How should we teach our kids about money? At what age should we start? We spoke with a local Chinese and an expat family from different backgrounds about their views on money, and more specifically, introducing it to their children.
Li Yuan works at a well-known multinational technology enterprise and just published a book, Design Your Life. His wife, Chu, works in the marketing department of a bilingual school. Their older son Aaron, 12, harbors a passion for environmental protection, charity, handiwork, and stop-motion animation. 7-year-old Zack is the younger son in the family, and he is good at communication and enjoys music and games.
At what age do you think it’s appropriate to start teaching your kids about money?
From the minute they’re born, a child’s understanding of money will subconsciously be learned from their parents, such as how the parents think about money and how they use it.
If at any point your kids were to come up to you and ask, “Mom, Dad, how much money do we have?”, what would you say to them?
Answering such a question depends on the age of the child and requires focusing on the reasons behind the question, and also looking at the “facts” and “emotions”. Kids may compare how much money their parents make to their friends’ families, and we want to avoid these kinds of private family matters being talked about so openly. So before telling them how much money we have, we must first start by asking our kids what makes them so curious.
Do you give your kids everything they want? Have your kids ever asked for anything unreasonable?
For young kids, they do not understand what is or isn’t “unreasonable”. So we set up some simple and easy to implement rules. Anything that doesn’t fit these rules will be considered unnecessary.
For older kids, we gradually give them more choices and initiative, so we can discuss what is considered “reasonable” and what is “unreasonable”. For example, our oldest son loves Legos so much that he often “wanted” them when he was young, but now he says, “We have so many toys, I’ll wait till the important days to buy more toys.”
How do you teach your kids the difference between wants and needs?
“Want” and “need” are traditional and classical ways to distinguish our attitudes toward things. But I think if we analyze it from Maslow’s Hierarchy of Needs, we can also say that at every level, all of us have a “need”. We don’t have to struggle to define if the subjective “want” is reasonable or not, instead, we can pay attention to what our kids really “need”.
Parents may be inclined to shield their kids from making poor money decisions. How would you react to your kids’ personal money mistakes?
One of the most effective ways to learn things is to make mistakes, so we can let our kids make small mistakes within our control, and then have a discussion about the effects of making poor money decisions, such as how they feel before and after, and how to change their behavior next time. Kids will feel respected by their parents, and at the same time, kids will most likely take responsibility for their behavior.
How would you teach your kids about how money works in the real world and how do they manage their allowance?
Actually nowadays, most families are willing to spend a lot of money on their kids. Especially grandparents, who tend to give “lucky money” to their grandkids during special holidays like Spring Festival, and it can be a source of funds for kids to make “irrational purchases”. In our family, if the kids want to spend the lucky money on any big purchase, we usually have a family meeting to discuss it.
We like to create opportunities for the kids to learn how money works in the real world. For example, last summer, our oldest son went to his godmother’s art summer camp to help take photos and videos of the campers every day. He made vlogs using video editing software and sent them to the parents’ group chat. Later, he was very happy when his godmother paid him for his help. During the Spring Festival this year, he used the money to give red envelopes to his classmates, and he was very proud to spend the money he earned.
Do your kids compare money with classmates? How do you deal with it?
It’s human nature to compare ourselves to others, but it’s not scary. Moderate competition can help us build an interesting life with a purpose. The thing we need to avoid is to frame ourselves by others’ definitions of success. We should encourage kids to find their inner confidence and their talent.
Bec Taylor and her husband Doug came to Beijing from Australia 11 years ago. They were both elementary school teachers back home, and now they are educators at international schools here in Beijing. Bec is a teacher-librarian, while Doug is a technology integrator. They have two kids, Will, who is 10.5 years old and Charlotte, who is 7.5 years old. Their passions include all things tech, living green, travel, glorious food, and spending time with family.
At what age do you think it’s appropriate to start teaching your kids about money?
We started teaching the kids about money around the age of 4 but formally started pocket money at 5.
If at any point your kids were to come up to you and ask, “Mom, Dad, how much money do we have?”, what would you say to them?
We tell our kids that we have enough money to pay our bills, go on lovely holidays, save for when we don’t work anymore, as well as having enough money to give to charity. We often talk about how our salaries compare to those of other occupations, as well as how grateful we are to be paid so well for doing the jobs we love. Our kids also know the realities of being a teacher in our home country and that on a teacher’s salary at home, we wouldn’t have as many luxuries like holidays.
It feels ridiculous to ever complain about any kind of lack in our lives when we are obviously so abundantly well-catered for by our generous salaries and employee benefits. Our choice to be expats has allowed us to experience life in a way we could never have done if we stayed at home.
Do you give your kids everything they want? Have your kids ever asked for anything unreasonable?
No way would we give our kids everything they want! If we did, they would never know the pleasure of being able to buy something after saving up for it. Our kids are surprisingly good about not repeatedly asking for new things. They will sometimes ask for a new tech toy like a Nintendo Switch, but they know what our answer will be, “Buy it yourself, that’s why you have pocket money.”
We see far more of that whiney behavior when we go back to our home country because they are bombarded with advertisements. Frankly, it is sickening the lengths that advertisers will go to sell to kids.
How do you teach your kids the difference between wants and needs?
We base it on Maslow’s Hierarchy of Needs, if something keeps them healthy and alive, it’s a need. The rest are wants.
We also openly discuss our wants so that it doesn’t eat away at us. Sometimes just talking about it can be half the fun and releases the emotion of wanting something so much. Obviously, it’s much easier now that they are 7 and 10 years old. When they were smaller it was much harder to explain the differences. Our best strategy back then was to acknowledge the want, write it down and then move on. We believed they just wanted to be heard and have their desires taken seriously. I think that applies to all of us actually, not just preschoolers!
Parents may be inclined to shield their kids from making poor money decisions. How would you react to your kids’ personal money mistakes?
Hopefully without shame and anger, but who knows? We have given, and will continue to give them lots of chances while young to make silly mistakes with their money, like the times they went to Roundabout or the supermarket and spent all their money at once and had nothing left for anything else.
Much like everything else in life, we hope they will experience the logical consequences of poor choices. As long as they are safe and healthy, we hope not to step in and save them from their own poor decisions.
How would you teach your kids about how money works in the real world and how do they manage their allowance?
Much of our money philosophy as a family is a mashup of ideas from Suze Orman (my first financial guru as a young adult) and Scott Pape (the “Barefoot Investor”) — common sense, honest communication, and clear expectations. Of course, our kids are young, they don’t always do everything perfectly and are still too young to grasp many financial concepts, but that doesn’t stop us from trying our best to instill smart thinking from a young age.
Both our kids have jobs around the house that are not tied to pocket money, they are just “being alive and part of our family” jobs — set the table, clear the table, put away your stuff, make your bed (on weekends), etc. The luxury of an Ayi makes it pretty hard for kids to do a tremendous amount around the house. They have an option to earn extra money by doing bigger jobs like watering the garden, washing the car, taking my parents’ dog for a walk.
Their pocket money is the renminbi equivalent of $1 per year of age, so my daughter currently gets RMB 35 and my son RMB 50. Our kids have three jars – Splurge, Smile, and Give – and their pocket money has to be divided between the jars any way they like, as long as each jar gets some money. Splurge is for daily, perhaps frivolous spending like a new toy or a treat at the supermarket. Smile money is for large purchases that take time to save for, but will make you smile when you get them. Things like a big Lego set or a fancy new doll would fit this category. Give is pretty self-explanatory, the money gets donated to a charity of their choice, whenever a genuine opportunity comes up. For example, both our kids just raided their Give jar to add to our donation to the Australian bushfire appeals.
Do your kids compare money with classmates? How do you deal with it?
At this point, both kids seem blissfully unaware of comparison, or, if they are aware of it, it doesn’t seem to faze them! We are lucky I guess. Our kids have pretty low expectations and are happy as long as we hang out with them, have a steady supply of library books around the house, plenty of food in the fridge, and seeing their grandparents in Australia at least once a year.
We are under no illusions that it will stay this way, but we feel pretty confident that our mantra of, “Buy it yourself if you want it” will hold us in good stead for a few more years at least!
This article appeared in the beijingkids 2020 March – April issue
