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Episode #62: Ron Lieber, “We’re Not Having the Right Kinds of Conversations with Our Kids About (Money)”

Episode #62: “We’re Not Having the Right Kinds of Conversations with Our Kids About (Money)”

 


 

Guest: Ron Lieber. Ron is a journalist who writes the “Your Money” column for The New York Times. From 2002 to 2007, he wrote for The Wall Street Journal, including the “Green Thumb” column on money management. From 2007 to 2008, Ron was the managing editor of FiLife.com, a site designed to help people in their 20s and 30s manage money. He is also the author of the book, “The Opposite of Spoiled.”

Date Recorded: 7/12/17

Run-Time: 59:59

 

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Summary: In Episode 62, we welcome journalist and author, Ron Lieber.

Meb begins by congratulating Ron, as it was Meb’s pregnant wife who read Ron’s book about how parents should discuss financial matters with their kids, and promptly told Meb he needed to read it and get Ron on the podcast.

Turning attention to Ron’s book, “The Opposite of Spoiled,” Meb begins by asking about Ron’s motivation for writing it. Ron tells us there were three factors: one, a pointed question from his three-year-old (“Daddy, why don’t we have a summer home?”); two, the focus of Ron’s writing at work (young people who borrow vast sums of money to pay the huge college tuition bills); and three, his own situation as a teen, having seen the collegiate financial aid application process thanks to his mother. All of this together led Ron to the conclusion that “we’re not having the right kinds of conversations with our kids about this stuff.”

Meb mentions how it’s a shame that they don’t teach personal finance in high school, which makes it all the more important that parents have these discussions with their kids. Unfortunately, many parents are reluctant. Meb asks Ron why this is so.

Ron points toward shame. Perhaps parents are ashamed they don’t know the answers to the questions (maybe they don’t have a firm grip on finances themselves), or maybe they’re ashamed at how much (or little) they earn, or at how they earn their money.

The conversation drifts toward a piece of advice in Ron’s book; it’s the suggestion that when facing a question from a child, the parent might ask “Why do you ask that?” The reason this is helpful is that many times, the stated question isn’t really want the child wants to know. Questions like “how much do you make?” are rooted in fundamental questions such as “Mom/Dad, are we okay here? Is our family normal?”

Meb brings up the four things spoiled kids have in common from Ron’s book and asks for some commentary. Ron tells us that, ironically, these spoiling factors have almost nothing to do with actual money. They are: one, not having any rules for kids; two, if there are rules, not enforcing them or having consequences; three, smoothing out the path in front of kids and making sure they never face any challenges; and four, allowing kids to grow up without any context for how lucky they are for their opportunities – no gratitude, and instead, an attitude of entitlement.

This dovetails into a great conversation about chores, which points toward allowances. Ron suggests dividing allowances into three buckets: savings, spending, and giving. The specific allocations will likely reflect the values the parent is looking to instill (for instance, if a parent wants to focus on giving, the allowance amount can reflect what the parent believes is an appropriate amount the child should skim off the top for “giving”).

There’s way more in this episode, and if you’re the parent or grandparent of a young child, you don’t want to miss this one. You’ll hear more about the conditions that lead toward materialistic kids and how to avoid them… Unique ways to deal with things like a visit from The Tooth Fairy… How to handle kids wanting cell phones (do you know how long Bill Gates made his kids wait before buying them a cell phone? You’ll find out)… And how to use a great tool called “The Fun Ratio” to help your kids make better spending decisions.

What is it and how does it work? Find out in Episode 62.

Links from the Episode:

Ron’s Reading list:

 

Transcript of Episode 62:

Welcome Message: Welcome to the Meb Faber Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the Co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

Sponsor: Support for the Meb Faber show and the following message comes from Wunder Capital allowing individuals to invest in solar projects. Earn up to 8.5% annually while diversified your portfolio in combating global climate change. Create an account for free at wundercapital.com/meb. Do well and do good.

Meb: Welcome podcast listeners. Today we welcome a very special guest. He’s the Your Money columnist for “The New York Times,” author of the book “The Opposite of Spoiled” which is his guide to teaching kids about money before writing of the times he wrote the Green Thumb personal finance column for “The Wall Street Journal” and his first book which he co-authored about taking time off from college is a New York Times bestseller. Welcome, Ron Lieber to the show.

Ron: It’s great to be here. Thanks for having me.

Meb: I wanna give you a little bit of a compliment. My wife, we actually just had a child, but for the last couple of years she has, like, dog eared your book and said, “Meb you’ve got to get Ron on the podcast.” So we’re stoked to have you here today. A lot that we wanna talk about. So let’s dive right in.

Ron: Wait wait wait. I got something I wanna ask you. So she was one of those special students who actually read the book before she had a kid?

Meb: Oh yeah. Well, so you got to remember I’m, you know, I’m an investing guy, I’m a finance guy. I bring all these books home, 99% she has zero interest in, like, quantitative investing books. She saw this one and it was like, “Oh man this was actually really good.”

So, and then there was one other, kind of, in this, in the philosophy of money and happiness genre, was another book called “Happy Money” that we had on the podcast a few months ago. So these two were hers. So kudos to you but yeah, she loved it.

Ron: Excellent. When I go out and speak, my favorite people to see are either the people with bulging bellies or the people who actually show up with tiny newborn infants, in arms, I just, nothing warms my heart more than people who are getting started early.

Meb: I have one question from her we’ll ask later, but otherwise we’ll jump right in. So this book it’s mainly written to parents about how to discuss money with their children, given all the set of challenges we face in the modern age. Why don’t we start with what was the motivation for writing this book? Was it the birth of your first daughter or was something going on in the world, journalism? What brought you to put pen to paper here?

Ron: Sure. I mean I think are at least three things. Right? There was something that happened in the moment when my daughter asked me, sort of, a complicated question about money at a younger age than I expected.

There was something that was happening at my job where I was writing about things that were disturbing to me. But then there was also of a 20 year stretch of time going back to my middle teen years that I think had had an impact on me too.

So I mean let me march through all of this is the acute question that came out was from my daughter who was three at the time who piped up one day from her car seat just literally out of nowhere. Apropos of absolutely nothing she says “daddy, why don’t we have a summer house? We had not been talking about buying a summer house. We weren’t even sure how that phrase had entered her vocabulary exactly. But it was obvious to me in that moment that she was super confused, but also had a lot figured out. She knew that there were people who had more stuff than we did. Maybe that meant that they had more money than we did. She knew there were people who were making different choices than we were. And she wanted to figure out why that was.

And I didn’t have a great answer for her. There I am like plain doctor money in the newspaper in front of hundreds of thousands of readers each week, and I was just stumped by this three year old. So that wasn’t very good. So take that and parrot with what I’ve been doing sporadically in the newspaper for years which was writing a lot about people who had made bad choices about how much money to borrow to go to college. And I was dumbfounded at how we had arrived at a point in the United States where we present these tuition bills to teenagers who often have very little experience in money.

And we asked them to make a decision at 17 or 18 or 19 about how much they’re gonna to borrow. With any luck maybe some of them have made purchase decisions about phones or bicycles for a couple hundred dollars before, but not a five or a six figure decision that involves tens of thousand dollars of debt. So I mean no wonder we ended up in a bad situation with student loan debt in the country. We were what did we expect this point at them. And then I thought about the situation that I’ve been in as a teenager. And my parent’s finances took a turn for the worse. I ended up going on scholarship and middle school and high school at the private school that I attended. And my mom gave me a front row seat for the financial aid application process. And I learned a lot from that experience and I was lucky enough to have made reasonable choices albeit at a time 25 years ago when the numbers were not so large.

So I took all that together and I thought, “wait a second, we’re not having the right kinds of conversations with our kids about this stuff.” And I thought about it some more and realize that financial literacy was a boring term that turned people off. And what I realized like more than anything, was that the way to get people talking about this stuff was to remind them that every single conversation about money whether it’s with your spouse if you have one or your friends or your kids as you’re teaching them, every single one of those conversations is also a conversation about value.

Saving is about modesty or saving it’s about patience and perseverance and the spending decisions that you make, those are about modesty and prudence and thrift. You’re giving decisions those are about generosity and gratitude. And again overall that is a deep curiosity at least among children and teenagers about who they are, how they got to be where they got to be. They’re searching for a sense of perspective about where their family stands. All of those conversations are values conversations in addition to money conversations. Every parent wants their kid to have good values. So that was how it rolled its way out.

Meb: So we’ve actually talked a lot about on the podcast about how it’s a shame that they don’t teach in the curriculum. At least most schools personal finance in high school is required class and then as college as well. So you have to rely like you said, parents and friends. And so a lot of parents really are reluctant to talk to their children about money and find it really challenging. Why is that and, kinda, how do you recommend parents start that conversation despite the difficulties?

Ron: Yeah. So about the classroom learning, I have it extremely mixed feelings about that and much depends on, kind of where you’re coming from. That the research itself is mixed on whether the y financial literacy curriculums in the schools are effective. I tend to think that that stuff is gonna work best when you’re teaching kids things that they can immediately put to work in their own lives.

So the thing that I find baffling about this curricula, is that it’s very rare that anybody teaches a personal finance class in high school where the kids spend the entire semester studying the financial aid and college financing system. Now that would be useful. Nobody does that. Right? And it really can take an entire semester to figure it out because it is so complex. Right?

And then because I think that all of these money conversations are also conversations about values, I personally don’t wanna outsource those to some middle school or high school teacher. I wanna be doing the values education for my kid. But I’m also aware of the fact that many, if maybe, most families just don’t have these conversations or can’t.

So I’m also grateful that some schools, at least, are giving it a shot which segues right into your question right so why doesn’t this happen in the first place? Well, for all sorts of reasons. Right?

A lot of it comes back to shame though. Parents are ashamed that they don’t know the answers to their kid’s questions. That maybe they don’t have a kind of a basic sense of financial literacy themselves. Or maybe they’re ashamed that when their kids start asking them probing questions, the kids are gonna find out, pretty quickly, that the parents actually, or the parent if it’s a single parent household, they don’t have a firm grip on their own finances. Most Americans don’t.

Maybe you’re spending recklessly even if you make a lot of money, or maybe you’re in a lot of debt and you don’t wanna talk about it because it makes you worried and you’re afraid that your kids will get worried. Maybe there’s shame about how you earn your money. Maybe you’re in an industry that people tend to criticize.

Or maybe you’re ashamed because you don’t earn as much as the majority of the people or the families that you or your kids hang out with, and you don’t want to have to answer questions about that.

There’s a lot of that that goes on and I think there’s more shame than there is a, sort of like, old-fashioned feeling that money conversations are inappropriate or impolite. I mean there’s some of that left in some parts of America, but I think most of us have woken up to the fact that money is an incredibly powerful force in the world, whether we like it or not. And part of our job as parents is to make sure that our kids are ready to make big important financial decisions.

Without anyone really paying much attention, in the last 20 or 25 years, we’ve plopped one of the biggest and most impactful financial decisions that anyone will ever make, where to go to college and how much to pay for it. We’ve plopped that into the teenage years, which is insane. Right?

And yet that is the way that it is. It’s gonna be that way for a while. And if our kids aren’t ready to reckon with that if we haven’t been talking to them about it for, you know, 10 years prior and kinda getting them ready to deal with those large numbers, they could be in real trouble. They can make some terrible decisions. So I think most people who look at this with a clear head, will realize that we don’t have any choice anymore about whether to have these conversations.

Meb: Well, there’s a very simple answer on the public in private education for middle school and that’s you and I just design the curriculum and then we can just take it to all the schools and say “This is what you should be teaching Ron.” This is perfect answer. But you have a couple good piece of advice to parents. You say, “Look, first of all don’t ever lie about the money stuff. Kids are too smart, they’ll figure it out anyway. And, praise curiosity. Let them know that it’s okay, even great, to ask questions.” And, for all these questions they ask, “Are we poor or are we going to have to move…” etc.., about life and finances.

One of my favorite responses you would always had, and maybe you could talk a little bit about, it gets to the heart of it, is your response is often to ask the child, “Why do you ask?” And maybe talk about why that’s a kind of a powerful response because a lot of adults get defensive, or they get is taken aback by the questions. Why is that such a good response to a lot of the questions that kids come up with?

Ron: Sure. Well, I guess for starters you know look let’s call this what it is which is a tactic. We know that, even when we are at our best, we will sometimes feel defensive about the questions that they are asking. Right? Often they will sound challenging. Maybe they are meant to be challenging. And maybe they feel challenging because our children are pointing to some underlying logic that is actually illogical. So it’s perfectly normal to feel that way. But it is also the case that sometimes, even often, the questions on the face of them may not be what they appear.

So think about the questions that involve large numbers. Particularly a younger child who’s asking, how much your house is worth or how much money you make. And now think about where that’s coming from. Right? Why might they be asking that question?

Well, with the younger ones, and they’re hanging out on the playground and the kids are throwing numbers around. Right? Often the numbers end with I-O-N. My mom’s a millionaire. Well, my dad’s a billionaire.

And so it’s natural for them to come home and wanna know how many illions you have in your family. So some of it may be coming from that. They’re overhearing things that make them wonder. Or, they’re overhearing things in your household that makes them wonder. Maybe you’re on the phone with creditor or a financial service company that you’re having an argument with or a disagreement with. Maybe you and your spouse, if you have one, are yelling at each other. You know, you’re in a fight that has to do with money. The kids get worried. Right? They’re taking all of this stuff and they’re trying to make sense of it.

Now with the slightly older ones they are picking stuff up in the newspaper, they are reading your mail. If they’re like me they’re in your file cabinets and looking at your tax returns. Which is something that I did to try and sort out what was going on with my parents’ divorce and why things seemed to be coming apart at the seams. Didn’t help me out much but I did try. Right?

And so if you ask, “Why you ask?” you’ll eventually get to the bottom of it. “Well, I overheard this kid saying this, or I overheard mom talking about that and I got worried or I saw this in the newspaper, I read this on a bill and it made me wonder.”

Because, when you get right down to it, these questions about how much money do we have or how much do you make, what they’re really trying to get to is something more fundamental.

It’s like, “Mom, Dad, are we okay here? Are we normal? And if we’re not normal, if we have more, than anybody else that we know, it is there something wrong with that?” Right? Or, if we have less, “If the reason why you won’t let me have those shoes is because we actually can’t afford them. Is that because we did something wrong?”

So those are very different questions than, “how much money do you make?” or, Are we rich?” And I think it’s ultimately important to answer the questions that they are truly trying to get to the bottom of the things that are unsettling to them, and to make sure we satisfy those. And then once we do that we’re, sort of, off the hook on the six-figure housing number, or the seven-figure net-worth number, or whatever it is. And we can save those more difficult conversations for later.

Meb: I thought one of the best examples in your book, money can be so abstract. Even for professionals in our field you start talking about these large numbers and what they mean. And I think it was, and I’ll paraphrase this, but a father came home one day. His kids were asking about a lot of topics and budget and he said, I think they looked up how much he made. And he just went to the bank, right, and withdrew a month’s of salary in ones. It took him a couple of days to get it. Laid it out on the table. Then after the kids’ eyes were just googly eyed, you know, actually went and took piles of the money and said, “Look this is how much we pay for insurance,” you know, “and this is how much we pay for this and that.”

I thought that was such a beautiful example to bring it home a little bit. I don’t know what he did with all the money afterwards. Maybe he took it to HorseCraft [SP]. I love that example. Let’s segue a little bit. There’s so much I want to cover.

The title of the book when you talk about “Spoiled,” the derivative used was originally the word was referring to meat, and there’s no real antonym to spoiled. I think you said the best was “fresh” and it would sound funny to go around talking about your really fresh kids.

But you said spoiled kids tend to have four things in common. Do you remember what those four are? Could you talk just real briefly about, kinda, the overview of what, you know, what these traits are? And then we can get into some specifics on how to avoid that, and cultivate the non-spoiled nature?

Ron: Sure. Yeah, I mean that when I got there in the first place was that the point which I seized on this values question, I was trying to figure out for myself. All right, well, what are the things that parents like us worry about in the first place? Like, what are the opposite of good values? And when I started to ask people, well, you know “What’s the, like, the worst word somebody could use to describe your kid, that would make you feel like you had flunked as a parent?” The word spoiled came up more than any other word.

But before I figured out what the opposite of spoiled was, I had to figure out what spoiled actually meant. Like, why does that make the hair rise up on people’s arms? What is it that is there like a clinical definition of it? And it turns out that there is one.

There’s this guy, based in Illinois, he’s mostly retired now but he used to travel around the country doing continuing-education seminars for school psychologists and other clinical psychologists. He developed his own definition of it that had four parts, that I felt it was the best one that I found. And the thing that’s cool about it is that it has almost nothing to do with money. You do not have to be rich to spoil your child. It can help some, but it’s not necessary. Right?

So this is this is how he put it. Right? Number one, spoiled kids do not have any rules at all. Right? Spoiled kids.

Number two, if there are any rules for the way in which they’re supposed to behave and conduct themselves, they are generally not enforced. So there are no consequences for breaking the rules, such as they exist.

Then the third part of the rule is that spoiled kids are also children for whom the path in front of them is always laid smooth. So there are no bumps in this road, and if you fall down, if you screw up, if you break the rules, if you fail, there’s always gonna be somebody there to, kinda, pick you up and brush you off, so that you do not have to, you know, suffer any consequences.

And it’s only in the fourth part of the definition when you start to get into things that involve money. Spoiled kids are also kids who express no gratitude. They think that they have it coming. They have an above average amount of material possessions, and they get to do an above average amount of things. And in both those instances, they just expect that that is the way that it is. They don’t have any context or perspective on how lucky they are to get to have, and do, what they do get to have and do.

And so obviously with that last one, it’s easier to spoil a child if you have a lot of money, but I also heard from people in situations where families were divorced or the parents had lost their job, you know, and often parents, and other family members, and family friends who feel badly or guilty in that context, will lavish whatever remaining resources there are on the kids. So that the kids are somehow insulated from the stress that the family is under.

So even if the family is under financial constraints, it may be that the parents overcompensate by trying to do nice things for the kids. And if the kids have no appreciation for that, or aren’t taught to appreciate it, they too can become spoiled.

Meb: Really interesting take away on that, by the way listeners, again, is that the majority…and a lot of these don’t relate necessarily directly to money. So a lot of these can be cultivated, regardless of whether you’re a super-wealthy family or not. And one of the ones you talked about which is, kind of, a good segue, in the book is also, a lot of spoiled kids tend to have few chores and, kinda, responsibilities there.

And so there’s a, kind of, a tangential topic which is both chores and allowances and I thought it’d be fun to chat about that real quick because, you give some good guidance on allowance. But what’s your overall take? When do you start it? Do you do it? How much? All that good stuff.

Ron: Yeah. You know, so it’s absolutely the case that one of the primary rules in a household in a family that doesn’t want to raise spoiled children, is that the kids have responsibilities for the maintenance and functioning of the household. And what we’re talking about here is not just, like, self care. You know, “I’m gonna pay you 10 bucks a month. In exchange you’re gonna make your bed and brush your teeth and get your homework done.” No.

The choice to have something or everything even to do with things that the entire family needs. Right? So that’s kitchen work of all kinds, it’s cleaning, it’s any number of things that impact the functioning of the household.

So the question that often comes up first, is the question of whether kids should be compensated for doing their chores. And I actually think that the answer to that one is a clear no. It’s not how the majority of households function.

Most of the survey work that’s been done on this suggests that roughly three-fourths of families that pay an allowance, do so in exchange for doing the chores. I have just like a practical problem with that.

As many families have discovered as the kids get older and smarter, they may say to the parents after a certain point, if they happen to be frugal… Right? Let’s say they’ve got like months of allowance saved up.

They may decide that they don’t want to do the chores anymore. They don’t want to do them for a while, and they don’t need to because they have all the money that they need, for a while. Right?

And, at which point you’re in a negotiating pickle, as a parent because, I don’t think anybody’s intent is that the chores will not get done some weeks, as opposed to others. But if that’s the deal that you set up, well, you’ve placed yourself in a rough position.

So I’d much rather parents put themselves in a situation where the chores are done as a matter of course. They’re done for free. And if you’re looking for leverage or consequences to make sure that they do get done, well you could just take away something that the kid likes to do, as opposed to something the kid likes to have. And that’ll be your leverage. Right? It’s like if the wireless password changes one minute after the chore deadline, you can be sure that the chores are gonna get done. Right?

So which then raises another question, well, like, what’s the point of allowance then? Like, you’re just like handing this money out. And I guess the way I’d encourage parents to think about it, is to think of allowance as a teaching tool, a tool for learning. The same way that you would books, or musical instruments.

We want them to practice reading and get really good at it. We want them to practice their musical instruments so that they get to understand the joy of improving at that. And in the same way, we want them to get good at money. We want them to learn to spend it in a way that brings them the most happiness.

We want them to learn to save it for things that are important to them, that take a while to save up for, and to feel that sense of satisfaction and accomplishment when they’ve worked for something and waited. And we want them to give the money to people who need it more than they do, and to support causes that move them. And that takes practice, to get good at that.

And we want them to be good at it because we’re gonna shove them out, at 17 or 18 or 19 to make big decisions about how much money they borrow to go to school and what they wanna do with their lives. So, you know, it makes sense to start that earlier rather than later.

Meb: It’s funny because in the book I think you said you can even start it in first grade and older kids will need more allowance than younger, and you recommend, like, you just briefly mentioned dividing the allowance into three parts. Spending, giving, saving.

And it’s funny because, as you read this book that it’s certainly a lens onto raising children, but so much of this advice and some of the questions I have coming up also apply to adults. And so many adults, kind of, focus on the wrong things when it comes to money. And I think this even if you applied part of this to an adult is such great advice. And so, could you talk just real quickly about the, kind of, three buckets?

Is that something that you see, is it equal allocation? Do you put equally in the give, saving, spending? How much leeway then do you let them use in what they choose from that? What’s, kind of, the thought process there?

Ron: Yeah. Well, I’m glad you mentioned the adult connection because I think it’s totally true. Right? If you look at those three jars and I put them on the cover of the book for a reason. If you think about it, that is how healthy grownups think of it. Right?

If you are a financially well-behaved middle-class or upper-class person, who is able to afford to save, that’s about how you do it. Right? And the ratios are roughly, I mean, we all, sort of, know what we’re supposed to be doing. Right?

We put away 15% or so for retirement, we put away another maybe 5% for college savings, or a down payment, or other more medium-term goals. Depending on which God we believe in, maybe we tithe 10%, or maybe we give away a little bit less, or a little bit more, and all the rest of it, kind of, goes towards spending.

We may not think of it that way, but that is in fact what we were doing with our mental accounting. Right? So the allowance and the three jars, that’s just a junior version of that.

Now kids’ allocations will be different. I don’t have any particular prescription for what makes the most sense. I think much is gonna depend, particularly as your kids get towards their teenage years, about what you’re asking them to use the allowance for.

And, you know, if they’re going to be responsible for their own mobile-phone bills and for their own gasoline for cars, and you’re gonna pay for that but you want them to learn to budget it. Well, maybe that becomes part of their allowance and that goes into the jars. And maybe more money will go towards spending than for saving. Right?

Or maybe, yours is a family that’s already taken the giving pledge, and you’re gonna give away 99% of your money before you die, in which case you want allowance to be an exercise in generosity. In which case, maybe 75% of the money goes towards giving, and you want your kids to get started thinking about that early on.

The easiest way to do it, right, is just to do it equally. The hardest part for parents quite often is just, like, the logistics of getting this done and make sure it happens each week. And if you’re having to do singles and fives and tens, and then it depends on having the right amount of green cash money, which many of us don’t carry around as much anymore. So I would default towards like, kind of, what’s easiest, what makes the most sense when you compare it to the values you’re trying to teach.

Meb: You know, as we talk about this, I have so many flashbacks from childhood. I mean I remember my grandmother, we had this like those big watercooler bottles that we would put change in, as a means of, kind of, saving and after a number of months or a year or whatever, we’d take it to the bank to get redeemed for cash. And I was always astonished about how much money it was because it only looked about $15. And it’d end up being like $100 or $200. Now, granted, grandma is probably dumping her change purse in there every day.

But thinking about guidelines for the giving and saving and spending it just remind me of another thing. We had a similar situation growing up, where my dad was like, “Look, if you save this money you can spend it on whatever you want.”

And when he finally got around to it, he was like, “All right Meb, what do you want to spend it on?”

I said, “I want to buy a butterfly knife.”

And he’s like, “What are you talking about?”

You know, I said, “Well, you said I could buy anything I wanted.” So we ended up… Or I think, it was either that and like a Chinese star. So, much to my neighbors’ chagrin, me throwing Chinese stars in the background.

But are there any guidelines you have? You know, is it just, kind of, common sense where you, kind of, say “Hey we’re going to give to charities that you really support.”? Or, like, is there any general suggestions you have here?

Ron: So a couple of things there. You know, you’d asked before about whether money can migrate from one jar to the other. You know, you can set whatever rules you want about that. And many parents are thrilled when something really bad happens in the world. Sometimes kids will wanna take all of their spend money and all of their save money and dump it in the give jar. And give it all away to help the victims of whatever tragedy has occurred. I don’t think anyone would wanna get in the way of their kids doing something like that.

And, you know, if your kid is not a big spender and wants to transfer some of their spend money to the save jar because they’re insistent upon getting the latest iPhone. By all means, allow them to do that if they want to deny themselves more everyday expenses.

But then that gets to the question that occurred to you when your dad seemed to change the rules. Which is that every family, whether they realize it or not, has a banned item list. Right? Your dad didn’t realize it until he began to understand just exactly what it was that you had your eye on.

And now I try to stay out of the business of what ought to be on the banned item list. But, I mean, we’ve definitely been tested over the years. My daughter is 11 now and she decided about a year and a half ago, that she really wanted an ombre. Do you guys know what an ombre is?

Meb: No.

Ron: Yeah. I didn’t know what it was either. I think I’m saying it right. It’s basically, you may see, there’s a lot of, like, teenage girls walking around right now with half of their hair their normal color and then like the bottom half, well, some completely whacked-out color. Well, she wanted half of her hair…it was actually a little bit less than half, she wanted it to be purple.

And so, you know, my wife and I had to talk about this. Right? We definitely were not gonna pay for it, you know, and we have a lot of conversations around allowance that has to do with like okay, the difference between a want and a need. And we supply her with the things that she needs, and allowance her for the things that she wants. Although, during the holidays and at her birthday we’ll buy her presents too.

But as a general rule, we want her paying for her wants out of allowance. So we’re perfectly fine with paying for haircuts, even good haircuts. But this is something different. Right? Definitely a want. But then we had to decide well, all right, body modification. Right? Where does that fit on the banned item list?

And while we would never allow her to get a tattoo. Right? Permanent body modification, and we’ve been debating for years her request for the second ear piercing. And I guess you could argue that that’s not permanent because those holes can close up over time.

This was temporary. And we ultimately decided that, if she was really willing to pay for it, that that was not going to go on the banned-item list. But we made it clear to her that we didn’t want her screwing her hair up with some kind of Kool-Aid dye job. Right? So she was gonna need to get it done at the place where she normally gets her haircut. And because we live in New York City and stuff is expensive, that was gonna cost $160. But she was determined to do it and she did and did it and it looked really cool. She was super proud of herself.

So, you know, these things can be a close call. And as it is with mobile phones. Right? Many parents get into this way earlier than they expect to. The 5-, the 6-, the 7-year-olds, they want iPhones. You hold out for a while but eventually, your kid probably needs some sort of a mobile device, if only to keep in touch with all their other friends who have them.

Now just as a footnote here, the Gates family, as in Bill and Melinda, they did not allow their kids to have mobile phones until they were 14. So years after most of their friends had them. So there is a prominent case for holding out here.

But when your kid gets their first phone most of them are gonna want an iPhone and you’re gonna have to decide, well, is that a want or a need? Or is a phone, that is that advanced and expensive, something that belongs on the banned item list permanently. Like, you know, it’s just that middle school kids and maybe even high school kids are not responsible enough to own an iPhone. That’s a judgment call that you’re gonna have to make.

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Meb: I remember a very traumatic part of my childhood where I was all about the idea dying my hair and used lemon juice and ended up being this horrific orange-yellow color for months on end. But I got the perfect solution for you on the tattoo. We just invested in a tattoo company that does the, kinda, two-week temporary tattoos that actually look pretty similar to the permanent ones, so maybe that’s a solution for you.

All right. I like the Bill Gates suggestion. I think I’ve often heard attributed to Steve Jobs too that he used to limit screen time per day for his kids, which I think makes a lot of sense.

But I wanna touch on one or two things before you have to go in. You know, it’s funny so much of what we talked about today, again, a lot of it doesn’t necessarily explicitly talk about money. Where we’re talking about rules governing behavior and boundaries and chores. But one of the things that people, I think, most associate a spoiled child with is, kind of, materialism. And so let’s switch the idea of a materialistic kid and what are the, kind of, influences or conditions that end up spoiling a kid there. Just kinda, let you run with that topic.

Ron: Sure. So for anybody listening out there who wants to, kinda, go deep on the topic of materialism and the damage it can do, I learned so much from reading a book called “The High Price of Materialism.” It’s by a Knox College psychology professor named Tim Kasser.

If you’ve never had him on or never even heard of him, he should basically be your next call. He’s just a terrific guy and has so many smart things to say. I read every word of that book twice, and it turns out there’s a lot of academic research on just how psychologically damaging materialism can be. Right?

So which is not to say that it is bad to covet things. Right? But I think it’s quite another to get everything or nearly everything that you covet, and then to value those things that you have and that you get to do, more than the human relationships in your life. Right? And so that’s what we’re trying to avoid.

And so for families who were lucky enough to be able to get their kids everything that they need and a pretty good chunk, or maybe even all of what the kids want, you have to come up with like a, sort of, dividing line. Like a line in the sand over which you will not step. Right?

And the psychologists who have studied affluent families, kind of, have a word or a phrase for this. It’s what they describe as, kind of like, the art of artificial deprivation or forced deprivation. Right? Where just because you can afford to do or to have something doesn’t mean that it’s necessarily a good idea.

And so trying to figure out exactly where that line is, it isn’t a bright line. But one way to give your kids, especially older ones — teenagers, some control over this, is in fact through allowance. Right?

And the question I always get is, “Well like how much is just the right amount?” or just like, “How much is enough?” Which is one of the greatest, most cosmic, money questions of our time. And I guess the answer to that question is more of, like, a rule or a maxim than it is a dollar figure.

I mean the answer, or the antidote, to materialism is this, you always want your kids to have enough money so that they can get some of the things that they want, but not so much that they don’t have to make a bunch of really hard choices. All right? Tradeoffs. Because that’s what we grownups do with our money each and every day. We may not realize that when we’re doing it unconsciously or subconsciously, but none of us can have everything. Right?

As Steven Wright used to say, “Where would you put it?” Right? But even those of us who are in the 5%, or the 2%, or the 1%, you still can’t do or have everything that you want.

You know, creating those constraints, giving them an opportunity to practice tradeoffs and to learn, often the hard way, by making really big mistakes that we don’t bail them out of. To learn, you know, which things that they can spend money on bring them the most joy. That’s incredibly valuable. It’s an incredibly valuable learning experience.

And the point which you figure out what that right amount is, you know, it becomes harder for them to take on materialistic tendencies because they just don’t have enough, to be in the upper third or upper half of their peer group, right? Because of that forced deprivation.

Now, I get that it takes discipline, I get that they will whine, I get that you will sometimes feel like the bad guy. But you just have to know that it’s good for them and, ultimately, good for you to put the decisions in their hands.

Meb: I love the example you give in the book. You talk about to prevent a spoiled kid yet not to be too austere. You mentioned the Dewey rule, where you arrange it so that your kids end up in, kind of, the 30th percentile. So if like 10 kids are getting a car, yours is like the seventh nicest out of 10.

And it’s so funny because I remember so many friends in high school had these just old, really terrible, station wagons. And I had this, my dad gave me his old 1983 Land Cruiser wagon.

Ron: Yeah.

Meb: And, I loved that thing more than any car I’ve ever had. The street value was nothing. I think I ended up, donated it, eventually when the engine went kaput.

But I also spent a lot of nights on the side of the road, learning about mechanics because it broke down all the time, but I loved that car more than anything in the world. And I think that’s a great example.

Can you tell us about your tooth fairy example in the book too? Because I thought that was such a wonderful example of not focusing, necessarily, on the dollar amount and being a little more creative about ways to think about, just, money in general and, kind of, material thinking.

Ron: Parents who are parents for the first time will get to the point, often quite unexpectedly, as my wife and I did. You know, when our daughter lost her first tooth and we just had not contemplated what our formula was for, you know, tooth fairy compensation at that point. We were sort of scrambling.

I remember posting on Facebook and a cascade of dozens and dozens of nutty responses, you know, some of which I put in the book. And, you know, the best two examples I had, one came from a couple here in Brooklyn, who had long since decided that they saw no reason to reward their children monetarily for a basic biological function, which is the baby teeth coming out and the grown-up teeth coming in.

This happened to be a family where the parents both travel outside of the U.S. for work pretty often. And so they decided what they were gonna do was that, when the first tooth came out they got their kids a book called “Throw Your Tooth On The Roof” which is a book about different traditions in different countries, about what they do in those cultures when kids lose their first teeth. And quite often they have nothing to do with money. It’s only we Americans who have decided that that’s a good thing to do.

But then they, when the kids lost subsequent teeth, they would put coins from different countries under their pillow. And so, you know, the next morning there would inevitably be conversations about, “Oh”, you know, “what did you see in that country? How much would this coin be worth there? What’s the coolest thing you could buy there to eat, or to drink, or to do, for this amount of money?” And it, kind of, expanded their imaginations and got them thinking about where they would like to go some day. And so I thought that was useful.

Then there were a couple of educators out in San Francisco Bay Area who did the following. Every time their daughters would lose a tooth they would replace that tooth overnight with a different tooth that came from an unnamed animal, and each time it would be a different animal. And the kids would wake up to a letter that had been written backwards, in disappearing ink that they could make appear, and then hold up to a mirror and the letter contained clues about the animal that the tooth had come from. ‘

And they would order these teeth on the internet, through some crazy store in New York City. I can already hear people, kind of, sighing with exhaustion. All right. It’s like how can I really pull something like that together?

So you don’t have to do something that elaborate but really the moral of that story is that there’s almost always a creative solution that will make your kid feel special. We’re dealing with that right now. Actually, our daughter is going to be Bat Mitzvah-ed in a year.

Trying to throw a party for 200 people in New York City is crazy expensive. It’s not at all clear how we’re gonna pay for it all. But, you know, our daughter is already, kind of, clued into the fact that this is gonna, you know, probably cost a fair bit of money that it’s not gonna be easy to pull off. And she, herself, has already got her head down thinking about creative solutions. Right?

Instead of buying dessert, she wants to do, you know, what’s essentially a sort of a potluck, where all of her closest friends and family members bake their favorite cookies and brownies. And a spread of 3,000 or 4,000 cookies and brownies is gonna be so much more awesome than, you know, some random cake that a caterer would make and it would also be free. Right?

So we feel like we’ve already got her thinking in that way. And so that there are solutions like that for birthday parties, there are solutions like that for vacations, there are all sorts of solutions like that, and kids can help come up with them.

Meb: I went to a Bar Mitzvah here in Los Angeles about a year or two ago. That’s probably the best party I’ve been to in many years, versus some of, like, the top clubs and around the world. I’ve never seen anything quite like it. And anyway yeah it’s kinda bananas.

You actually bring up a good point a little bit talking about materialism and things versus what you call in the book the fun ratio where, you know, so many people think about materialistic objects, cars, houses, jewelry whatever it may be. Things they want. But in reality, it’s often the experiences that make us much happier, and long lasting memories, and looking forward to it, and all those sort of things. Tell us a little bit about the fun ratio and how that’s a good gauge to think about kids and thinking about things to spend money on?

Ron: Sure. This came from a family in Ohio, and the mother had come up with it both as a math exercise but also as a way to get kids thinking about how they wanted to use their save money and their spend money. And she just asked them to think about what are the hours of fun that you are going to get out of this thing that you want to buy.

You know, it’s one thing if it’s like dozens or hundreds of hours of fun per dollar spent which is often the case with like a deck of cards. But for some random toy or it’s like, you know, you think about the things that show up on the radar. There are different ones each year. But just think about the hover boards of yesteryear, of 17 months ago, or whenever that was.

I think a lot of the kids used those for hours but not dozens of hours. And then they broke, or they hurt themselves, or then they burst into flame, or all the warnings came out about the flammability of the battery. I think the hours of fun per dollar spent on those, I think the fun ratio on that was, like, really poor.

And so, you know, it can be hard to, kind of, compare that to the hours of fun that you get by spending money on an experience, right, because the memories of those are often long lasting and different ways. But I think it’s important to encourage kids to think about these things as an investment in good times and good memories, and not just being about what will happen to you in the moment.

Meb: We gave one of my friend’s, in North Carolina, child for his birthday a wet banana or a slip and slide which is like one of the oldest school gifts, but only cost about 10 bucks. But he said that has been their gift of the summer in humid, hot North Carolina. So that’s a good example of remembering back to childhood.

I have a question that you didn’t really talk about. Well, you talked briefly about, in the book but I am curious about, you talk about an exchange between Jon Stewart and Chris Rock where they’re talking about their kids and how much better they they’ve had it than they did. And at one point Chris Rock’s like, I don’t even recognize these children. He’s like, “I want to send my children to Camp Kick Ass in Harlem, and get to see, you know, let them experience hardship.”

And it actually reminds me of, there’s this great speech that Judge, Supreme Court, Roberts did at a graduation ceremony. It was actually a ninth grade graduation ceremony, which is also a little crazy. But I’m gonna read, like, two lines from it and then we can, kinda, talk about this because, I don’t know that I have a great answer for this.

But Roberts says “Now the commencement speakers will typically also wish you good luck and extend good wishes to you. I will not do that and I’ll tell you why. From time to time in the years to come, I hope you’ll be treated unfairly. So that you’ll come to know the value of justice. I hope that you will suffer betrayal because that will teach you the importance of loyalty. Sorry to say but I hope you’ll be lonely from time to time so you don’t take friends for granted. I wish you bad luck again, from time to time so be conscious of the role of chance in life…”

And it goes on. It’s a really beautiful paragraph and one of the things I was trying to think about is, kinda, how do you cultivate… So many of these podcasts that I listen to and we talk about, they often ask guests, “What would you do differently?” and they’ll say I wouldn’t do anything differently because it was the hardships that really made me who I am.

And so from so many children of privilege that, kinda, you know, grow up in a wealthy country and, in many cases the top wealth of that country, how do you cultivate those experiences to develop a child that, kinda, has that hunger and that drive? Is that something you think about? Or, do you have any good insights there? Thoughts?

Ron: I do. And, I mean, here’s one way to think about it. I mean, I talked about this in the book, as a sometimes, like, deliberate down grading of lifestyle, or circumstance, and I get that it’s just not reasonable to expect that parents will do that, when it comes to their kids’ education, say. But it is quite often possible, say in the summer, to help your kids live in a way that’s maybe different in the way they might have been accustomed to, during the school year.

I spent a lot of time thinking about summer camps and actually visiting them because I just had this hunch that the sleepaway camps that were a little bit, kind of, lower to the ground, had a lot to teach us about life and about putting things in perspective.

And probably the favorite one I visited was a place called Pine Island which was a little island in the middle of a lake, in the middle of the state of Maine. And there’s barely any electricity or running water on Pine Island. And the boys all they bathe naked in the lake with biodegradable soap. They sleep in tents. The bathroom there is like an elevated perch. I hesitate to even call it an outhouse. But the boys, kinda, sit up there in a, you know, a bathroom with no partitions. It’s the largest biodegradable, kind of, collective toilet I’ve ever seen. And when I sat down with the camp director to ask him what exactly it was that he was trying to figure out they’re trying to accomplish, he said, “Well,” he said, “think about it this way.” He said, “A bunch of my kids here come every year from New Canaan, Connecticut.”

If you don’t know what New Canaan is, it’s a stand in for Palo Alto, or Scarsdale, or Beverly Hills, or Highland Park, Illinois, or name your favorite upper middle-class suburb. Right? And he said, “The problem with New Canaan is nobody needs you in New Canaan. But,” he said, “here on the island,” he said, “there’s only 90 of us, we’ve got no electricity, not much running water. The happiness that we create, the joy that we share, the fun that we have is generated by the boys who are here. And for that, every single person is needed.” Right?

And if you go to a camp like that, if you can somehow have that kind of experience, I think you come to the conclusion that all the stuff that you may be lucky enough to be surrounded with, during the school year, whether it’s a nice home that you’re lucky enough to live in, or school, or school system, that has an above average amounts of resources.

All that stuff is great, but it may not be necessary. Right? What’s actually necessary is those things that Justice Roberts was talking about. It’s loyalty and friendship and kindness and teamwork and togetherness. Right?

And sometimes the best way to learn about those is in an environment that’s stripped of the creature comforts that you might have become accustomed to. So, you know, that’s the value of a great sleepaway camp.

Now the irony there, is that that experience cost $10,000 a summer, the same way that the robotics camp does. But at Pine Island and many other camps do have scholarship programs and it’s possible to get financial aid. The Y camps that are out there are often much less expensive, but can teach many of the same lessons. And so there’s a value to being away from home, in a different environment, doing different kinds of things.

Meb: That makes me very nostalgic, like, I want to go to camp right now. I want to go sailing, go hang out, and go to sleep in the woods. You also mentioned that it’s totally reasonable for kids to work when they’re young. Do you have any parameters on, you know, on getting a job? It probably transitions from chores to having more responsibilities. Any just broad 10,000-foot view on, kinda, working in general for kids?

Ron: Oh sure. I mean just because we’re not going to pay our kids for the regular chores, does not mean that they should not learn what it’s like to earn a wage and work for somebody else, preferably someone who isn’t a blood relative. Somebody who will, you know, kick their ass around a little bit and fire them if they don’t do what they’re supposed to do. Those are good lessons to learn.

The academic research on this suggests that as long as kids are not doing it for more than 10 or 15 hours a week, their grades tend not to suffer. Some kids will wanna do it much more than that, you know, the entrepreneurial sort. At which point parents wonder well, “Gosh this might be getting in the way of their extracurricular activities.” Even if it’s not getting in the way of their grades. And you shouldn’t let it get in the way of their schoolwork obviously.

But parents worry about substituting entrepreneurial activity for some other extracurricular activity that might be “worth more”, when it comes time to apply for colleges. I would encourage people not to worry about that. Colleges are looking for kids with commitment, and passion, and who are doing things that are unique. Things that they can talk about intelligently, that will make them interesting peers in the dorm room, or in the classroom.

I heard so much of this when I was recording “The Opposite of Spoiled.” I actually went and talked to a bunch of college admissions officers about this, and the basic response was this, “We are so sick of these over programmed kids who all look the same.” And if there are kids out there, who have worked for money and have done interesting things, that’s actually gonna make them stand out not the opposite.” Right? So by all means, if your kids want to work let’em work. And I would say, “Make them work, at least one summer,” so that they get a sense of, you know, what that is actually like.

Meb: I think that’s a great rule of thumb that we used, which was, my niece was working during college, and then found out to the point where she was also selling blood plasma. We said, “Okay, you’re a little strapped. You may you may need a little more help to the point where you’re doing that.” But look, I have four pages more of questions, so we may have to invite you back on my son’s first birthday to talk a little more about this, Ron.

So by the way, listeners we’re gonna add a lot of these links to the show notes. Ron’s got some great book suggestions for young adults, including even a subscription for kids’ books that talk about money, at the picturebookclub.com. So we’ll show links to all these.

Ron, if people want to find, in addition to your fantastic book, “The Opposite of Spoiled,” where can people follow you? Your writings, your tweets, and keep up with all you’re up to?

Ron: Sure. I’m on Twitter @ronlieber, and for people who want to follow along on you know the kids and money and parenting values conversation, the best place to do that is on my Facebook page. It’s facebook.com/ronlieberauthor. If you just click the “Like” button there, you’ll be all set. At least a couple of times a week I’m in there, posting whatever the most interesting thing is that I’ve found in that moment, and leading discussions about it. So I would love to have more people along for the ride.

Meb: Awesome. Again thanks so much Ron. Listeners, thanks for taking the time to listen today. We always welcome feedback and questions for the mailbag at feedback@themebfabershow.com.

As a reminder, you can always find the show notes, other episodes at mebfaber.com/podcasts. Subscribe to the show on iTunes and if you’re enjoying the podcasts please leave a review. Thanks for listening friends, and good investing.

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