Parenting Guru: What are your money priorities?

Laura Vanderkam, a mother of three kids under the age of 5, and author of All the Money in the World: What the Happiest People Know about Getting and Spending, helps you think about the role money plays in your family. Vanderkam shares her insight about finances, parenting and priorities below.

Banking on Baby

The decision to have another child sometimes comes down to finances. Do kids really get cheaper the more you have?

Laura Vanderkam: The marginal cost of children does decline — according to official USDA figures — for two reasons. First, many of the major expenditures (family house, family car) come with the first kid. Later, children use hand-me-downs and share the first child’s toys, and otherwise don’t require as many purchases. Money simply has to go farther — so it does.

Do kids unconsciously pick up lessons about money from us?

Vanderkam: Kids pick up all sorts of habits from their parents. If they see you saving and investing, it will come naturally to them — they won’t view an index fund as something weird. Likewise, if you’re always short on money at the end of the month, your children will grow up viewing this as the natural state of affairs.

Flex careers

What money lessons do parents today say they won’t pass on?

Vanderkam: I think many people learned from their parents that jobs are long-term affairs and that your income is what it is. You get raises and promotions over time, but it’s not malleable in the short run. But these days, we see that jobs often last just a few years (if that). People will have multiple jobs and even multiple careers. They’ll also move in and out of entrepreneurship.

We’ll have to teach our kids to make a career with a far less clear career ladder. The upside is that it’s possible in this world to change your income — to hustle and set up a side business, or freelance, or otherwise change your circumstances.

Spend and scrimp

What’s the best money advice we can give to our kids and how do we teach them to be financially responsible?

Vanderkam: Figure out what matters to you, and spend big on those things or experiences in order to buy happiness. Scrimp on everything else. If you want to work for a few years, save up and then travel the world. Or, buy a tiny house, but fill it with expensive art.

What do you want parents today to understand about money?

Vanderkam: Money is a tool. We can use it to help build the lives we want, or we can use it ineffectively. The choice is up to us.

Read more on money and kids

How to teach your kids about saving money and budgets
Teaching your kids about money and debt
Teaching kids the importance of saving money