Interview with author Ron Lieber

Robert Brokamp: Hello everybody. Hi! Before
we get started, I just want to do a quick survey of people. Some of these are somewhat
personal questions, so if you don’t feel comfortable responding, close your eyes and
just imagine you’re home alone, dreaming about me and Ron, as you always do. Raise your hand if you have kids, that you
know of. On a scale of 1-5, how much did your parents
tell you about their finances, one being nothing, five being you knew everything about their
finances. Just raise your hand, 1, 2, 3, 4, or 5. Those of you who have kids, how much do you
tell your kids about your finances? All right. How many of the parents pay an
allowance to the kids? Audience Member: She’s a baby. Brokamp: She can change her own diapers! For the parents, what is the worst single
word that someone could use to describe your kid? Just think of it. You don’t have to
shout it out loud, but one word that you would hate to be applied to your kid. What would
that be? With that thought, I’m going to introduce
Ron Lieber, who is the “Your Money” columnist with The New York Times since 2008. Before
then he wrote for the Wall Street Journal, Fast Company, and Fortune. You won a business award in 2011 for your
coverage on student loans. Ron Lieber, welcome to The Motley Fool. The question about the worst word being applied
to your kid comes from your book. If I understood it, your mother’s response was “average.”
Is that true? That’s either a lot of pressure, or she wanted you to be below average! Ron Lieber: Right! The question was a thought
exercise, and it began with a couple of phone calls I got right around the time that Occupy
Wall Street was happening in New York. There were some parents who had seen some
of the scattered things I’d written in the paper and online about kids and money, and
questions that kids asked about money. They thought maybe I could come speak to their
community and help them with some of the dissention there, with people who had more than average
and people who had less. The people who had more were starting to feel
sort of demonized by some of the conversations going on in the community. The people with
less felt like their noses were being rubbed in everybody else’s affluence. They thought I could set everybody straight,
and I tried to think. I was trying to figure out what those people had in common. I tried
to think about the worst word that somebody might use to describe my own parenting, that
would be an indictment of what I had done. The first thing that popped into my head was
“spoiled,” mostly because spoiled is a passive verb. Spoiled by whom? Spoiled by
you, spoiled by us. I tested that question out on a bunch of people
I knew, and I heard a lot of “spoiled,” but I heard some “mean,” I heard some
“racist.” Then I thought to ask my mom. Thankfully, she hadn’t spoken that way when
I was young, but when I put it to her, I said, “What’s the single worst word that somebody
could have ever used to describe the three of us?” She said, “average.” Brokamp: Then you were thinking about, “What’s
the opposite of spoiled?” and you actually couldn’t come up with a good term, right? Lieber: Yes, that was how it started. I figured,
“If ‘spoiled’ is the thing that we do to them; if it’s what we’re trying to
solve for or avoid, then what’s the opposite of that, if that’s what we’re trying to
achieve?” It wasn’t a useful exercise at first, because
if you look in the thesaurus you’d see “fresh,” which is good for meat and fruit … Brokamp: We want fresh kids! Lieber: Right. But not for kids. Brokamp: That’s the name of the book, The
Opposite of Spoiled, because “fresh” isn’t good enough! Lieber: Right! It became this kind of quest.
“What are the values and virtues and character traits that add up to the opposite of spoiled,
if that’s what we’re trying to achieve? I made this list of things like modesty and
thrift and prudence and generosity and gratitude and patience and perspective, curiosity about
the world around you; not living in a bubble. I looked at all those things and I thought,
“Wow, you can use money and conversations about money to teach all of those things.”
Rather than just close kids off when they ask these really hard questions about money,
what if we did the inverse? What if we embraced those questions and used
the answers to start conversations and rituals in our families that last for years, where
the endpoint of all of those conversations is one of those values or virtues that adds
up to the opposite of spoiled? I realized in that moment, before I went to
talk to the parents about it, that these money conversations weren’t just about numbers.
They were actually about the core of what we stand for, and what we want to imprint
on our kids. While everybody likes the idea of financial
literacy in theory, a lot of people are bored by it. But if you can convince people — and
I think it’s a reasonable proposition — if you can convince people that these conversations
about money are actually conversations about values, then you bring way more people under
the tent. That was how this started. Brokamp: You actually had looked at the work
of James Fogarty, who is a psychologist, who wrote a book called … it wasn’t The Spoiled
Child, but it was something along those lines. The four characteristics that you had listed
in the book from him were, number one, few chores or other responsibilities — these
are characteristics of the spoiled child; not many rules that govern their behavior
or schedules; three, parents and others lavish them with time and assistance; and four, a
lot of material possessions. I talked about these with my wife, and we
decided that our kids are half-spoiled, because they do get the time and the assistance, and
of course like every kid they have more stuff than they need. It’s tough not to do some
of that stuff. Lieber: But it depends on how far you’re
going over the line. There’s a normal amount of time and attention, and then there’s
the helicopter version of time and attention. The point at which you’re not letting them
fail, not letting them fall; the point at which you are finishing their sentences when
they’re struggling and intervene with their teachers and their friends — then I think
you’ve gone too far. The same thing is true with the possessions.
There are plenty of kids from really wealthy families who live in big houses and have all
sorts of stuff and fly private, and they are incredibly gracious, exceedingly generous,
and totally lovely. Then there are kids who don’t have very
much at all, who are not gracious or grateful or thankful, whatsoever. It’s not like people who are rich have a
lock on spoiling their children, and it’s also not the case that kids with very little
can’t be exceedingly spoiled. So much of it has to do with gratitude and graciousness,
in addition to just the volume of stuff and privileges. Brokamp: Right. When I asked the question
beforehand, I think generally speaking most people here didn’t know a whole lot about
their parents’ finances. You’re an advocate for being pretty open
with your kids about money. Why is it that it’s such a hard discussion to have, and
what do you recommend people do with it? I have to say, one of the most interesting things
that I read about the book was the guy, I think his name was Scott Parker? This is a guy, his monthly income was $12,000,
so he went to the bank and got out 12,000 one-dollar bills, and brought them home to
show the kids, “All right, this is what we get. Then this much goes to taxes, this
much goes to the mortgage,” and things like that. I thought that was quite something! I’m
going to need to borrow some money from you all, afterwards …! Why is it so hard? Lieber: It’s hard for so many reasons. I
have a ton of sympathy with people who struggle with it. A big part of it is shame, and the
shame exists on so many levels. It’s the shame about the fact that you inherited
a bunch of money; you didn’t have to work for it. There may be shame about how you made
the money. There may be shame about not having money, or not having a job. There may even be shame about having plenty,
but just not having as much as most of the people who live near you in some fancy suburb,
or in some really affluent part of the city, or in your private school community if you’ve
scraped to send your kids to one, or if you’re on scholarship for one. There may be shame about lack of knowledge
of money, so you don’t feel like you can talk about it with kids, or answer their questions.
There may be a lot of shame about how you spend it. One of the things that stands in the way of
transparency in a lot of families is that the parents don’t really want to be questioned
about their choices, because their choices kind of suck! They’ve made indefensible
choices about how much they save, or how little they give away, or what they spend things
on. When the kids, particularly the older ones,
start asking really pointed questions, the parents just want to shut them up. It starts there. Then I think there are a whole bunch of parents
who think that shielding kids from all of this money stuff is a form of protection.
It’s like, “I don’t want my kids to have to worry about this stuff at all, maybe
because I worried about it when I was a kid, so I’m going to shield them from that. I
want their lives to be carefree.” I literally had somebody who is writing a
book right now called Brilliant, the Science of Smart, admit to me that she refuses to
talk about money with her six-year-old and her nine-year-old, because she wants them
to live in a bubble where money doesn’t exist. Brokamp: Can I join that bubble? Lieber: Right? There are parents who, “The more we talk
about this stuff, the more I answer their questions, the more I engage with them, the
more they’re going to be sizing people up on the basis of who has what. They’re going
to be classifying people according to their social class.” Look, it’s true that kids will do that,
but kids are going to do that no matter what. To deny that money is a source of great power
and mystery, and not to honor their curiosity, is just foolish … that’s a bad word to
use here! Brokamp: As long as you said it in a lower-case
way, it’s good. Lieber: It just doesn’t make any sense.
It’s their job to figure out how the world works. It’s our job to tell them. Also, we’re getting them ready for … first
of all, they’re going to make what’s probably the biggest financial decision of their lives
at the age of 17; it’s a six-figure decision at minimum, or at least it seems that way
until you find out what kind of financial aid you’ll get. What kind of world is this, by the way, where
you get all of your choices like four weeks, if you’re lucky, before you have to make
this enormous choice? Maybe it’s only two weeks or one week, after you’re done haggling
with the financial aid office. You’re making this six-figure decision,
you’re 17 years old, and you’ve had like a week or two to sort out the numbers and
even know what your choices are. It’s madness! But it’s the world that we live in, and
we ought to get them ready for it. They’re graduating into a world where they’ve
had heaps of responsibility and risk thrown at them over the last 10-20 years. Everybody’s
responsible for their retirement, everybody’s got to buy health insurance now. You don’t
have to explain that in this room! We’re in a world now where I think it’s
become increasingly clear, however you feel politically, that we have not taxed ourselves
enough to pay for all of the promises that we’ve made to one another, as a society. So, one way or the other — higher taxes or
people reaching into their pockets to pay for things that the government used to pay
for — there’s going to be more money coming out of their pocket. That’s the world that we’re raising them
for. To shield them from that reality, to shield them from the knowledge, is not a form
of protection. The best form of protection is to arm them with the information that they
need to get ready to make these big, grown-up choices at ever-earlier ages. I just don’t buy the silence. I think it’s
wrong. I think it’s morally wrong. Brokamp: You have a nine-year-old daughter. Lieber: And another one coming. Brokamp: Another one coming — another nine-year-old
coming. No, wait. That’s just not how it works, right? Lieber: That would be cool, if it worked out
that way. My wife, that would be a lot to carry around for nine months. Brokamp: How much does she know about your
finances, and how many questions does she ask? Did she know you were writing this book,
and maybe get a little defensive, like “I’m not spoiled. I don’t know why you’re writing
this book.” Lieber: It’s a tricky thing. Who are the
parents in the room? Do you ever write about your kids? Yes. It’s complicated, right? Do you give
them a choice in the matter? Do you give them veto power over what you write? Do you let
them see it beforehand? Even if their names aren’t mentioned, all
of this sort of goes down on their permanent Google record, unless it’s behind a paywall.
It’s tricky. I was worried and my wife was worried about
turning our daughter into some kind of show pony, or putting pressure on her to make her
think that she had to act one way or the other. But the book isn’t really about her. The
book is written as a sort of solemn promise, not just to her but to all kids, that we’re
going to do better at this than our parents did. It’s a generational manifesto in that
way. It’s throwing down the gauntlet to say, “The silence must end.” But it isn’t so much about her. She appears
a couple times, and the deal we made was that I would sit down with her and fact-check.
We went over every part of the book where she appears. We talked about it and made sure
that she was comfortable with it. That was how we did it. Brokamp: How do you recommend families do
it, based on your experience or what you learned? You talked to a lot of families to feel out
how they do it. Is it where you sit down as a family each
month and go over the finances? Or does every kid in the family know everyone’s salary?
To what degree, logistically and informationally, are the kids involved? Lieber: I think about it in segments of childhood.
They’re going to start asking questions much earlier than you think. I started finding
myself tongue-tied when she was three. We were away one weekend. I can’t even remember
where we were. Somebody had rented a house for the summer someplace, and we went out
to hang out for the weekend. On the way back, she pipes up from the back seat. She said,
“Why don’t we have a summer house?” I thought, “Whoa. Well, we actually probably
could, but we would have to make very different choices.” We wouldn’t be saving any money.
We’d probably have to have a smaller apartment. We wouldn’t go out to eat nearly as much. It wasn’t so much about affordability, as
it was about choices, about tradeoffs. What are tradeoffs, really, but just a different
way of saying, “These are the things that we value.” What’s “these are things
that we value,” except a different way of stating your values? I thought, “Okay, what she’s really doing
back there — maybe she doesn’t quite realize it — but what she’s really doing when she
pipes up and asks these questions is, she wants to know what we stand for, and why.
Why we do what we do.” She’s doing her job, and my job is to answer
her. I had no idea how to explain it. I learned later; as I was doing the reporting
I heard from the mother of a two-year-old. The two-year-old said to her, “Why do you
have to go to work, when the other mommies don’t go to work?” She didn’t know how
to answer that one, either. Whether you like it or not, they’re coming
at you with this stuff. Brokamp: I love the one question you have
as a delaying tactic, which is to ask, “Why do you ask?” It gives you like 10 seconds
to think about it! Lieber: Right, and quite often, especially
when they’re asking for big numbers that they won’t understand because they’re
still too young, they’re curious about the number because it represents something else
that they’re scared about, or that they overheard. But you have to start somewhere with this
stuff. The most important thing for them to do is practice. I think they should get allowance
at a relatively early age; generally as soon as they start really wanting stuff, and as
soon as they can count. As soon as you think they’ll be responsible
with it, you can start giving them a dollar a week for every year they’ve been alive.
Usually, the time when I think it’s really necessary to start is right after the Tooth
Fairy comes for the first time, because then they’ve got this money, often for the first
time, that’s theirs. They realize very quickly that it’s not
enough to get whatever it is that they want, so then they want more. Some of them will
try and pull their other teeth out to get more. Brokamp: Or their siblings’ teeth, whatever. Lieber: You don’t want to do that, so that’s
usually a good time to start. Then they can start counting and saving, and figuring out
what’s more important to them and what’s less important to them. You take it from there. You want them practicing
with ever-larger amounts of their own, for many years. Then usually by the time the kids are 8, 9,
10, is when they start asking about how much their home costs, or they have the sense that
different people make different amounts of money and they want to know what you make. To me, the answer to that question is, “We
have every intention of telling you that someday, but not yet. You don’t have enough math
skills yet to add up the numbers that big.” Or if they’re math geniuses and they can
already do that you can say, “Look, you don’t know enough about where our money
goes, and it’s going to take us several years to teach you all that. “We’re going to do that for the next couple
of years, and then when you’re in high school we can start talking about when you’ll find
out how much money we make, because we do want to tell you. In fact, we think you’re
entitled to that information. “We think it’s information that’s essential,
and we want to tell you, but there’s all this other stuff that you’ve got to learn
first in order to earn your right to that information.” All through middle school, you’re breaking
down the grocery store for them. You could spend a whole year doing lessons in the grocery
store. Even if you’re buying groceries online,
every choice is an amazing trip down the want/need continuum, where you’ve got environmental
issues and you’ve got nutrition and you’ve got social consciousness and responsibility,
in addition to the money stuff. Every one of those choices is an interesting tradeoff,
so you do that. Eventually they’re going to Google their
home address. They’ll get the Zillow estimate. They’ll think that you’re … whatever.
If you have a townhouse in Old Town Alexandria, they may think you’re a millionaire. At that point, you have to start explaining
mortgages and the five or six bills you pay each month. You can give them the electric
bill for a year, and make them responsible for cutting it by 10%, and give them the savings.
That’s a year of work that they can do. Eventually, they understand all of the things
that add up to the take-home pay. Then, by the time they’re in high school, I think
they’re usually ready to get this information and hold onto it — only if they can pass
the discretion test. Are they getting in trouble for gossiping
behind their friend’s back? Do they read their siblings diaries? Do they repeat private
information that comes up in the family? If they do, you’ve got to take some corrective
action and say, “Look, you haven’t proven yourself to be discreet enough to get access
to our family’s financial information, but once you do we’ll tell you.” I think by the time they’re seniors and
making these huge decisions about college, they ought to know what it takes to have the
life that they have now, whatever it is that you’ve been able to provide for them. I
think they need to know it as they start making their own decisions about what they’re going
to study and how much of that they’re going to take on. Then there’s the small matter that you have
to tell them if you’re filling out the FAFSA, because they’ve got to sign that form; 70%
of people going to college take out student loans. Several percentage points more, of
those families, fill out the FAFSA even if they don’t take out loans, so three quarters
of families are going to have to tell the kids during senior year anyway, though I think
all of them probably should. Brokamp: Speaking of the Tooth Fairy, you
actually asked your audience and people, “What do you give? What amount?” and you got quite
a range of answers in terms of amount and just other things that people give instead
of money. Lieber: Yes, it was an interesting moment
for us because we were caught unaware and we did not have a plan in place. We had a
couple hours to get it sorted out before everybody went to bed, so we posted on Facebook and
dozens and dozens of reports came in from precincts all over the globe! In the fancier northern suburbs of Chicago
there were reports of $20 bills, and somebody in upper Westchester, outside of New York
reported that there was at least one kid who had gotten a $100 bill when he lost his first
tooth. But somebody tipped us off that if you went
to the Subway Metro Card machines and you put a $5 bill in and bought a $2.50 card,
it would give you two gold coins back — gold dollar coins — with your card, so that’s
what we ended up doing. We got her a couple of gold coins and put some glitter, like fairy
dust, on the windowsill, and that was that. That was fine, but afterwards I heard about
way more creative things that people did. Some friends of ours who both travel a lot
for work, they now give their kids international currency so they can then Google where it’s
from and look at pictures of that place. They can fantasize about going to spend it
someday, and it gets them interested in helping the family plan whatever eventual vacation
they may be able to take outside the United States. It’s a great tool for imagination.
It doesn’t just become about what they can spend, but actually where they can go, which
is cool. My favorite came from a couple that I know
who live in Oakland. They are Teach for America veterans, app developers, Stanford Design
graduates, and charter school founders, between the two of them. Try and top these two for
creativity! What they do is that every time one of their
children loses a tooth, in return they get a tooth from a different animal. It gets suspended
in a glitter bath that’s waiting for them when they wake up, and then a note that’s
written backwards that they have to hold up to the mirror to read, that gives clues as
to which animal the tooth came from. Brokamp: The kids enjoy this? Lieber: They seem to! As Randy, the dad, explained
it to me, “They just want to be part of the conversation. They just want something
to talk about that makes them feel good about being a part of the chatter at school. Rather
than turn this into something that’s competitive, why not turn it into something that’s creative?” I thought that was a great point, particularly
with something that’s just so singularly focused on money, or has been, traditionally.
I liked the way they made it about something different. Brokamp: That’s clever. Now, if I understand
correctly, you don’t necessarily think that allowance should be tied to chores. Explain
why you think kids should be entitled and lazy. Lieber: Ha! Just on a practical basis, if
you give them money in exchange for doing their chores, there’s going to come a point
where they decide they have enough money and then they’re not going to want to do the
chores that week, or that month. Then you’re sort of in a pickle. You can
stomp your foot and make them do the chores anyway, but that wasn’t part of the deal.
The deal wasn’t, “You do chores, no matter what.” If you let them go, then you’re
stuck doing the chores. That’s no fun. Here’s another way to think about it. I
think everybody in the house should do chores. In the same way that the parents don’t get
paid to do chores — the do it because that’s what you do when you live in a household — I
think it’s just a responsibility that comes with being a member of the family. If you’re looking for leverage, you can
take away their privileges, whatever it is they like doing the most, as opposed to a
couple of bucks a week if the chores don’t get done. When I explain this to parents, they often
think I’m a softie, but I actually think kids should do way more chores than they currently
do. I think they’re capable of a lot more than we give them credit for. We often don’t
have the patience to teach them to do useful things. How many of you are watching Master Chef Junior,
or know what it is? It’s all these 8- and 10- and 12-year-olds, competing in a cooking
competition in front of Gordon Ramsay and all the sidekicks. To me, the moral of that
story is that they absolutely can cook dinner, and we should make them. Brokamp: Call my children! Lieber: Seriously. It’s not that hard to
make an omelet or make pasta and make a salad. We think they’re going to cut their fingers
off or burn the house down, but they’re not. Brokamp: Actually, I’m more likely to do
that than my children. Lieber: Yes! We were a little late getting
the kiddo’s camp situation figured out this summer. It turns out now that there are all
of these fake Master Chef Junior camps in New York City, where the kids come into camp
in the morning and there’s the Mystery Basket of ingredients. Teams of four get together in a commercial
kitchen, and they have to figure out how to make a whole meal out of the basket. That’s
what they do all day, and that’s camp. Then they come home and they do it again. Brokamp: When you go to New York, at a restaurant,
just think about what you’re eating. You hate piggy banks. Explain how you have
your daughter apportion her allowance. Lieber: I just think the metaphor is bad.
It’s like you’re a hog, your snout in the mud? You’re piggish if you save your
money? No! But also, it’s a design problem. It’s
a UX problem, really. You can’t see through them, and the containers are too small, and
you have to fold the money into little bits to get them in the slot. Nothing about it
works. We just use jars, a jar like this that you
would pour a box of Cheerios into, or a big bag of rice or flour and put it in your kitchen
cabinet. Then our daughter decorates it. It’s much easier to put your hand in and
take your hand out, and you can see the money grow when it’s a big bit, and it can hold
a year’s worth of singles. It makes her feel like she’s accomplishing something. Brokamp: You have three jars, right? Lieber: Three jars, yes. I put them on the
cover of the book for a reason. First of all, this is a stand-in for the kind of budgeting
that grown-ups do. If we’re relatively healthy, maybe we spend 80% of what we make and we
save 15-17%. Most Americans give away 2.5-3% of what they make. Having kids divide money the same way begins
to lay the foundations for what an adult budget might look like. You can have them divide
it any way you want. We do it roughly in thirds, but different families do it in different
ways. Sometimes families will match the money that
kids keep in savings for a long time, or match the money that they give, if they can keep
it around for a while. It does that for us, but I also like the way
that the jars are kind of a stand-in for the values and the virtues and the character traits
that we were talking about before. Spending is modesty, it’s prudence, it’s thrift
— but it’s not cheapness, or at least I don’t like to think about it that way. I’m big into spending lavishly, to the extent
that I can afford to, on the things that make me happiest, but I don’t like doing mindless
wallet dives into other random stuff that just doesn’t bring me any joy. There are some things that I’m willing to
spend a lot of money on and I never feel guilt about it, and there are some things that make
me feel like an idiot if I spend even $5 on them. Everybody’s got their own list. I think we’ve all, by now, seen the happiness
research, that shows that doing things is better than having things. Spending on experiences
is much more powerful in terms of a happiness delivery vehicle than spending on stuff, on
material possessions. That’s part of what we want to teach to our kids. That’s Spend. Saving is just patience. Patience is a virtue,
particularly in a world where things just conspire against kids waiting. You don’t have to go to Blockbuster and
sign up for the new release anymore. You just push a button. You don’t have to wait to
watch the television commercials unless it’s the first Monday night in April and you want
to watch the final basketball game live. Even amusement parks now, these places that
are literally custom-built for kids to have fun, the kids with the most money, or the
parents who are willing to spend their money, can buy line-jumping passes. You go to school,
the most important rule is “Don’t cut the line,” and then you go into this park
full of kids and you march right to the front if you’re willing to spend enough. In all sorts of ways, kids don’t have to
wait as much as they used to. But when you’re a grown-up, you have to wait. You have to
wait for 50 years, or whatever it is, to retire. You have to wait for 30 years to pay your
mortgage. I don’t know if any of the rest of you have
noticed this; it was a source of mine that mentioned this to me a couple months ago and
I put it in the column. It was one of the most profound things that anybody has said
to me in at least a year or two. She said, “While nobody was looking, college
all of a sudden became something that you spend half a century paying for.” I thought, “Huh?” She said, “Well, the kid’s born. At age
0 you start the 529. But maybe you have two kids, and no matter what, unless you’re
really wealthy, you’re just not going to be able to save everything so then you borrow
when the kid’s in school. “The kid borrows, you borrow. You take out
a PLUS loan. Then you can extend that loan to 25-30 years if you want, and all of a sudden
you look back and you have spent 50 years paying for college.” Five-zero. Half a century. You’re going to have to wait. You’re going
to have to save. You’re going to have to be patient if you want to get through all
of life’s big expenses, so the sooner we start teaching them that, having them practice
that, I think, the better. Then giving and helping people who have less
than you is just another way to remind kids, I think, about their own family history more
than anything else, because almost certainly there was a point somewhere in the past where
somebody helped you. Maybe somebody’s helping you now in any number of ways. It’s a way to connect kids to a past where
they may not have had as much, and it’s a reminder to them that they should be grateful
for what they have now, and that in the same way that others have thrown the rope back
for their family, their ancestors, it’s their job to throw the rope back for other
people too. Brokamp: That’s great. How much control
do you think parents should have over the Spending part? If you’re doing this, you’ve
got the Savings, you’ve got the Giving. Do you say to kids, “I don’t care what
you buy at this point,” or do you say, “You want to buy this thing, but I have this feeling
that a day from now you’re going to regret it.” Should you exercise any control over
the spending, or it’s just totally up to the kids? Lieber: I think every family has their own
banned item list, like no pierced navels, no tattoos, no bare midriffs, push-up bras. Brokamp: I wore my full shirt today. Lieber: Some families have laid down the line
and said, “Not another LEGO will cross this doorstep.” Whatever it is that’s on your
banned list, that’s fine. Make it clear so the kids know. But beyond that I think you should let them
spend on whatever they want, and especially on things that look like they’re going to
be wasteful because the sooner they feel that regret, the better. You want them screwing up, screwing up in
really big ways, while they’re still under your roof, before it can mess up their credit
score or cause them to get evicted, or whatever. You want to be able to talk to them about
that regret. I think you should give them as much rope
as you can, and ever-larger amounts of money. I’ve talked to parents who have turned the
whole clothing budget over to kids who are as young as 9 or 10, just to see what they
would do with it. Inevitably, they make all sorts of spectacular
mistakes, and it’s great fun to watch! Right? Because then they have to bail themselves
out. Brokamp: They have to wear the midriff in
the winter. Lieber: Yes, right? Or it’s like, “You’ve
gotten one pair of jeans because you wanted the fancy jeans and that was all you could
afford, and then you split them down the middle because you’ve grown really fast in the
course of four or five months, and then you’ve got to figure out what to do about that.” Hopefully the parents are not bailing those
kids out. They’re letting them learn the lesson. Brokamp: What about investing some of that
savings? Do you think that’s important, or is that a lesson later on in life? Lieber: I think for kids who are interested
in it, I think it’s a terrific idea. Quite often, it starts with kids who have an intense
amount of curiosity about how things get made, or they’re particularly obsessed with a
favorite restaurant or a favorite theme park or a favorite toy, and it goes from there. I don’t know if I would force it on kids
who are not necessarily showing any interest in it, but I think it can only help for kids
who want to play around with individual stocks. One of the things I really like about it is
that it teaches them the concept of risk. There are not a lot of ways for kids to learn
about risk, at least through the standard educational curriculum, so we parents have
to sort of gin stuff up for them. The problem is, we don’t want them to do
it because we don’t want them taking any risks because we’re scared to death that
they’ll harm themselves. This is something that’s actually useful.
I wish there were more ways for kids to understand the concept of economic loss — at least without
their families going through it, which happens to many families. I think if more kids understood downside risks,
there might be fewer of them taking on absurd amounts of undergraduate student loan debt
to go to some third-tier private college instead of the flagship state university. Brokamp: You talk a little bit in the book
about different things that parents do in terms of paying interest, matching contributions.
There was an “inconvenience tax.” I thought that was interesting! Why don’t you explain
some of those? Lieber: Sure. Parents put all sorts of incentives
in place, which makes perfect sense to me because employers do it in the workplace.
That is part of what life is like in the real world. Our government puts incentives in place
through tax breaks of various sorts. There are parents who will match savings in
various ways, and some parents will put bonuses into place that depend on how long the kid
has saved the money, so rewarding longer periods of patience with ever-larger amounts of bonuses. If you haven’t touched your Save jar in
3 months, you get X, but if you haven’t touched it in 6 months you get X+Y, and if
you haven’t touched it in 12 months you get X+Y+Z. It encourages them not to raid
the kitty, in essence. You can do all sorts of things there. The penalties, I like less. There are some
parents who hand the allowance money over to the kids and then immediately take some
back, to try and teach them about the concept of taxes. There’s another family I met recently that
does something cool. They have a fourth jar for taxes and that tax money gets collected
each year, and then they spend it on something really awesome when the family is on vacation.
That works for me. Penalties I’m less fond of, although that
inconvenience tax was pretty awesome. Basically the way that worked, it was a family actually
right around here, Northern Virginia. Two siblings, and the younger boy was constantly
borrowing his older sister’s water bottles and lunch boxes, and he was constantly losing
stuff, so they decided to put an inconvenience tax into place. Not only did he have to replace the item when
it disappeared, but he would have to pay extra for however many days his sister was inconvenienced,
and that money went to her. He really did not like paying her the tax, so very quickly
he got his act into shape. Brokamp: One more question, then we’ll open
it up to the audience for questions. Because you got the award covering student
loans — we’ve talked a little bit about college — and in the book you actually talk
about mandatory tuition savings, and things like that. What’s your take on how much
kids should contribute to their college educations, how much even veto power parents should have
over which schools they go to? Lieber: There’s a family I profiled in the
book that sat down with each of their kids as they were starting freshman year in high
school and said to them, “We have enough money right now to pay for you to go to college
any place that you want. But, we are going to require that you pay for the first semester
of tuition yourself.” They give them plenty of warning. They’ve
got basically four summers to earn it. The last kid graduated, I think, a year ago. They
all went to private colleges. They weren’t scared away by this, and they didn’t all
decide to just go to the SUNY school to save themselves — it would have been more than
a 50% savings. They all went to private colleges, and the
amount ended up ranging between $15,000 and $22,000 that they had to make, but they did
it. They worked 50, 60, 70 hours a week, each and every summer. They scooped ice cream and the umpired softball
games and they scrubbed toilets at the beach and they tutored, and then eventually they
all got their lifeguard certifications, and that’s a slightly higher-paying job than
a lot of other summer jobs that kids can get. They worked just enough to make all of that
money, and they handed it over to their parents, and that was how it went down. Some people find that to be an impossible
task, or they want their kids doing enrichment or traveling with the family during the summer,
but make them pay for something. Make them pay for all of their spending money in college,
at the very least, just because I think it’s important that they have some skin in the
game. That, I think, is a good thing to do with
all kids who are going to college. A trickier question comes down to, how much will you
let them borrow? It’s ultimately up to you. Beyond the federal loan limits, which are
whatever they are –$32,000 or $33,000 over the course of an undergraduate education — if
they want to go to a private college or even a public college and you don’t have enough,
and they want to take on a private debt from a private lender that’s not the federal
government, in most cases these days you’ve got to get a co-signer. You literally have veto power there, so it
becomes a very tricky conversation. How much debt is too much? I don’t think we have
come up with a reasonable answer to that question yet. There are a lot of rules of thumb out
there that say, “Don’t borrow more than whatever your starting salary is going to
be.” How on earth are you going to know what that
is at 18, or even at 20, or even at the beginning of your senior year in college, you have no
way of knowing how the economy is going to turn or whether you’re going to be attractive
to employers. It’s really, really difficult, so I don’t
think we have a good answer to that question yet. To me, it’s just better to be safe
than sorry, and to avoid the private student loan debt altogether, just because it doesn’t
come with the same protections that the federal student loan debt comes with, like this income-based
repayment program. Some of you may be in it. There, no matter how little you’re earning,
you only have to pay what you can afford to pay. That’s not the case with these loans
that come from Sallie Mae and the banks.

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