Parents

Would your kid pass this '$20 challenge'? 6 money tips for parents

If you handed your child a $20 bill with the opportunity to buy anything, or donate the money instead, what do you think he or she would do?

Recently, money coach Peter Dunn, aka Pete the Planner, decided to find out. He presented his 7-year-old daughter with a $20 bill and two choices: Buy something for yourself or put it toward a charity that provides lunches for children who can’t afford them. To his relief, she chose the charity, which mattered a great deal to Dunn, who believes this challenge reflected more on him than it did his daughter.

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Would your child pass the '$20 challenge'?

Parents work hard to provide for their families, but are these efforts to ensure that our kids never go without in harmony with raising them to be caring, independent adults? Dunn believes many parents are making mistakes hand over fist in this department, and is on a mission to help families help themselves.

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“As a parent, you haven’t done the best job if you haven’t conceived [of the] idea that they need to give to someone else,” he said. “They’re putting something else they don’t need over the need of someone that actually has a true need.”

Teaching your kids how to live and understand the old saying that “money doesn’t grow on trees” doesn’t have to be painful. It can even be fun. Dunn shared a few pointers with TODAY on how to get started.

1. The sooner parents realize money decisions are about behavior and not math, the better.

According to Dunn, our decisions are based on two simple things we constantly seek: pleasure or satisfaction. Pleasure brings instant gratification (and sometimes regret), while satisfaction can take time to reveal its benefits. For example, the decision to eat a greasy triple cheeseburger comes from the pleasure center, while satisfaction would have most likely come from opting for a healthier dish instead. “Nobody eats a salad and wishes they’d had the burger,” said Dunn. “We never regret doing things [simply] for the satisfaction.”

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2. Play the game “Wants and Needs.”

The game is simple but impactful. Look at everyday things together and find out if your kids think it is more of a want or a need. While the obvious needs of food, clothing and shelter show up if you get it right, there are subtle subgroups within those categories. In the case of his children, at the dinner table, “It’s fascinating to see the brain develop around [concepts like] ‘What is dessert? Is it a want or a need?’” said Dunn. “They realize toys aren’t a need, but when they are used to having dessert it doesn’t register.”

3. Reinforce the idea of physical money.

The world moves at the speed of digital, and so does our money. This convenience is a godsend that has disconnected many of us from physical money. Dunn said kids need to grasp the notion of paper and coin, which still reinforce the fact that there’s something behind the money. Parents shouldn’t shy away from the act of letting their child take money out of a piggy bank to buy something.

Similarly, if they break something they shouldn’t have been playing with, making them pay with their own money to replace it has an impact at a young age. But, brace yourself. “We train college kids to dine out for three meals a day for four years with a piece of plastic,” said Dunn. “It’s a meal-plan card, not a debit or credit card, but it is that disconnect between money and commerce. It’s training them to have bad behaviors. Preempt that when they’re young.”

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4. Skip a traditional allowance and opt instead to teach your kids how to manufacture and create money, aka “lemonade stand money.”

We live in a society that embraces unlimited everything, and imparting that on our children sidesteps a very teachable moment about mass consumption and entrepreneurship, according to Dunn. By allowing them figure out how to set up a lemonade stand, where they create a product that generates their own money, children learn how to budget and be resourceful through their very own startup. Dunn also greenlights payment for special projects like helping cut the grass, but favors the lemonade stand above all else. “Who’s going to drive by and not stop at a lemonade stand?” he said.

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5. Introduce investing concepts at their level.

Every month, Dunn’s daughter buys a small amount of stock on a platform he subscribes to called Loyal3. One company she invests in is pet-food maker Blue Buffalo. “The way she understands it, [our dog] eats his dinner and she owns the company that makes his dinner,” said Dunn. “We like the idea that she’s understanding [the] idea of ownership.” And the lesson is sinking in. At his daughter’s school, the teacher asked someone to spell “stalk” and she opted to spell “stock” instead and explained to her class that it’s when you own a company.

6. Create a scenario where you tell your kids, “We can’t afford it.”

While this concept runs against many of our ideas about working hard to provide, it’s worth it to remind your children that everything has a cost — and that you have to say no from time to time. Dunn said this teaches the lesson that everything has a limit, and that we can’t always have what we want immediately.

“To my daughter, I have resources and she doesn’t know what that means, but she can feel it if I can provide a scenario where I can’t provide something,” said Dunn. It doesn’t have to be epic. Foregoing something simple like a toy or experience sends the message.

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