ISSUE 8 APRIL 2009

There are seven styles: the hustler, the hoarder, the spendthrift, the scrimper, the giver, the beggar, and the oblivious. This article focuses on the first two of the money styles:

Style 1: The hustler

The hustler is the child who sees a 'deal' in everything. For them, an agreed amount of pocket money or allowance is just a starting point for getting more and more out of parents. The good news is that your child shows promise of skills in negotiation and management. The less good news is that parents have to be particularly firm, consistent and vigilant in setting limits and providing clear moral values about money.

Suppose you set a certain amount of pocket money for your eight-year-old hustler. Before long, she is coming up with ways to increase it. 'Dad, if I tidy up my room every week will you give me extra? And if I pick them up every day will you give me even more? How about I tidy them up every hour - do I get twenty times as much?'

It could be dangerous to go down the route of paying for basic chores like tidying up. When people live together in a family there are certain obligations such as taking responsibility for one's own belongings. If you pay children to do something that they should be doing without charge, what message are you sending about the nature of family obligation?

Joline Godfrey, author of 'Raising Financially Fit Kids', suggests that well-meaning parents who pay their kids to do basic chores give them 'conflicting signals about the nature of family - and are later puzzled when, as they get older, the same kids tend not to pull together as part of the family unit'.

It is fair enough to identify some extra-credit chores that the children can do to earn extra money. For example, painting a fence is an extra that can reasonably be paid for, especially if it saves the parents having to pay someone else to do it. But parents can rightly insist that children contribute to family life by tidying up their own mess - without any payment.
Another favourite tactic of the hustler-child is to exploit differences between parents. 'Dad, mum promised me I could have this game so please give me the money for it.' The hustler could well be over-stating the 'promise' from mum. It is essential for Father and Mother to have a consistent view on what they will or will not buy - and to communicate frequently enough to stay one step ahead of their little hustler.

Style 2: The hoarder

If a child's only interest in money is to see it pile up and up, then they could be a hoarder. The good news is that they will never ruin themselves through over-spending. The bad news is that they might deny themselves and others much enjoyment in life. One day they might also deny the family business the opportunity to grow, refusing to make necessary investments and under-spending on essential equipment. If the aim is to pass the business on to future generations then watch out for hoarders, who can stop the business dead in one generation.

Develop good habits in children when they are young and they will keep to them when they grow up.

If you have a five- to eight-year-old who is a hoarder, try giving them three jars to hold the pocket money or allowance that you give them every week. One jar is for saving, one is for giving to charity, and the third is for spending. The rule is that they must put at least some of their weekly pocket money into each jar. To make giving and spending more exciting, work with them on specific projects that capture their interest. What is one charity that they think is worth supporting? Maybe the parent can go with them to visit it and find out all about it. What is one thing that would be really useful to them and is worth spending money on? The parent could help them research different ways of buying it and then be with them as they make the purchase, turning it into an enjoyable and memorable experience.

Suppose a seven year-old has agreed on spending and giving projects but is still piling up pocket money in his saving jar. The jar is becoming so full that you suggest that he opens a bank account where he will receive interest (if this is possible) and experience the important reality of making money from money. He screams, 'No! I want my money in my room so that I can keep counting it. It's my money and it's not fair if you take it away from where I want it!' What should you do as the parent?

How about saying: 'The reason for that we give you pocket money is to help you learn how to manage money. By keeping all this money in your room, rather than using it to make more money for yourself, you are showing me that you aren't learning yet. We will go to the bank tomorrow and put the money in together. Then you can start to refill the savings jar when you receive next week's pocket money.'

It's important to stick to what you say. Go the bank, whether they like it or not. If you give in on this point, and agree that it's their money and they can just keep it in their room if that will make them happy, then you are surrendering an important principle. It will shape their view on money for years to come. Hoarder-children must learn; the parents must teach. There may be tears and tantrums but better to get it out of the way when the children are young than when they have grown up and hold the future of the family business in their hands.

Other styles

Joline Godfrey's book 'Raising Financially Fit Kids' identifies five other money styles: the spendthrift, the scrimper, the giver, the beggar, and the oblivious. Future articles will look at these styles in more detail - and what parents can do to train these types of children in how to manage money.

For further information: Joline Godfrey's book is published by Ten Speed Press. It is one of the books recommended by the UK chapter of the Family Business Network

 

In this issue

The benefit of 'patient capital'
'In the good times it was easy to say that our priority was to build a long-term profitable business,'

Intelligent nepotism
Some entrepreneurs claim they do not want to be 'family businesses'.

A lesson from past economic crises
What values and approaches have helped long-lasting family businesses to survive through past booms and busts?

Case study on using bonuses to motivate employees
Today's banking crisis has caused the media to ask questions about the wisdom of some types of bonus systems.

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