kids are no exception. Just because you’ve achieved financial independence doesn’t mean your kids should have every want covered with no hard work or sacrifice required on their end, especially as they get older.

Insist on having your kids complete chores, or work a part-time job to earn spending money. If you own your own business, you could even have them help out with extra clerical or administrative work that needs to get done. Whatever it is that makes sense for your family, be sure to pair their real-life work with at-home conversations about why earning their own money is important.

4. Teach Wise Money Management From a Young Age

Teaching your kids about wise money management is something that should start at a young age. It doesn’t have to be long drawn-out discussions; rather, just letting them in on your thinking and decision-making as you go about your day-to-day life can be quite helpful. At a restaurant, explain why some food items cost more than others; at the bank, explain why the bank keeps your money and why you only take what you need from the ATM. These real-world scenarios help cement the whys and hows of money in your child’s mind. 

On a practical level, here are some things you can do to teach wise money management as your children age:

  • Give your 5-year-old money to buy something at the store so they learn the value of different items and realize that to obtain something like a toy, an exchange of money needs to take place. 
  • Try letting your 10-year-old figure out the cost of a new video game, plus tax, and help them save up allowance money to pay for it. 
  • Let your teenager buy their back-to-school clothes with a set amount of money. 
  • As they get older, you may even guide them in investing some of their hard-earned money, letting them make some of the decisions.

It may not seem all that noteworthy at first, especially when you have more than enough to provide for your children’s day-to-day needs. But we all learn best by doing, so allowing your kids to make decisions and even mistakes on their own can teach them valuable life-long lessons about how to use money responsibly.

5. Talk About How You Got to Where You Are Today

Achieving financial independence is a success that should be celebrated, but more than likely, there were failures, missed opportunities, or struggles along the way. Be willing to share how you got to where you are today so your kids can see that financial success does not happen overnight. It is built on years of hard work and sacrifice, and it’s not something that should be taken for granted. The more you can paint a realistic picture of what it took to create your lifestyle, the more likely your kids are to appreciate what they have and what they need to do to make their own success.

It can be as simple as talking about the long hours you spent working on your start-up company, how worried you felt that you might not succeed, and the incredible sense of fulfillment you experienced when your hard work finally paid off. Or you can talk about why you made specific decisions, like choosing to go to an in-state university versus out-of-state, or how you decided to take that leap of faith and become an entrepreneur. 

Be open about what drove you to persevere even in the face of challenges. Chances are it wasn’t just a desire for financial independence, but a dream to build, create, or be a part of something meaningful. These are the stories that can greatly impact your kids’ perspectives on why they have access to significant wealth and how that may not have always been the case.

We Are Here to Help

At JGP Wealth Management, our expertise lies in managing the finances of affluent families, but our commitment goes beyond that. We strive to be your trusted companion on life’s journey, offering financial guidance to help you and your children experience financial harmony.

If you’d like to partner with a financial planner who understands your unique needs and inspires you to be more confident in your financial decisions, contact Joe today at 503-446-6450 or jgross@jgpwealth.com.

About Joe

Joe Gross is first vice president and senior financial advisor at JGP Wealth Management, an independent, fee-based financial advisory firm in Portland, Oregon. With over 25 years of experience under his belt, Joe is passionate about putting his clients first and helping them stay focused on their financial goals, inspiring confidence in their future. As a Certified Divorce Financial Analyst® professional, he specializes in addressing the unique financial issues of divorce. Joe is known for his tenacity to keep clients on track toward their dreams and for his attention to detail, which is second to none! His clients know that nothing will slip through the cracks when working with Joe! 

Joe graduated from the University of Arizona with a bachelor’s degree in finance. Outside of work, he enjoys being involved in the community and is actively involved with organizations close to his heart. Joe is a former president and current board member of the ALS Association of Oregon and Southwest Washington and a long-time member of The Multnomah Athletic Club. In his free time, he enjoys fly fishing, spending time with his family, and cheering on his alma mater, the University of Arizona. To learn more about Joe, connect with him on LinkedIn. You can also watch his latest webinar on How To Pick Up The Financial Pieces After Divorce.