• Financially Intelligent Parents Are optimistic about their ability to change money behaviors.
• Financially Intelligent Parents value the difference between financial savvy and financial intelligence.
• Financially Intelligent Parents think long and hard about the meaning of money in their lives.
• Financially Intelligent Parents consider the financial education of their children a primary parenting responsibility.

Financially Intelligent Parents recognize that their unconscious money deeds have at least as much impact on their kids as their conscious money words.

We are communicating to our children about money all the time. Sometimes it is verbal and intentional, such as when we have discussions about allowances or summer jobs. Other times our children absorb messages about money from our behavior, such as observing the way we treat the sales clerk at the department store or seeing us put money in the Salvation Army kettle at Christmas. Research shows that as much as 90% of communication is through non-verbal modeling behavior; it is what we do, the tone of our voice, our eye gaze, our gestures and our posture.

Understanding this concept helps us make the unconscious conscious. Financially intelligent parents recognize that they are sending the wrong message when they fail to give a food server or a taxi driver an adequate tip or when they talk about how they wish they could have been the one to make a million dollars through insider trading. While no one can catch and control all his negative messages, the goal is to catch and control some of them.

Financially intelligent parents also understand that they may be sending their children money messages because of unresolved issues from their own childhood. In Parenting From The Inside Out, Dan Siegel and Mary Hartzell point out that experiences parents have with their children often trigger the parents’ unresolved, leftover issues from their childhood. When such an issue is triggered, they experience what psychologists call “implicit memories.” These memories are recalled so fast that it feels as if they are happening right now rather than in the past, and thus trigger the childhood feelings that accompanied the original experience. Here is an example of how implicit memories can affect the money messages children receive.

Larry and Mary have a 15 year old son, Chris. When Larry was a child, his father would become angry and emotionally abusive if Larry ran out of allowance money before the end of the week and asked for an advance. Larry’s dad would scream that he was going to be a failure when he grew up because he couldn’t manage money. Larry said that when his father yelled at him like this, he would feel rejected, fearful and angry. When Larry and Chris have disagreements over money, Larry sometimes experiences that disagreement as a personal rejection, rather than as a teenager reflexively rejecting his father’s advice. The feeling of being personally rejected triggers Larry’s memories of his own father and he becomes angry and fearful.

Emotions such as anger, fear and rejection interfere with our ability to use our pre-frontal cortex, the part of the brain that allows us to be rational and reflective. As a result, we end up sending the wrong messages to our kids in these moments. Like Larry, we might respond to our child’s reasonable request for money – summer music camp tuition, for instance – by worrying about the cost and making our child feel guilty for no reason. If we repeat this type of behavior regularly, we may raise a child who feels guilty about spending money on himself for any reason!

The belief here helps parents think before they act, especially when it comes to money issues. Financially intelligent parents spend a few minutes at the end of each day asking themselves why they reacted the way they did and whether their behaviors expressed their values.

Financially Intelligent Parents feel that “no” and “enough” are words that children need to hear as part of their money education.

Under the mistaken notion that they can never give their children enough, some parents shower their children with gifts at all ages and routinely give in to pleas and demands for more. They may set limits in other areas of a child’s life, but when it comes to money, they just can’t say no.

Sometimes this is due to guilt – they’re trying to compensate for being away from home so much, a common problem among parents pursuing high-powered professional careers. In other instances, limit-averse parents are responding to a childhood in which their parents always said no. They want to give their children what they never had, and as a result, they believe in indulging their child with few if any limits.

It is easier to say no in theory, of course, than when staring into the eyes of a child you love who acts betrayed and hurt when you say no. Recognize, however, that the importance of limits is psychologically sound. In all areas of their lives, kids need limits. As much as they might act as if they don’t want them – especially in adolescence – they actually crave boundaries. These boundaries give them a sense of security; it structures their lives and helps them deal with the complexities and uncertainties of growing up. Though kids often push against these boundaries and sometimes cross them, they also need them. Allow children to have anything they want and you foster a sense of entitlement and diminish their drive to achieve. In fact, overindulged children tend to lack a sense of self-worth: They believe that they are not important enough for their parents to bother to set limits.

The art of saying no is one that financially intelligent parents master. It is an art because they must balance the no’s with yes’s. There are times when kids deserve rewards and should be allowed to exercise financial independence. A belief in saying no, however, gives parents the inherent right to set limits when necessary. As a result, they don’t feel like they are being mean or withholding love when practicing financially intelligent behaviors.

Financially Intelligent Parents want their children to work for love more than for money.

Children who are passionate about a given activity or interest exhibit what social psychologists call autotelic behavior. Autotelic is a word composed of two Greek roots, auto, which means self and telos, which means goal. An autotelic activity is one we do for its own sake, because to experience it is the main goal. In other words, autotelic behavior is behavior we engage in because we enjoy it, rather than for a reward or out of fear of failure.

When we use money to motivate our children, we are creating external motivation rather than relying on their own enthusiasms and passions. As psychiatrist Ed Hallowell points out in The Childhood Roots of Adult Happiness, we want motivation to come from the inside and not be supplied from the outside. “You may still deal with carrots and sticks, but if the carrot and the stick come from within a person, that system will last much longer than if the motivation comes entirely from the outside.” Hallowell believes that using money to motivate children is as likely to produce a depressed adult as it is to produce a materially successful one.

Social psychologist Mihaly Csikszentmihalyi, who coined the term autotelic, points out that the less parents rely on external motivators and the more they concentrate on helping their children become internally motivated, the happier their children will be. If you overemphasize the importance of money or rewards in achieving a goal, rather than the process of achievement itself, you run the risk of turning your child into a kind of money junkie who has no true enthusiasm for anything except more money. This is not a recipe for a meaningful or happy life.

USC economist Richard Easterlin, who has pioneered studies on the relationship between material goods and happiness, observed in an L.A. Times interview that the more we make, the more we want. Using money as a motivator simply makes us want even more. If materialism is our motivating factor, we can never get ahead of our material wants. Social psychologists call this the hedonic treadmill. The hedonic treadmill ensures that very few of us can be very happy for very long if what motivates us is getting more. As Easterlin comments, “The more you have, the more you need, especially if someone you know already has it.” Money and material goods are external; happiness is internal.

A belief in working for passion more than money helps parents keep kids off this treadmill. The more you can help your child discover what he loves to do and then encourage him to do it, the more autotelic your child will become. Autotelic children are able to keep money in perspective. They view money as a tool to use, not a goal to achieve. They take money into consideration when making decisions but they don’t allow their lives to be driven and controlled by money.

Eileen and Jon Gallo are the authors of Silver Spoon Kids: How Successful Parents Raise Responsible Children (McGraw-Hill/Contemporary 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin USA/New American Library 2005). Their website is www.galloconsulting.com. Portions of this material have been adapted from their books.

Our research has shown that financially intelligent parents:

• Are optimistic about their ability to change money behaviors.
• Value the difference between financial savvy and financial intelligence.
• Think long and hard about the meaning of money in their lives.
• Consider the financial education of their children a primary parenting responsibility.
• Recognize that their unconscious money deeds have at least as much impact on their kids as their conscious money words.
• Feel that “no” and “enough” are words that children need to hear as part of their money education.
• Want their children to work more for a sense of satisfaction than for money.

Let’s look at each of these beliefs or attitudes a little more closely.

Financially Intelligent Parents are optimistic about their ability to change money behaviors.

When we pass away, our children inherit our money; during our lifetimes, they inherit our beliefs about money. A financially intelligent parent understands that money history doesn’t have to repeat itself. Your children don’t have to inherit your anxieties or problems related to money.

In other words, financially intelligent parents believe that both they and their kids are not locked into a behavioral pattern, that even if they’ve exhibited negative behaviors in the past, they can change in the future. They also believe that their children are capable of adjusting and outgrowing bad attitudes, that they aren’t doomed to be forever greedy, entitled or careless when it comes to money.

We can’t overemphasize this related point: financially intelligent parents understand that it’s never too late to start! We’ve helped parents of adult children successfully change their money behaviors, and their kids have responded positively.

Helping children become financially literate takes time and patience. You’re going to feel frustrated in trying to encourage your pre-teen to be less materialistic. You might be upset with your teenager when he displays little empathy for those less fortunate than himself. Similarly, you’re going to find some of your ingrained money attitudes and behaviors hard to shake. If you’ve been obsessively cheap for 30 years, for instance, you will have to struggle to display a healthier attitude toward spending, especially in the presence of your children.

The good news is that optimistic parents usually succeed at changing their behaviors and helping their children change. They don’t give up when their children do stupid things or when they find themselves falling into old patterns. They persist in the belief that with patience and practice, financial intelligence is possible for them and their children.

Financially Intelligent Parents value the difference between financial savvy and financial intelligence.

Being financially savvy means that you handle your finances well. You budget appropriately, save for retirement, invest intelligently, avoid credit card debt and pay your bills on time. But you may be totally oblivious to the messages about money you are sending your children. Financially intelligent parents tend to be financially savvy, but even if they are not, they are aware of what they are teaching their children about money.

One parent we know, for instance, was socially conscious and involved in a variety of charitable organizations. He was also very smart about spending his money carefully and saving wisely, and he did a good job of teaching his children budgeting, investing and other financial skills. This man, though, was savvy rather than intelligent. He showed absolutely no balance, lecturing his children from the time they were toddlers about “wretched excess” and the need to live simply; refusing to buy products and services from at least half of all businesses because of sins real or imagined; and moaning about how Americans are terribly wasteful and consume far more goods and services than is necessary.

Almost predictably, one child reacted by living even more ascetically than her dad, creating problems at school where she had trouble making friends because she chastised the other children for being greedy and selfish. The other child responded by rebelling, becoming extremely materialistic and constantly telling his dad that when he grew up, he wanted to make a lot of money and have all the things that he’d been denied as a child. This parent might have been very smart about money, but he did not possess financial intelligence.

Financially Intelligent Parents think long and hard about the meaning of money in their lives.

To many of us, money represents far more than just a medium of exchange. It represents our deepest emotional needs for love, power, security, independence, control and self-worth. Money might represent a scorecard, a measure of success, a source of satisfaction or security, or a cause for anxiety, guilt or dependence. Financially intelligent parents work at understanding what money means to them because they know their relationship with money will have a profound effect on every aspect of their children’s lives.

Financially intelligent parents maintain a money consciousness. They make an effort to think about what messages they are sending their kids regarding financial issues. They don’t turn down requests for a toy or insist that their child get a job without thinking about it. They develop a reflex by which they reflect upon and question how their money decisions or responses might affect their child’s development. Obviously, they don’t do this every second of every day, but they do it often enough that they are alert for mistakes they’re making or ways their children are being adversely affected.

We’ve found that parents are more likely to think long and hard about money when they understand its enormous emotional influence.

Sociologist Louis Yablonsky points out that:

• Money often forms the basis of our self-concept, self-esteem and sense of intelligence, as well as our perceived status.
• We spend our entire time at work focused on making money.
• Sexual attractiveness is enhanced by the possession of money and diminished by its absence.
• Money is at the heart of many family fights.
• Money is a prominent feature in daydreams and fantasies.
• Money symbolizes power and autonomy.

Money, therefore, is far more than a medium of exchange, and when parents grasp that it is a symbol for everything from love to success, they take the time to think about what it really means in their lives.

Financially Intelligent Parents consider the financial education of their children a primary parenting responsibility.

Financially intelligent parents do not treat this education as something that can be taken care of through one dinner table discussion or by explaining how a bank account works. One financial birds-and-bees discussion isn’t sufficient. Financially intelligent parents view financial education as a continuing process. Whether the subject is allowances, car insurance shopping or credit cards, financially intelligent parents actively seek opportunities to involve their kids in financial learning experiences, taking advantage of teachable moments throughout their children’s lives in a variety of circumstances. It may be a small child’s innocent question about why houses cost so much or a teenager’s complaint that the fast food restaurant where he works doesn’t pay him enough. Parents see these questions and complaints as catalysts for increased financial literacy.

Prioritizing a child’s financial education sometimes means making an effort to engage in difficult discussions – a key behavior of financially intelligent parents that we’ll discuss in future articles.

For too many parents, money remains the last taboo topic. They are often far more comfortable talking about their sex lives or marital problems than disclosing how much they make or what money means to them. It’s easy to rationalize why their kids don’t need to know about certain topics such as the compromises they’ve made to make decent incomes, or to avoid their children’s questions about why their cousins have a lot more money and toys than they do.

When financial education is a priority, on the other hand, parents understand that these questions and discussions are their responsibility. As a result, they not only don’t avoid them but actively seek them out.

Eileen and Jon Gallo are the authors of Silver Spoon Kids: How Successful Parents Raise Responsible Children (McGraw-Hill/Contemporary 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin USA/New American Library 2005). Their website is www.galloconsulting.com. Portions of this material have been adapted from their books.

Smaller children especially are curious about everything, including money. Think back to when you were growing up. Did you wonder how much money your parents had, what your house cost, and how much your father or mother made each year? Your curiosity caused you to articulate these questions, and when you did, you created a teachable moment. This is your window to communicate the information and the values you want to impart to your child.

Although there are many teachable moments, the following list of such moments will help you be aware of some of the more common ones:

• Your child is toddling around the house, picks up a coin on the floor, and asks, “What’s this?”
• You’re at a store (often a toy store or grocery store), and your child points at something and asks, “How much does this cost?”
• You and your spouse are debating a money issue, and your child asks what you’re talking about.
• Your child asks you if you’re rich.
• Your child’s friend receives an expensive gift, your child wants the same thing, and you want to say “no” because you consider it too expensive or inappropriate.
• You tell your child she is going to receive an allowance (or your child asks for a raise in that allowance).
• You drive through a dilapidated neighborhood, and your child asks, “Are these people poor?”
• You open a checking account for your child, or give him a few shares of stock (or some other investment vehicle).
• Your child asks for something relatively expensive, and you explain that he has to earn it.
• You lose your job or make some other major life change and have to or want to downshift your lifestyle as a result.
• Your child asks what he can do to help those less fortunate than himself.
• You pass someone on the street asking for a handout.

You can also create teachable moments on your own. For instance, if you are taking the family to Disney World, let the teenagers help figure out the budget. Younger children might lack the skills for budgeting, but they can be given the opportunity to help make decisions after the budget is completed. Give them a fixed dollar amount to spend during the day, and don’t bail them out if they lack sufficient funds for one more soft drink or ride.

Expect your child to make mistakes, and recognize that these mistakes provide prime teachable moments. For instance, we had taken our twelve-year-old son with us to San Francisco and were staying in one of the city’s finest hotels. We had given him permission to order breakfast from room service. When we were checking out and received the bill, we noticed an $18 laundry charge. Because we hadn’t sent anything out to be cleaned, we asked our son if he had done so. He explained his T-shirts were dirty and he had decided the hotel service could wash them. We made it clear to him that this wasn’t acceptable; ordering meals from room service was OK, but it wasn’t financially prudent to have $5 worth of T-shirts cleaned for $18. He understood that we weren’t upset about the money but about the waste of money on an unnecessary extravagance. Because we dealt with the problem immediately and when he was most receptive to what we had to say, it helped him to learn to distinguish between reasonable and unreasonable spending.

Eileen and Jon Gallo are the authors of Silver Spoon Kids: How Successful Parents Raise Responsible Children (McGraw-Hill/Contemporary 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin USA/New American Library 2005). Their website is www.galloconsulting.com. Portions of this material have been adapted from their books.

In our last column, we began sharing some ideas when it comes to helping your kids connect money and values. Here are some more.

• Help your children understand the difference between using money for self worth and using money for self fulfillment. Over the years, we have worked with literally thousands of families with different amounts of money and we’ve discovered something that we think is truly important. We’ve never seen money ruin anyone, child or adult. On the other hand, we’ve seen money without values ruin lots of people. When it comes to values, money is a tool you have, not part of what you are. Parents who haven’t learned to think of money as a tool don’t see the difference between using money for self worth and using money for self fulfillment. We don’t want to teach our kids to confuse their self worth with their net worth. Money becomes a scorecard: “I am my money; therefore, the more money I have, the better I am.” Unless you happen to be Bill Gates, there will always be someone who has more money than you. You always need more. Kids who grow up confusing their self worth with their net worth don’t learn to have enough as part of their money vocabulary. We think of such people as not having an Off Switch when it comes to money. As parents they often model such negative money values as being workaholics or spending money to impress other people. Marie and Walter had been married for fifteen years and had two pre-teens when Walter got interested in golf and decided to sign up for lessons at the local golf course. For the first few lessons, Walter used clubs provided by the golf pro. But his brother-in-law who loved golf had really expensive golf clubs and within a month Walter needed better clubs. Soon he had spent thousands on custom made titanium and graphite clubs and the finest possible bag. But within ninety days, Walter decided that golf was boring! Walter was one of those folks who tended to confuse net worth with self worth. What money messages was his behavior sending his kids? He was teaching them to buy things spontaneously without thinking it through in order to impress other people and not to ask “Will I use _____ if I buy it?”
• Kids who learn to view money as a tool have a money Off Switch. They learn that money can be used to promote self fulfillment but that it can’t be used to create self worth. Enough becomes part of their money values vocabulary. Had Walter not confused using money for self worth with using money for self fulfillment, he would have waited until he decided whether or not he liked golf. Then he might have asked himself how often he thought he might play and what quality of clubs should he buy. In fact, had he shared this thought process with his children, he would have been a positive role model for his kids.
• Let your kids catch you living your values. If you don’t, you become a role model for “do as I say, not as I do” and teaching your children hypocrisy is not one of the values we recommend. If you are looking for a role model of a parent living his values, try Steven Spielberg. Spielberg strongly believes in the importance of education and wanted his kids to go to college. But in 1968 he dropped out of California State University Long Beach to become a film maker and eventually, along with David Geffen and Jeffrey Katzenberg, one of the founders of Dreamworks. Thirty-four years after dropping out, he quietly went back to college and accumulated enough credits to graduate from the College of the Arts with a bachelor’s degree in 2002. (Like many people who go back to college in their 40s and 50s, Spielberg was given credit for some life experience. The advanced film making class required students to produce a 12 minute film. Sharyn Blumenthal, director of the Film and Electronic Arts Department, told the Los Angeles Times that the professors felt that Schindler’s List, which earned Spielberg Oscars for best director and best film, satisfied that requirement even though it exceeded the 12 minute limit! ) Upon graduating, Spielberg described his decision to complete his studies as “a personal note for my own family,” and as a message to young people everywhere about the importance of education. He added: “How could I tell my kids to go to college when I had not graduated?”
• Deconstructing commercials is an important aspect of teaching kids money values. A study by the American Psychological Association found that kids under 8 have a tough time distinguishing commercials from entertainment. Don’t let young children watch TV on their own. Sit with them and, when a commercial comes on, explain that the purpose of the program they’ve been watching is to entertain them and the purpose of the commercial is to make them want to buy something. Ask them if they think the product being sold really works that way in real life. Will the action figure really fly around the room by itself and does the cereal really sing when you pour it in the bowl? And discuss with your child the message the commercial is sending about how to act. Ann Bracken teaches a college-level course on media literacy. Writing in the March, 2002 issue of the Baltimore Chronicle and Sentinel (www.baltimorechronicle.com) Professor Bracken discussed her students’ experience in deconstructing the “Barbie and Kelly go shopping” commercial. The class identified three messages about shopping that the commercial sends young children: “It’s lots of fun; it’s not finished until the cart is full; and sneaking things into the cart when mom isn’t looking is a cool thing to get away with.”
• Larry Mantle, the host AirTalk, a daily interview/call-in program on radio station KPCC in Southern California, and the winner of numerous Golden Mike and Associated Press awards, shared a great deconstructing story with us during one of our appearances on his program. When he was growing up, Larry desperately wanted a genuine James Bond 007 Super Spy Briefcase that was being advertised daily on several local TV channels. His parents did not want to buy it but Larry’s father recognized that the commercial made it look much better than it would in real life and took Larry to the local toy shop. To this day Larry recalls his feelings when the briefcase that was so wonderful on TV turned out in real life to be small, plastic and poorly constructed.
• Every day events are opportunities to model money values, especially when shopping for items that are the most heavily advertised to kids. Demonstrating to your kids how you go about deciding among competing brands of microwave ovens is important but it has less immediate impact than your behavior in buying athletic shoes that are heavily advertised and showing how you evaluate the shoes, versus what the commercials try to tell us. The next time you take the kids to a market or drug store, explain the difference between generic and brand name drugs. The FDA makes certain that the ingredients are identical; you often pay double just for the brand name. When you get to the cash registers, point out how the store strategically places all of the “impulse items” right there for you to grab while waiting to get checked out. Take the kids to one of the club stores like Wal-Mart, Sam’s Club or Costco and explain how you save by buying some items in bulk while it makes no sense to buy others in quantity. For a family of five, it might be a good idea to buy napkins, toilet paper and paper towels by the case, but how likely is it that you will barbecue enough hot dogs to use up a two gallon jar of pickle relish before it spoils? And will it fit in the refrigerator if I do buy it? This provides the opportunity to illustrate a vitally important question kids need to learn to ask themselves before spending money: Will I use it if I buy it?
• If you feel guilty about not spending enough time with your kids, figure out a way to spend more time with them. Don’t use money and things to make you feel better about being gone. We’ve already talked about the dangers of overindulgence. Some busy parents give their kids things to make up for the lack of time they spend with them. It may make the parents feel better, but look at the messages you are sending your kids: “You can use money to make yourself feel better.” And “Giving things to members of your family can replace giving them your time and attention.” Do you really want your kids to grow up with those values?
• Be careful of rationalizations when it comes to money and values. Sometimes it is hard to figure out whether money decisions really demonstrate money values or whether they are simply rationalizations intended to justify what we want to do. For example, remember fourteen year old Brian who wanted his parents, Janet and Eric, to get an $8,000 giant screen TV just like the one his cousin Larry’s family had bought? Although they eventually said no, Janet and Eric didn’t dismiss Brian’s request out of hand. They really wanted to spend more time with Brian and that big screen, hang on the wall TV was really impressive! Eric said that maybe Brian had a good idea; if they bought a big screen TV they could rent DVDs and watch them with Brian. Janet pointed out that they could rent DVDs right now, watch them on their 32 inch TV and share time with Brian without spending $8,000! Beware of rationalizations when it comes to money and values: Eric’s initial suggestion demonstrated how to rationalize spending money on the latest technology more than how to connect with your child.

Our most poignant example of money rationalizations and the messages they send children is a story told us by a mother at one of our workshops. About a week before spring break, she was in the beauty parlor and struck up a conversation with the woman seated in the next chair. She knew her through the local PTA because they both had 6th graders at the same school. The woman confided that she was going to have to send her kids to camp over spring break. She wasn’t going to have enough time to take care of them because she was heading up a charity event that was raising money for neglected children! Just imagine the money values message her children received!

Eileen Gallo, Ph.D. is a psychotherapist in private practice in Los Angeles, where she works with individuals and families on issues related to money. Jon Gallo heads the Family Wealth Practice Group of Greenberg Glusker Fields Claman & Machtinger LLP in Los Angeles. They are the authors of two books on families and money: Silver Spoon Kids: How Successful Families Raise Responsible Children (McGraw Hill, 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin, 2005). Their website is www.galloconsulting.com.

Because money is so loaded with meaning for most of us, it is not unusual for our behavior with money to be in conflict with our other values. Using money to buy things because we’re depressed and want to feel better is a classic example of money values in conflict.

Depression is the world’s number 1 psychological disorder. Depression is such a common human experience that the ancient Greeks were writing about it 3,000 years ago! In fact, melancholy, the original name for depression, comes from the Greek melaina kole or black bile, a term first used by Aristotle. The National Institute of Mental Health projects that between 10 and 25 percent of women and 5 to 12 percent of men in the United States will experience a depressive illness during their lives. Perhaps twice as many will experience “subsyndromal depression,” or depressive symptoms that fall short of meeting full diagnostic criteria for a mental disorder, like a bad case of the “blahs” or feeling “down” much of the time. Studies by the U.S. Center for Disease Control disclose that as many as 20% of teenagers experience a major depression during high school.

What does depression have to do with money and values? Most of us believe in the value of not wasting our money. But we live in a society where sophisticated advertising – much of it targeting teens and pre-teens – urges us to buy and sends us a message something like this: You deserve a break today, so go buy x, y or z and it will make you handsome, sexy, happy and cool. If you’re depressed you tend to feel empty. You need to fill this sense of emptiness. Even if you value frugality, you’re likely to think: “I am empty. I need to fill myself up with things because I’m not enough by myself, so I’ll go buy x, y or z and I’ll feel better.” Buying things to help depression is a quick fix that doesn’t last. In fact, it may make you feel more depressed than before because now you’re spending money in a futile effort to make yourself feel better and that conflicts with your belief in the importance of frugality.

But even if we don’t suffer from depression, our money behavior can still be in conflict with our values. In our society, consumer spending is incredibly important. Remember that following 9/11 politicians were telling us that we needed to demonstrate our patriotism by getting back to the shopping malls. People want to conform to societal values. The Japanese have a saying that the nail which stands out above the others gets hammered down. In other words, not conforming to societal values attracts adverse attention. In practically every culture, seeing one self as a responsible member of society is an important value. This need to conform becomes particularly important for adolescents, who are going through the identity stage of development. In one of those ironies of life that makes parents simultaneously want to laugh and cry, teenagers often attempt to establish an identity separate from their parents by slavishly conforming to the standards of their peer group. “In order to show adults – especially my parents – my disdain for the way they slavishly dress the same way, like the same boring movies and listen to the same boring music, I’m going to assert my individuality by dressing the same way as my friends, going to the same movies as my friends and listening to the same music as my friends.” In order to fit in, many teens feel that they have no option but to share the same interests as their peers, dress like their peers and spend their money like their peers. In contemporary American culture, the value to our kids of spending their money like their peers can conflict with money values we are trying to help them learn based on saving rather than spending, or spending responsibly rather than buying everything that is advertised.

Look for chances to share money values with your kids. You’d be surprised how early you can start. One parent seized the opportunity to talk about money and values when her six year old tried to fool the tooth fairy! When six year old Maggie lost her first tooth, Mommy got her a tooth fairy pillow with a special pocket in it for the tooth. She explained that losing your first tooth is very special and that the tooth fairy was going to leave Maggie $5, but for the rest of her teeth, Maggie was going to get just $1 each. Maggie thought this was a great idea because she was getting interested in money. She had just started receiving a $3 a week allowance that she tended to spend at the local arts and crafts store to buy herself supplies to make things. The tooth fairy was a great way to be able to buy additional stickers and supplies. When Maggie lost her second tooth, she put the tooth in the pocket together with a note asking the tooth fairy to leave her tooth behind. Sure enough, the next morning both the tooth and $1 were in the pocket. The next night Mom noticed that Maggie was sleeping with the tooth fairy pillow again. When she asked why, Maggie told her that she was recycling her tooth! The conversation went like this:

Maggie: “I’m going to get more money, Mommy.”
Mommy: “You can’t do that. You can’t fool the tooth fairy like that.”
Maggie: “Yes, I can; I’ll sleep with my mouth closed.”
Mommy: “No, you can’t do that. It’s not right to fool the tooth fairy like that. You’re not being truthful in the way you’re getting money. If you want an opportunity to make some more money, tell Mommy or Daddy and we’ll see if we can’t find something extra for you to do around the house.”

Here are some ideas when it comes to helping your kids connect money and values. We’ll share one idea with you in this column and several more in the next column.

Help your kids develop a money values vocabulary.

Neurologists tell us that thinking is unconscious. We don’t remember thinking. What we remember are the words that accompany our thoughts, not the thoughts themselves. This means that an important part of teaching your kids money values is giving them the necessary vocabulary to be able to think about money in terms of values. We call this giving your kids a money values vocabulary. When we introduce the concept of a money values vocabulary in our workshops, some parents initially assume that we’re talking about a way of saying “No” in a manner that articulates our values if your child or grandchild asks to buy something you don’t agree with. Sometimes it is, but more often a money values vocabulary helps you and your child evaluate whether to buy something.

Elisabeth Guthrie, M.D., the Clinical Director of the Learning Diagnostic Center at Blythedale Children’s Hospital in Valhalla, New York, and the author of The Trouble with Perfect, has commented that parents can learn a lot about the importance of teaching kids values by watching swimmers in a pool. Swimmers need to push off against the end wall of the pool in order to do the best possible turn. When it comes to teaching our kids to go out into the world with good money values, it’s parental money values expressed in a way that our kids can understand that serve as the wall for them to push against.

Way too often as parents we keep our values in our head and don’t articulate them. When you talk to your children and grandchildren about day to day purchases, find opportunities to use terms that reflect money values like important, significant, useful, necessary, essential, practical and functional. “It is important to have extra batteries for our flashlights.” “I will treasure the memories of the trip. It was worth spending extra so we could stay another day.” “A warm coat is necessary during the winter.” “Your book bag is very practical. It allows you to keep all of your books together.” “The new microwave oven is something that we will be able to use every day.” Your vocabulary will rub off on your kids. When they start talking about a purchase, you can discuss it in terms of a values vocabulary. Ask questions like “Will you use it or do you just want it?” “Is it really important to you?” Another way of sharing values is to discuss the price in terms of how long you had to work to afford it or how much of your child’s allowance is involved. “We had to save for two years to be able to afford the new car, but it was worth it.” “If you buy that toy, you won’t have any more allowance money to spend all week. Is the toy important enough for you not to have any treats for the rest of the week?”

Sometimes it’s necessary to say “No.” Do so in terms of your values and the value vocabulary. One Saturday morning, fourteen year old Brian announced to his parents, Janet and Eric, that they “had” to get a really cool $8,000 50 inch flat screen TV just like the one his cousin Larry’s family had bought that week. “The store is offering zero percent financing for five years,” said Brian. “I did the math and it will only cost about $130 a month.” Janet and Eric didn’t watch that much TV and didn’t want to spend the money. They could have copped out by simply saying “We can’t afford it” or “We don’t have the money.” Instead they replied: “It’s very impressive but spending that much money on a TV isn’t something we want to do as a family. We’re saving for college and we think that putting money away for education is more important.” This response tied their comments about money to their values.

Other ways of saying no in terms of values include:

• “It doesn’t fit our values.”
• We don’t want to buy any more _________. You already have two and that’s enough.”
• “Spending money on ______ isn’t ok with us.”
• “Other families have different values. That’s the way our family does things.”
• “We don’t want to buy from that company. They have a bad record of using child labor.”

We will continue our discussion of time, money and values in our next column.

Eileen Gallo, Ph.D. is a psychotherapist in private practice in Los Angeles, where she works with individuals and families on issues related to money. Jon Gallo heads the Family Wealth Practice Group of Greenberg Glusker Fields Claman & Machtinger LLP in Los Angeles. They are the authors of two books on families and money: Silver Spoon Kids: How Successful Families Raise Responsible Children (McGraw Hill, 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin, 2005). Their website is www.galloconsulting.com.

What do Billie Jean King, tennis super-star Venus Williams, John Lennon and Bill Walton, UCLA All-American and NBA star have in common? They all attribute their success to someone in their life who was a role model. As a parent, you are your child’s first and often most important role model, especially when it comes to money. Just consider the following developments over the last ten years or so:

• Mirror neuron theory now provides a scientific basis to understand the vitally important role that parental modeling plays in raising our children.
• A study by the Pacella Parent Child Center of the New York Psychoanalytic Society has found that toddlers express anger and frustration in ways that are similar to their parents.
• Pediatricians are starting to pay almost as much attention to what’s emotionally going on with the parents as to what’s physically happening to the child. Barbara Howard, M.D., assistant professor of pediatrics at Johns Hopkins and Co-Director of the Center for Promotion of Child Development Through Primary Care is quoted in the May, 2002 issue of Child as saying: “If our goal as pediatricians is to treat the whole child, we’re not always going to be effective if we don’t address the family context.”

The media, unlike parents, is there 24/7 for our kids. The media is so prevalent in our kids’ lives that two recent books have referred to it as the other parent and the second family. If we want to counteract what the media is teaching our kids about the importance of consumption in their lives, we need to be the most important role models in our kids lives when it comes to money values. In fact, we need to be the most important role models in two areas of money values: Helping our kids figure out the importance of money in their lives, and helping them with the more concrete areas of how they should actually deal with money on a day to day basis.

Let’s start with what we think of as the philosophical task of learning to balance the importance of money in their lives, because it is the more important of the two. All of us need to make a conscious decision to control the importance of money in our lives. After all, we have only so much time in this life. Joe Dominguez, author of Your Money or Your Life, refers to time as hours of “life energy” and treats time spent on earning a living as “maintenance.” If you are 35 years old, Dominguez figures that you have about 365,000 hours of remaining life energy ahead of you. As parents, we need to decide how many of those hours we going to spend making a living and how many are we going to spend having a life. If we want to have a life, we have to control the role that money plays in our life rather than letting money control us.

Mary Pipher, a distinguished psychotherapist and author, refers to this type of value system as the “North Star that orients our life.” As parents, it sometimes is necessary to chose between time and money. Say you want to buy a big screen TV that costs $2,500 and your family income is $80,000 a year. After taxes and social security, you have to work about two weeks to earn enough for the TV. So you need to ask yourself whether you want that TV more than $2,500 worth of family vacation money or taking off two weeks without pay to spend with your family. If families don’t think through their key values and “just let the culture happen to them,” says Pipher, “they end up fat, addicted and broke, with a house full of junk and no time.” In order to protect her time with her family, Pipher doesn’t answer the telephone during meals after 8 at night. Barbara and Phil have three children under age 12. They turn off the phones, TVs, stereos, and radios from 4 to 8 every evening so that the kids can do homework and the entire family can be together for dinner. “The kids are more relaxed and feel special because we’re paying attention to them,” comments Barbara.

If our kids are going to learn how to balance the role of money in their lives, they need a bigger picture of life than is taught by most TV programs. Our kids need to internalize the concepts that there are more important things in life than possessions and that contrary to the pop culture saying, he who dies with the most toys doesn’t win; he’s just as dead as the next dead person with fewer toys. Ever since the turn of the 21st century, our kids have been exposed to the spectacle of corporate executives, sports figures and entertainment stars being led off in handcuffs. Usually their crimes involved money and most of the time they already had more money than most of us. But they were willing to take the chance of having their reputations destroyed and going to jail in order to get more money.

Teaching money values and controlling the importance of money in our lives isn’t easy. Sometimes, we don’t even realize the messages we are sending our kids about money and values. A great example is the experience of the 11 year old who went on two shopping trips the same day. Maureen and Barry have three kids. The oldest, Haley, is 11. One Saturday morning Maureen took Haley to the local mall to by a new dress, shoes and a purse for a special family wedding. That afternoon, Barry went to the local hardware store for batteries and few other equally exciting items for the house and Haley came along. We like to think of Maureen, Barry and their kids as enlightened because they had read our book, Silver Spoon Kids, and had started having family meetings weekly to discuss issues that were important to anyone in the family. The kids valued the meetings because it gave them a forum where they really felt heard by their parents. If work or travel made it necessary for Maureen or Barry to cancel a meeting, the kids made sure it was rescheduled. One week they actually had the meeting in the pool! At the next family meeting, Haley commented that she had a better time with her father looking for batteries than with her mother buying a new dress. Maureen couldn’t believe that an 11 year old girl would rather look for batteries than shop for new clothes. She automatically assumed that spending money on oneself ranks higher than going to a hardware store. Haley explained that what was important to her wasn’t what they were buying. It was that Maureen was rushing to get through, even though she was spending money on Haley, while Barry wasn’t in a hurry and she had more connecting time with her father. Maureen realized that there had been too much urgency in their shopping experience. She had rushed through the morning in order to get home in time to take the other two kids to their activities. Maureen got an important lesson out of the shopping experience: In the future, she would make certain to adjust her schedule to allow for unhurried time together with Haley, and that time with her daughter was much more important than what she spent on her.

As role models, we are communicating money values to our children even when we’re not talking to them. As Maureen found out, communicating about money values doesn’t simply involve talking. According to Albert Mehrabian, Ph.D., a pioneer in the field of nonverbal communication (body language), the majority of communication takes places through such nonverbal channels as gesture, posture and facial expression. So, we are communicating our money values not only by what we say but by such non-verbal signals as how we tip a waiter or treat a checkout clerk at the market. And not only isn’t communication just talking, money isn’t just money. What we do with money can have meanings and consequences that we may never have thought of. Take Amy, an interior decorator, and Richard, a mid level manager with a national company. They had twin girls, Samantha and Kimberly. When the girls were nine, Amy and Richard decided to buy their dream house. Samantha was deeply involved in the choral group at her private school and Kimberly was taking private piano lessons. Buying the new house would be a bit of a financial stretch but Richard was in line for a promotion and they would live only five minutes from the twin’s school. They used their credit cards to help furnish the house. Richard’s expected promotion didn’t come through. Even with two incomes, they didn’t have enough to pay the mortgage, pay down the credit cards, keep their daughters in private school and pay for piano lessons. They either had to sell their dream house and try to find something cheaper or keep the dream house and economize by sending the twins to public school and stopping piano lessons. Money had suddenly become associated with an increased level of anxiety for the entire family. Moving to a smaller and less expensive home in order to keep the girls in private school and pay for piano lessons meant that everyone had to deal with the stress of another move, the twins would have to make new friends and might feel guilty. Taking the twins out of private school and canceling piano lessons in order to keep the dream house was likely to be interpreted by the twins as a message that their parents loved their house more than their children.

While it’s vitally important to teach our children to balance money and meaning in their lives and to help them learn through our example that they can both make a living and have a life, it’s also important to teach them how to connect their money behavior with their values on a day to day basis. And this is far more difficult to say than to do. For most of humanity’s recorded existence, philosophers, psychologists and religious leaders have been trying to understand the role that money plays in our lives. One of the few things they could all agree on is that, for most of us, sex and money are among the most powerful factors in our lives and money might be the most powerful. Ed Hallowell, a distinguished writer and psychiatrist, has ironically observed that “the average person would not uproot his family and move across the country for sex, but he almost certainly would for enough money.”

We will continue our discussion of time, money and values in our next column.

Eileen Gallo, Ph.D. is a psychotherapist in private practice in Los Angeles, where she works with individuals and families on issues related to money. Jon Gallo heads the Family Wealth Practice Group of Greenberg Glusker Fields Claman & Machtinger LLP in Los Angeles. They are the authors of two books on families and money: Silver Spoon Kids: How Successful Families Raise Responsible Children (McGraw Hill, 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin, 2005). Their website is www.galloconsulting.com.

It’s difficult to teach our kids how to be responsible with money when someone is spending $26 billion a year to make them want and need everything they see!

Although the experts can’t quite agree on how much purchasing power is controlled by kids, the numbers are clearly enormous. The June 28, 2004 issue of Time Magazine projected that American kids under age 13 spent at least $40 billion of their own money on purchases from candy to clothes. In 2001, teenagers were estimated to spend at least $170 billion. Time Magazine projects that children, one way or another, influence over $600 billion in purchases. At a conservative estimate, our kids are responsible for almost three-quarters of a trillion dollars in purchases annually.

Given what’s at stake, it is no wonder that the advertising industry has become extremely sophisticated about selling to children and has developed psychologically astute marketing techniques. For instance, they know how to encourage children to pester us into buying them things. Advertising industry statistics show that nagging is responsible for about a third of all family trips to fast-food restaurants and purchases of children’s clothing or videos. Cheryl Idell, a guru in the field of advertising to children, is the author of The Nag Factor, an article for copywriters and others who sell to kids. Idell explains that more products are sold when kids whine with importance rather than persistence. What’s the difference? Whining with persistence is being a broken record: “Mommy, I want Barbie’s Dream House; Mommy, I want Barbie’s Dream House” and on and on until you are driven to distraction. Whining with importance is giving a reason: “Mommy I need Barbie’s Dream House so Ken and Barbie can settle down and raise a family.” As Idell points out to the copywriters: they have to put copy into the ad that gives kids all the reasons they should want the product, and in language they can use to nag us. You may have thought that your kids had a natural ability to nag and whine. We’ve got news for you: They are getting a lot of help from the advertising industry!

Advertisers have also become skilled at communicating to children that consumption will make their lives better and that their self-worth hinges on the brand of their possessions. At the same time, they communicate to parents that giving children things equals giving them love. It’s difficult to say which message is causing the greatest long-term harm, but together they have a profoundly negative effect on children’s relationships with money and our ability to help them learn to regulate their money behavior.

According to the Kaiser Family Foundation, the typical kid is exposed to 40 hours of media weekly through a combination of television, radio, magazines, movies and the Internet. Our children typically see between 480 and 770 advertisements a week or 25,000 and 40,000 advertisements a year. By the time children are three, they often have become brand-conscious. Our friend Madeline remembers taking her two and half year old to the market. They were walking down the detergent aisle when her daughter stopped and said “Mommy, buy that one. It gets your whites even whiter!” A young mother recently told us that when she and her six-year-old passed a new BMW, he yelled out, “Mom, we need that car! It’s the Ultimate Driving Machine!” When she told us the story, she commented: “The TV is talking to my kid and telling him what to say to me!”

When marketing professionals are accused of corrupting children’s values, many respond that it’s the parents’ job to provide them with the right values. But even marketing professionals are starting to get concerned. In a Harris Interactive poll of youth marketers conducted in 2004, 61% felt that advertising to children starts too early. Though we believe marketers should be more responsible for the messages they send, we too believe that parents are responsible for monitoring and counteracting the impact of these messages and helping their kids learn to regulate their money behavior. This is a much greater responsibility than it was years ago, but it is one that any parent is perfectly capable of handling with the right knowledge and effort.

In The Shelter of Each Other, Mary Pipher makes the point that survival in the modern world requires families to be intentional in their choices. Parents need to protect their children from what is harmful and connect them to what is good and beautiful. In other words, we need to protect our kids by instilling positive values and critical thinking, especially when it comes to commercials. This can be done in a number of ways, but here are some simple suggestions every financially intelligent parent should adopt:

• Limit your child’s exposure to commercials. If you’re watching with your child, turn off the television or at least the sound when commercials are on. A recent study by the American Psychological Association found that kids under 8 have a tough time distinguishing commercials from entertainment. Encourage your child to spend at least some of his time in front of the television watching rented movies or stations without commercials. Even better, buy a PVR (personal video recorder) or DVR (digital video recorder), prerecord the programs and filter out the commercials. You should also limit the time he spends watching television. It is the accumulated and repeated messages of advertising that does damage. Remember that television is not the only way our kids are being exposed to commercials. Sophisticated internet sites like www.neopets.com attract millions of kids under 13 and offer games in which kids win points by viewing commercials. As a parent, you have the power to limit your child’s exposure to commercials.
• Counteract negative advertising messages. When you and your child are watching television and a commercial airs that suggests a brand name can make you happy or successful, explain that this isn’t the case. Don’t deliver a long-winded lecture; just note that people become happy and successful based on hard work, meeting goals and knowing themselves. You don’t have to counteract every commercial you view. Every so often, however, provide your child with some real “truth in advertising.”
• Capitalize on teachable moments related to advertising. At some point – usually when you’re in a store – your child will see a product featured in a commercial and say she wants it. Ask your child if she saw a commercial for the product and what happened in the commercial. If it seems like the ad was misleading or manipulative, point out why it was deceptive. Your child may still want the product, but at least you may have instilled some skepticism about the advertising – skepticism that will probably prove justified if you buy the product and it turns out not to deliver on the inflated, advertised message. These requests for advertised products provide you with teachable moments, and financially intelligent parents take advantage of at least some of them.

Some parents may have their doubts about the power of advertising over their children. After all, some commercials seem so idiotic and simplistic that it’s difficult to believe they have much of an effect. But remember that marketers have become very sophisticated. A good example is What Kids Buy and Why: The Psychology of Marketing To Kids, written by Dan S. Acuff and Robert H. Reiher, both PhDs who specialize in the science of marketing to kids. The book uses the same developmental stages we discussed in one of our earlier articles to teach the advertising industry how to push our kids’ “hot buttons” at each developmental stage.

What’s wrong with this? In Wise Up To Teens: Insights into Marketing and Advertising to Teenagers, Peter Zollo makes the point that at least half of all ads aimed at teens focus on friendships or romantic relationships and suggest that the product or service being advertised will help make the reader cool. Enmeshed in the Identity stage of their lives, teens are trying to develop their own identities, separate from their family. Think of how many CDs, jeans, tank tops and lipsticks you can sell by convincing teenagers that they can attract friends through your product. Even more troublesome, you can create the illusion that the right product or brand name can provide them with a new identity, an illusion that can hinder their development.

Just as disturbingly, the consumerist culture is targeting increasingly younger market segments. An article in the April 20, 1998, New York Times quotes the product licensing firm Character World as describing the Teletubbies as the first brand to come along for the “one-to-two-year-old niche. . . . . on a very large scale.” For the one year old who doesn’t have everything, the Teletubbies website offers 54 items to purchase, ranging from backpacks to dolls to videos to saucers. On its website (http://www.aap.org/family/tv1.htm) entitled “Television and the Family”, the American Academy of Pediatrics states it “does not recommend television for children age 2 or younger.” For older children, the Academy recommends no more than “1 to 2 hours per day of educational, nonviolent programs. . . . . the first 2 years of life are especially important in the growth and development of your child’s brain. During this time, children need good, positive interaction with other children and adults. Too much television can negatively affect early brain development. This is especially true at younger ages, when learning to talk and play with others is so important.”

Eileen and Jon Gallo are the authors of Silver Spoon Kids: How Successful Parents Raise Responsible Children (McGraw-Hill/Contemporary 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin USA/New American Library 2005). Their website is www.galloconsulting.com. Portions of this material have been adapted from their books.)

We don’t talk to our children – and often, our spouse – about money because we don’t know what to say. Our own parents didn’t talk to us about money, and their parents didn’t talk to them about money. Given this multi-generational silence, it’s no wonder that the this topic is off limits. We may not consciously consider it taboo, but unconsciously, we avoid talking about such things as our salaries, the importance of saving, conspicuous consumption and other topics. We may also make provide excuses to ourselves about why we don’t talk about money. Saying that it’s crass to discuss such a subject is a common excuse. In reality, we lack the language and framework necessary to have a good discussion.

As a result, when we do talk to our spouse about money, the conversation often ends up in an argument. Money arguments are a recurring theme in just about every marriage – and certainly among many divorced parents. At The Gallo Institute, we have worked with some of the wealthiest families in America as well as many middle class couples, and we can tell you that money fights are not a function of how much money you have. One couple might fight over whether their third vacation of the year should be Spain or Japan, while another couple might fight over whether they can even afford to take a week off for a vacation.

The list of money topics couples fight over could fill a book:

• How much to spend on the purchase of a house.
• The obsessive-compulsiveness of one person regarding finances.
• Risky investment decisions.
• What you feel is the outlandish cost of a child’s toy.
• Public or private education (state college versus a private one).
• Amount of money spent on clothes.
• Whether one spouse should be a stay-at-home parent and give up his/her job.
• The decision to look for a better-paying job (and leave a lower-paying one that the individual loves).
• The need to buy a bigger house (or a house in a more upscale community with better schools).
• Where all the money goes (and the bad record-keeping that results in this argument).
• Where all the money goes (because one spouse pt good records and uses the records to blame her spouse).

While the types of arguments vary, the underlying reason for the fights is the same: Husbands and wives learned different money scripts as children, and the differences create tension when money issues arise. They naturally assume that their spouses will be following the same script and are shocked and saddened to discover that it is very much different. If you argue with your spouse about money, it may be that the two of you are reading from different scripts based on different values you learned as children. Your fight is really over the psychological issues and the values that are hiding behind the financial issues. Consider Janice and Frank. Janice grew up in a home in which her father worked and controlled how the money was spent. Mom stayed home and acquiesced to Dad’s decisions. As a result, she learned that money determines who has the power and control in the family. The role of the spouse with less money is to agree with the decisions reached by the other spouse. All of this added up to her money script, a series of expectations about how a husband and wife carry out their roles when it comes to money. When Janice married Frank, she carried this script into the marriage and expected Frank to be reading from the same script. But Frank grew up in a family where his parents shared money decision-making responsibility. Janice felt that Frank wanted her to take on financial duties that were his job, and Frank complained that Janice wouldn’t participate in making important family decisions.

Some spouses keep a secret stash of money for particular types of purchases. Sometimes, their motivation for these stashes is to avoid money fights, other times to retain a sense of autonomy and security. and they also end up hiding purchases and debts from their spouses. We’ve met many couples where one or both partners admit to keeping a secret stash of cash in a drawer or maintaining a bank account that the other person does not know about. While they sometimes explain that they simply want a source of mad money, a better solution would to create a mad money account for each spouse. No matter what the reason for the secrecy, the result is often a huge blow-up when the hidden money behavior comes to light, with feelings of betrayal in one spouse and guilt in the other, usually emerge when the secret money behavior is revealed. For the children who witness the emergence of these feelings as well as the gargantuan, secret-ending fight, can be adversely impacted. Not only does money become associated with a source of conflict, anger, guilt and betrayal, but it feeds the concept of money as a taboo subject.

To avoid these secrecy fights, we recommend a “Money Amnesty Day.” Set aside a time for you and your spouse to sit down and reveal any money secrets that you may have been keeping from each other. Agree in advance that you will forgive whatever is revealed so long as it stops.

Of course, these Amnesty Days aren’t going to end all money fights. If you and your spouse grew up with different money values, some tension is always going to exist between the two of you. What you need to resolve is to keep this tension from erupting into real combat; even fighting in private can hurt impact children, since in that they often can “read” their parents and know when and about what they’ve been fighting without actually witnessing the bout. Getting your money stories straight means resolving to limit your fights to infrequent skirmishes.

Perhaps the first and best thing you and your spouse can do is to create three basic money messages that will as a guide for what the two of you say and do with each other and your kids for everything from allowances to buying toys to saving money. You want to agree on money messages for acquisition, use and management (how you get, use and manage money). These basic money messages serve as scripts you can use again and again in a consistent manner when dealing with money issues. Obviously, your messages should reflect the values you and your spouse agree upon, but here is a sample of three that you can adopt or adapt:

Acquisition: Setting an ambitious financial goal for acquiring money is fine as long as you don’t become consumed, obsessed and otherwise a slave to this goal.

Use: Money can be used to buy both necessities and luxuries, but not to buy things to impress others or to establish your own worth.

Management: Keeping track of finances is responsible behavior, but to keep track of them down to the last penny or for hours every night may involve shirking your responsibility to family, friends and other more meaningful pursuits.

A good place to start is for you and your spouse to write down your version of the three messages. Then trade lists. Agree in advance. Perhaps the first and best thing you can do is create three money relationship messages corresponding to acquisition, use and management. You and your spouse should put these in writing and use them as a guide for what you say and do regarding everything from allowances to buying toys to saving money. Obviously, your messages should reflect the values you and your spouse agree upon, but here is a sample of three that you can adopt or adapt:

Acquisition: Setting an ambitious financial goal is fine as long as you don’t become consumed, obsessed and otherwise a slave to this goal.

Use: Money can be used to buy both necessities and luxuries, but not to buy things to impress others or to establish your own worth.

Management: Keeping track of finances is responsible behavior, but to keep track of them down to the last penny or for hours every night may involve shirking your responsibility to family, friends and other more meaningful pursuits.

Next, a that you will compromise if your money messages are in conflict. Compromise requires that you listen to your spouse and abandon black and white thinking in which “I’m willing to listen to you, but I’m right and you’re wrong.” Remember that the question isn’t who’s right and who’s wrong; it’s how the basic money messages you are jointly creating are going to affect the emotional well being of your child! Black and white thinking gets in the way of the give and take necessary for good compromises. Try to understand your spouse’s position and respond constructively with the best interests of your child in mind. Responding to your husband’s proposals by telling him that he is as irresponsible with money as his mother does not make for good compromises! Watch your body language. Rolling your eyes or sighing loudly suggests that your spouse’s position is worthless.

Even after you both agree on the three basic money messages, your childhood values will still have a powerful influence on your behaviors, making conflict possible. Once again, compromise comes in. Your spouse wants to give your daughter a car on her 16th birthday. You are opposed. When the two of you disagree when money conflicts arise. Even if you both agree on the three basic money messages, your childhood values will still have a powerful influence on your behaviors, making conflict possible. That’s where compromise comes in. Over a money issue, you need to ask yourselves whether the way you are looking at the issue is based on fear or love. You may fear that buying your teenage daughter a car on her 16th birthday will spoil her forever. Your spouse may fear that the neighbors will think you are tightwads if you don’t give her the car. Fear makes it difficult to compromise. Looking at the issue based on love means asking what is in the best interests of your daughter. It’s much easier to reach an agreement when you approach the issue with your child’s best interests in mind.

We also recommend that couples try to share financial responsibilities. Divide financial chores based on your talents and interests. One spouse may be better at dealing with mistakes on bills, like not getting credit for returned merchandise, while the other might be better at securing bids to have the bathroom painted. The spouse who makes more money than the other should not receive the lion’s share of responsibility. Just because you make more money than your partner doesn’t mean you’re a better money manager. In fact, we know families in which the breadwinners are so focused on work that they lack the time and energy for money management responsibilities. Sharing these responsibilities sends kids the message that money management is something both Mom and Dad – and more specifically, women and men – are equally capable of handling.

Finally, don’t be cavalier or unthinking about your money-related decisions and actions. Regularly evaluate if your money words and deeds are consistent and clear. Specifically:

- Are you and your spouse saying and doing things regarding allowances, gifts and so on that communicate the same message or that send opposing messages?
- Are you avoiding major money battles, both in front of your children and in private?
- Are you talking to your spouse about money issues that are arising in your family and formulating a plan to handle these issues in keeping with your agreed-upon values?

Keeping these questions in mind will help you keep your money stories straight.

Eileen Gallo, Ph.D. is a psychotherapist in private practice in Los Angeles, where she works with individuals and families on issues related to money. Jon Gallo heads the Family Wealth Practice Group of Greenberg Glusker Fields Claman & Machtinger LLP in Los Angeles. They are the authors of two books on families and money: Silver Spoon Kids: How Successful Families Raise Responsible Children (McGraw Hill, 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin, 2005). Their website is www.galloconsulting.com.

The trust stage is from birth until about age two. A child’s task is to develop a view of the world as a safe and secure place.

The autonomy stage runs from about two to four. Here – during the “terrible twos” – children are beginning the long, hard job of becoming self-sufficient and autonomous, separate from their parents. This need for autonomy explains why a child’s first two words are probably “mommy” and “daddy,” and the third is “no!”

During the initiative stage from about four to six, children are learning to explore the world and test their limits. Their curiosity about everything is boundless and their favorite word is “why?”

From about the start of school at six to adolescence at 12 or 13, children are in the industry stage, where they need to develop a “can do” approach to the world.

The identity stage runs from the start of adolescence until young adulthood. Although historically young adulthood was viewed as starting around 18, many young people today do not reach adulthood until 26 or even later. During this final stage of childhood, children need to develop a sense of their own identity, independent of their family and their family’s money.

Through our work at The Gallo Institute, we have identified a parallel series of parental money tasks that will help children grow up with a healthy relationship with money. Conversely, parents who are unaware of or ignore these tasks may be encouraging their children to embrace negative attitudes and actions.

The following chart provides a capsule view of these money tasks:

Let’s look at each of the five developmental stages and the role that parental money behaviors play in each.

Trust. Your parental task during this first stage of life involves helping your children develop context. By this we mean helping them learn to view the world as a safe and secure place. At first, it may seem unlikely that this task has anything to do with money. However, it actually has a profound impact on the attitudes your children eventually develop toward money. Psychologists tell us that we project the sense of security or insecurity we develop during this first stage of life onto three aspects of adult life: food, sex and money.

The way you create safety and security is by ensuring your child establishes a strong, continuous relationship with a loving caregiver. Child psychologists call this individual an “attachment figure” and talk about the need for children to have a “secure attachment” with their primary caregiver. While the mother is often probably the best attachment figure, in most situations, this certainly doesn’t mean that a father or a grandparent can’t fill this role. In fact, even loving nannies or daycare workers can serve as good attachment figures.

This attachment doesn’t happen, however, when you and your spouse are often absent and you change nannies three times during your child’s first two years. It also doesn’t happen if the primary caregiver is physically there but emotionally distant. And it doesn’t happen if this caregiver is fulfilling this role every other week – she is loving and involved for a week and then is gone traveling for work the following week. In these instances, babies develop feelings of insecurity, which may manifest themselves later in life in regard to food, sex or money – or all three! When parents fail to make sure a secure attachment takes place, they increase the odds that their children will grow up with money-related issues – being overly materialistic, unable to manage money and so on.

Autonomy. In February, 2004, we asked one of our employees to watch television’s Nickelodeon channel for two hours, from 9 to 11 a.m., and count the commercials. There were 29, promoting everything from toys to fast food to video games. Starting around age two, most children start watching TV. What do they see? Commercials. We know parents who try to insulate their children from the media, but it it is usually is a losing proposition. If children aren’t exposed to commercials at their own home, they will view them at friends’ homes. It’s normal for children to like and want things. Commercial television, though, will start teaching two or three year olds that they should not only like and want what they see on TV, but that they need what is advertised.

A parent’s money task during this stage is to help children learn the difference between liking and wanting things as opposed to needing everything they see advertised. The former is normal, the latter is not. When you think about good versus bad parental money behaviors, realize that your children learn not only by what you say and do, but also by what you don’t say or do. If you use the television as a babysitter and don’t watch with your children and talk to them about what they are seeing, you are allowing advertising to deliver a “you need everything we’re selling” message. A steady diet of commercials during this developmental stage may yield children with an overwhelming need for instant gratification. These are the children who may resent you for not buying them things and perhaps carry this resentment and anger about what they don’t have into adulthood. Financially intelligent parents, therefore, ration the amount of television small children watch and try to and watch with their children whenever possible. In this way, they can help them learn to understand what commercials are telling them and give them the tools they need to evaluate the truthfulness of what is being said. Financially intelligent parents also “reframe” the way their children think about commercials. Reframing allows your children to think in terms of “I like” what I see on TV, rather than “I need” or “I want” what is being advertised.

Initiative. During the initiative stage, children become curious about many things, including money. For this reason, you want to become comfortable communicating to your children about financial issues, using both words and behaviors. Financially clueless parents communicate poorly or not at all. Perhaps the worst sin parents commit during this stage is to engage in constant quarrels with each other in their children’s presence. As a result, children grow up associating money with hostility and disagreements, and this association colors their own attitudes about both relationships and money. It can cause them to replicate this behavior when they’re older and in relationships or it may cause them to avoid any discussion about money with their spouses. It can also create a sense of money as the root of all evil and cause children to pursue interests and careers precisely because they’re guaranteed not to make any money at them. Financially intelligent parents learn to keep the majority of their money arguments private.

During the Initiative stage, financially intelligent parents also make an effort to satisfy their child’s curiosity about why things cost what they cost, even if the questions their children ask seem silly.

Finally, they don’t hide money matters from their children on the assumption that they are too young and won’t understand. They talk about salaries, bills, charitable donations and contemplated purchases when their children are present. Even if their children don’t understand every part of the discussion, they learn that their parents view money as emotionally neutral; that they don’t over-value or under-value it.

Industry. During this stage, financially intelligent parents practice very specific money behaviors. They help their child develop a work ethic and teach the basics of money management through allowances. It seems simple, yet but for a number of reasons, parents are frequently clueless about these issues. Perhaps the most common error parents make is to link chores and school work to allowances. Connecting chores to allowances teaches children that they have a right to be paid for doing tasks that are their responsibility as members of the family. Similarly, paying for grades substitutes external rewards for the internal motivation that help children grow into self-reliant and happy adults.

No doubt, you have known children who are highly irresponsible and who come to view any request for household assistance – from taking out the trash to mowing the lawn – as an unfair imposition. Later, these same children may not feel responsible for achieving good grades or doing anything beyond the minimum at a job. They often lack motivation and can become overly dependent on mom’s and dad’s generosity, since they have never learned to value a job for its own sake.

Parents should also be involving their children in charitable activities during this stage. When they don’t use some of the family’s resources – both money and time – to help people in need, they miss out on an opportunity to teach children that there are uses for money other than consumption. This is a crucial life lesson, and this is the stage when it can really hit home with children.

Identity. This is the final stage of childhood, and parents model money attitudes and actions here that can prepare children to function as emotionally healthy, financially responsible adults when they leave home. The financially intelligent parent uses checking accounts, debit cards and pre-paid credit cards to teach their children about credit and money management before they get to college. This parent also helps her children learn that money cannot buy happiness, a lesson that adolescents often find difficult to accept. A financially intelligent mom or dad makes a conscious effort to avoid frequent displays of extreme money behaviors – greed, extreme frugality or chaotic money management – that may send the wrong message to their children.

We will talk more about these concepts in future columns.

Eileen Gallo, Ph.D. is a psychotherapist in private practice in Los Angeles, where she works with individuals and families on issues related to money. Jon Gallo heads the Family Wealth Practice Group of Greenberg Glusker Fields Claman & Machtinger LLP in Los Angeles. They are the authors of two books on families and money: Silver Spoon Kids: How Successful Families Raise Responsible Children (McGraw Hill, 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin, 2005). Their website is www.galloconsulting.com.

In Part Two of this series, we introduced the concept of money scripts. If you fight with your spouse about money, it may be that the two of you are reading from different scripts based on different values you learned as children. The fight is really over the psychological issues and the values that are hiding behind the financial issues. Linda and Charlie had been married for 14 years when they realized they needed help. They had been arguing about their eleven-year-old son’s allowance for weeks, placing a strain on their marriage. Ken was receiving $5 dollar a week, and he kept running out of allowance before he ran out of week. To help him learn to manage his allowance better, Charlie told Ken to keep a ledger to track how he was spending his money, but Ken wasn’t keeping the ledger up to date. Charlie wanted to reduce Ken’s allowance by $1 a week each time the ledger didn’t balance. Linda didn’t think it was such a big deal and felt that the penalty was ridiculously harsh.

In 14 years of marriage, Linda and Charlie rarely talked about their money stories with each other. When they finally started to share their stories, they began to understand and appreciate their differences. As a child, Linda had received a regular allowance from her parents, and she viewed allowances as a valuable tool to help her kids learn to manage money and make choices. Charlie, on the other hand, grew up in a family that couldn’t afford to give him an allowance and he valued self-sufficiency. Their fight, therefore, wasn’t really about Ken’s spending habits or his failure to keep the ledger up to date; it was about competing values they had learned as children and expected the other person to share. When Linda and Charlie saw their fight for what it really was, they realized that not only was their argument confusing Ken, but that they were missing an opportunity to help Ken learn a positive money lesson, rather than taking money away as a punishment. They told Ken that they would help him with the ledger, and if an accurate ledger showed that his allowance wasn’t sufficient, they would be willing to discuss a reasonable increase.
Another example is Janice and Frank. Janice grew up in a home in which her father worked and controlled how the money was spent. Mom stayed home and acquiesced to Dad’s decisions. As a result, she learned that money determines who has the power and control in the family. The role of the spouse with less money is to agree with the decisions reached by the other spouse. All of this added up to her money script, a series of expectations about how a husband and wife carry out their roles when it comes to money. When Janice married Frank, she carried this script into the marriage and expected Frank to be reading from the same script. But Frank grew up in a family where his parents shared money decision-making responsibility. Janice felt that Frank wanted her to take on financial duties that were his job, and Frank complained that Janice wouldn’t participate in making important family decisions.

Perhaps the first and best thing you and your spouse can do is to create three basic money messages that will guide what the two of you say and do in the three dimensions of acquisition, use and management that were discussed in Part One of this series. These basic money messages serve as scripts you can use again and again in a consistent manner when dealing with money issues. Obviously, your messages should reflect the values you and your spouse agree upon, but here is a sample of three that you can adopt or adapt:

Acquisition: Setting an ambitious financial goal is fine as long as you don’t become consumed, obsessed and otherwise a slave to this goal.

Use: Money can be used to buy both necessities and luxuries, but not to buy things to impress others or to establish your own worth.

Management: Keeping track of finances is responsible behavior, but obsessively keeping track down to the last penny may involve shirking your responsibility to family, friends and other more meaningful pursuits.

A good place to start is for you and your spouse to write down your version of the three messages. Then trade lists. Agree in advance that you will compromise if your money messages are in conflict. Compromise requires that you listen to your spouse and abandon black and white thinking in which “I’m willing to listen to you, but I’m right and you’re wrong!” Black and white thinking gets in the way of the give and take necessary for good compromises. Try to understand your spouse’s position and respond constructively with the best interests of your child in mind. Responding to your spouse’s proposals by telling her that she is as irresponsible with money as her mother does not make for good compromises! Watch your body language. Rolling your eyes or sighing loudly suggests your spouse’s position is worthless.

Even after you both agree on the three basic money messages, your childhood values will still have a powerful influence on your behaviors, making conflict possible. Once again, compromise comes in. Your spouse wants to give your daughter a car on her 16th birthday. You are opposed. When the two of you disagree over a money issue, you need to ask yourselves whether the way you are looking at the issue is based on fear or love. You may fear that buying your teenage daughter a car on her 16th birthday will spoil her forever. Your spouse may fear that the neighbors will think you are tightwads if you don’t give her the car. Fear makes it difficult to compromise. Looking at the issue based on love means asking what is in the best interests of your daughter. It’s much easier to reach an agreement when you approach the issue with your child’s best interests in mind.

We also recommend that couples try to share financial responsibilities. Divide financial chores based on your talents and interests. One spouse may be better at dealing with mistakes on bills, like not getting credit for returned merchandise, while the other might be better at securing bids to have the bathroom painted. A spouse who makes more money than the other should not necessarily receive the lion’s share of financial responsibility. Just because you make more money doesn’t mean you’re a better money manager. In fact, we know families in which the breadwinners are so focused on work that they lack the time and energy for money management responsibilities. Sharing these responsibilities sends kids the message that money management is something both Mom and Dad – and more specifically, women and men – are equally capable of handling.

A few years ago, we worked with the client we’ll refer to as the Clothing Concealer. She was married with two teenage daughters. She had a responsible middle management job with a large corporation. She loved to buy clothes, but early in her marriage, she had fights with her husband who felt that she was spending too much money. Several years ago, she obtained a credit card in her own name and had the statements sent to her office. The Concealer would go shopping, sometimes with her daughters, and use the secret credit card. But she couldn’t wear the new clothing because her husband would notice. Over time, she accumulated thousands of dollars worth of new clothes and hid them in a closet in the spare bedroom.

This “hiding” behavior is more common than you might think. MSN Money report that a survey by British online bank Cahoot.com found that about 75% of women admitted to hiding money, compared with 53% of men. A 1999 study by the Stepfamily Association of America found that 71% of the women who were married for the second time kept money hidden from their husbands. Lying about purchases is another common but negative money behavior. In a poll taken by Reader’s Digest in 2001, forty percent admitted lying to their spouses, with the most frequent lie being covering up the purchase price of an item. In and of itself, these money lies and hidden accounts might not seem like anything so terrible. Consider, though, what it communicates about marriage and trust.

Other potentially negative money behaviors include:

• Lying to my spouse about what I’m buying.
• Buying certain products or services obsessively.
• Talking incessantly about being one step from the poorhouse when this is not the case.
• Exhibiting a fascination with the rich and famous (watching television shows, buying magazines, gossiping about celebrities).
• Using credit to obtain a lifestyle far beyond your means.
• Being completely irrational about purchases in a specific category (i.e. buying luxury automobiles when you can’t pay your mortgage or refusing to spend money on decent clothes even though you have plenty of money in the bank).
• Paying cash for everything, refusing to own a credit card or get a loan, even when you are well-off financially.

If you find that some of these money behaviors applies to you, one of the first and simplest steps you can take is to create a Money Constitution for your family. The Money Constitution is a basic agreement how the two of you are going to spend and manage money. For example, you might agree that any non-routine expense over $500 requires approval of both you and your spouse. As part of the Constitution, determine that there will be no secret stashes of cash or credit. Along with these family financial laws, however, your Constitution should also be flexible, so you can include Amendments that take your specific family circumstances and money styles into consideration. For instance, one amendment might provide for separate checking accounts because you balance the checkbook to the penny and your spouse is constitutionally unable to balance it. If you then decide to have one joint account as well – a common one in many families—then you must agree on what percentage or amount of your joint income should be deposited to the “ours” account. If you have children, talk about the Constitution with them. This teaches them that money is an appropriate topic to discuss and that there are rational and appropriate ways to resolve differences over money.

As we noted earlier, some spouses keep a secret stash of money for particular types of purchases. Sometimes, their motivation for these stashes is to avoid money fights, other times to retain a sense of autonomy and security. No matter what the reason for the secrecy, the result is often a huge blow-up when the hidden money behavior comes to light, with feelings of betrayal in one spouse and guilt in the other. To avoid these secrecy fights, we recommend a “Money Amnesty Day.” Set aside a time for you and your spouse to sit down and reveal any money secrets that you may have been keeping from each other. Agree in advance that you will forgive whatever is revealed so long as it stops.

Of course, these Amnesty Days aren’t going to end all money arguments. If you and your spouse grew up with different money values, some tension is probably going to exist between the two of you. What you need to resolve is to keep this tension from erupting into armed combat.

Getting your money stories straight and understanding your relationship with money helps you limit your fights to infrequent skirmishes.

Eileen Gallo, Ph.D. is a psychotherapist in private practice in Los Angeles, where she works with individuals and families on issues related to money. Jon Gallo heads the Family Wealth Practice Group of Greenberg Glusker Fields Claman & Machtinger LLP in Los Angeles. They are the authors of two books on families and money: Silver Spoon Kids: How Successful Families Raise Responsible Children (McGraw Hill, 2001) and The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (Penguin, 2005). Their website is www.galloconsulting.com.