Money and Main Street

It's time to unspoil your kids

You gave them everything. Now you wish you hadn't? Well, it's not too late to teach them the value of money.

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By Karen Cheney, Money Magazine contributing writer

Donna Kornegay used to routinely take Dalyn, 14, on shopping sprees. Now the teen must use her allowance.
Be a good role model
Your kids are sponges. They learn by watching you. So if you're trying to unspoil them, you must lead by example.
1. Unspoil yourself.
See if there are ways to trim your own indulgences. Cutting back on self-spending shows kids they're not the only ones having to sacrifice, says Richard Bromfield, author of How to Unspoil Your Child Fast. Since children may not be aware of what you're doing, you may need to show them how you've changed.
2. Explain your actions.
Share your buying decisions with your kid so that he or she can learn to prioritize. "If you're buying in bulk because it's cheaper, say so," says Jon Gallo, author of The Financially Intelligent Parent. "You might talk about a vacation you're planning and explain how you're saving now," adds his co-author and wife, Eileen.
3. Stick to cash.
As much as you can, pay with cash over credit, as this models that purchases should be made with money you already have. But don't hit the ATM too frequently, warns Bromfield. Limit your trips to the magic money machine to once weekly - and budget your cash just as you'd like your kid to do.
Susan and George Basso are having daughter Julia pay more of her own expenses, including some car costs.
What to teach when
What to teach when These age-based money skills can help transform a spoiled kid into a financially grounded one, say Jon and Eileen Gallo, authors of "The Financially Intelligent Parent."
Ages 5-9
Assign simple chores, start a weekly allowance, talk about money decisions and values, introduce the idea of charity.
Ages 10-13
Open a savings account, offer extra chores as a way to earn money, raise allowance to cover more of your child's expenses.
Ages 14-18
Open a checking account and deposit allowance into it, introduce debit or prepaid credit card and monitor use (by 16), encourage part-time job (by 16).
Ages 19-22
Expand allowance to cover a semester (if in college), provide financial help only if it fuels independence, continue to encourage involvement in charity.
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(Money Magazine) -- Fourteen-year-old Dalyn Fountain has all the trappings of today's teens: her own cellphone, an iPod, a new laptop, and cable television in her bedroom. Until recently she also had a ready line of credit from the Bank of Mom & Dad - no payback necessary.

"We'd regularly give her money to go to the mall and keep up with the latest trends at Abercrombie and Aeropostale," confesses her mom, Donna Kornegay, 41, a director of wellness at a law school in Durham, N.C.

But with the country in a recession, Donna and her husband (Dalyn's stepfather), Dexter, 36, feel an urgency to change Dalyn's spendthrift ways - and, frankly, their own as well. "We've been extravagant with our kids and with ourselves," says Donna. "Now we're readjusting."

For one, they've put a stop to shopping binges and instituted a $20 weekly allowance for Dalyn, and $3 weekly for her 6-year-old sister, Desmyn. The change hasn't been too tough on Desmyn, who isn't yet beating a path to the local mall. But for Dalyn this strange new thing called a budget isn't much fun. "It's hard," she says. "It's like we were shopping, shopping, shopping - then we just stopped."

The Kornegays are one of many families reacquainting themselves with a small yet powerful word: no. No to over-the-top birthday parties, no to another iPod to replace the one you lost, no to letting a kid take your credit card to J. Crew.

In a recent Money survey, 54% of parents admitted that their kids have too much stuff. Similarly, more than half said that because of the economic crisis, they would spend less on their kids for years to come. In short, the stock market correction may lead to a correction in the financial values with which we raise our kids.

"Parents are seeing the shortcomings of giving children everything they want," says Nathan Dungan, financial coach and author of "Prodigal Sons and Material Girls." For one thing, it's costly to cater to a child's every whim - a cost that's harder to bear in an economy of anxiety. But also, by overindulging, you risk raising kids who don't understand the value of a dollar or gain the skills necessary to handle life off the parental payroll. And that can lead to bad habits - like credit card reliance - later on.

Ready to join the wave of parents who are changing their ways? Well, be prepared: Getting kids, especially teens, to accept a new - less indulgent - reality can be a challenge. The following strategies can help you face it:

Escape the parent trap

It's easy to fall into bad habits with regard to how you spend money on your kids. (You know what they say about the best intentions ...) The first step to correcting such behaviors is identifying them. Be honest with yourself about whether - and how - you've been spoiling your child: Do you frequently give in to your kid's pleas for cash or stuff? Do you hand out your credit card freely? Think, too, about why you've been spoiling your kid (you might start by asking what money values you learned from your parents), and what the consequences might be if you don't stop.

"I was of a generation when money was tight," says Susan Basso, 56, of Montclair, N.J., mother of 18-year-old Julia. "So when we had the capability of giving our daughter things, we wanted to give her everything." That meant music lessons, riding lessons, skating lessons, and tennis lessons. Then there were the gifts - like the $1,700 designer purse Julia got on a random shopping trip.

"In hindsight, I didn't do her any favors," says Susan, who's concerned about how her daughter will manage money when she goes off to college in the fall. Julia is concerned too. "I'm horrible with money," she says. "My parents worked so hard to have this stuff, but now I have no sense of reality."

Be team mom and dad

Make sure you're on the same page with your spouse "or the kids will play you off each other," warns Dungan. Elona Washington, 37, of Wylie, Texas, knows this too well. After losing her job, Elona told her daughter, Brynna, now 17, that she no longer had carte blanche with Mom's credit cards. So Brynna went to her step-father. "And she gets whatever she wants from him," says Elona ruefully. If this continues, says Jon Gallo, coauthor with his wife, Eileen, of "Silver Spoon Kids," Brynna "will never learn the consequences of not saving."

Sit down as a couple to talk about the steps you'll take with your kids (use the ideas in this story and sidebars as a guide). And pledge that you'll each check with the other before diverging from the plan.

Get the kids onboard

Since you're changing the rules mid-game, it's critical to talk with your children about how life will be different going forward. Let them know that you want them to develop important money skills like budgeting and saving - which they won't learn if you continue with the status quo.

If your child is older, be frank: Tell him or her that the economy has you feeling more vulnerable, or that Dad's losing his job means you can't spend as you used to. You can even confess that you overdid it during good times and regret it.

"Get your kids involved in the discussion," says Sharon M. Danes, a family economics professor at the University of Minnesota. Over dinner recently Stephen Leonard and Kimberly Jeffries Leonard, 48 and 46, of Washington, D.C., had this kind of chat with sons Victor, 12, and Alexander, 8. They solicited feedback from the boys, who "came up with great ideas," says Kimberly. One example: "They said they'd trade in old PSP games for new ones they wanted."

Pass the budgeting buck

One of the best ways to teach children about limited resources? Have them manage their own money.

For younger kids: That means an allowance and responsibility for an expense - say, iTunes music - that you've been covering, says Jon Gallo.

For teens: Give them a bigger allowance, and make them responsible for more of their expenses (movies, car costs, and so forth). You may require that they earn some of the money needed; see the next section. Also, state clearly which expenses you'll pay for and to what extent (e.g., $100 a month for clothes).

You may find your formerly spend-happy kids are misers with their own cash. Though not quite there yet, Dalyn Fountain is quickly learning the need to budget her allowance. "I get it on Friday, but then Saturday comes and I go to the mall. This week I blew it in, like, a day."

Make 'em work for it

If your kids have received most of what they've asked for, they won't understand the link between effort and reward. To get that lesson across, have them earn the things they want.

For younger kids: Offer payment for tasks above and beyond usual chores, says Eileen Gallo.

For teens: Encourage them to get part-time work, as Julia Basso's parents have done for their daughter. Now that she has a regular babysitting gig, Julia has begun to understand that money is harder to make than it is to spend. "I'm proud of her," says her dad, George. "We used to be her bank, but now she's taking care of her own day-to-day expenses."

Don't let whiners win

At some point you're certain to hear the familiar cry "But everyone else has one!" Trina Giusti, 35, of Chandler, Ariz., certainly has: "My 10-year-old daughter really wants a cellphone. She says she's the only fifth-grader without one." First, do a reality check: Help the child understand that while it may seem that everyone else has one, it's not true.

If you'd consider buying the item, explain that limited resources require sacrifice: Getting this means not getting something else. So when your son says he wants a $60 skateboard, say, "But don't you also want new sneakers? I can only spend $60. Which would you rather have?"

If you aren't going to buy the item, explain why. (Giusti told daughter Gabriela just how much a cellphone plan costs.) But encourage your kid to save for it, and consider offering to match some of his or her savings. As bad as you may feel, don't cave. Doing so sends mixed messages and teaches that pushing back works.

Donna Kornegay finds herself increasingly comfortable setting limits - especially as she's seen the results. "Now the girls understand that they have to work for what they want, or they won't get the things they desire." Clear your throats, parents. You can say it too: "No."

Additional reporting by Emma Haak contributed to this article. To top of page

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