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Money habits are set by age 7. Teach your kids the value of a dollar now

More money doesn’t always equal more happiness. And now we have the research to prove it.

In a 2018 study, a group of psychologists at Purdue University looked at correlations between how people feel about their lives, and how much money they earn. The unexpected takeaway: At a certain point, more money stops making people happier.

In fact, it does the opposite. Adults from the U.S. and Canada who reported the greatest life satisfaction earned $105,000 a year. (Solidly in the upper-income tier for the U.S., but not exactly a tycoon’s salary.) Once you pass that threshold, though, the good feelings start to decline. And worry rises again.

Obviously, the worries of the very wealthy and the middle class are different. But when it comes to their children’s money skills, their concerns can sound quite similar. As I traveled from public libraries to posh private schools, talking about financial literacy on a recent book tour, I found something striking: whether they had a great deal of money or were somewhere in the middle, families shared many of the same concerns about passing good money habits along to their kids. (Of course, families struggling to cover the basics face much more serious challenges.)

Here are just a few common questions that parents across the country — and across income levels — want answered.

When should I start talking to my kid about money?

The short answer is now. By age 3, your kids can grasp basic money concepts. By age 7, many of their money habits are already set. That doesn’t mean you throw in the towel after first grade. Start wringing money lessons out of everyday life.

Video by Above Average Productions and BethKobliner.com

Take a publishing friend of mine, who was in the market for a new car. He worried when his 10-year-old daughter asked to tag along — he didn’t want her to get the mistaken impression that they were rich just because he was shopping for such a big-ticket item. It turned out to be the best learning experience she could get. Car shopping offered the perfect excuse to discuss smart ways to save, how to see through clever marketing, how to negotiate prices, and how to avoid the pitfalls of loans. These are lessons that have a real impact on kids, whether you’re looking for a used Toyota or brand-new Tesla.

As online banking and bill-paying become ubiquitous, real-world lessons like this are harder to come by. I still look back fondly on Sunday evenings at the Kobliner house in Queens. We’d gather around the table to watch our mom and dad fill out checks to pay the bills, balance their checkbooks, and then seal the envelopes. (I know it sounds dull, but for a kid like me, it was better than Monopoly.) Today, parents of all income levels have to put in more effort to show their kids financial tasks that take just a few taps on a screen. One classic to cling to: opening a bank savings account. As soon as your kid is old enough to have money, head to a bricks-and-mortar bank and open one. Make sure to find a bank or credit union with a no-fee account.

How do I teach the value of dollar?

Two parents in very different circumstances asked me this same question. One was a Google executive in New York City, who said, “I’m worried that my kids are growing up with a lot more money than I had. How do I keep them from becoming entitled?” The second was a single mom from Los Angeles who approached me after a book talk. She explained that her son was asking her for $150 jeans so that he could fit in with the cool crowd, and she didn’t know what to do.

Paul Solman reported in March 2017 on personal finance guru Beth Kobliner and her lessons on teaching money and key economic concepts early.

To both parents I gave the same answer: Start talking about money values. The same way you’d teach your kid to tell the truth or be kind to others, make sure they know what matters to your family when it comes to money. Yes, we could afford fancy jeans, but they’re not a priority for us.

When it comes to day-to-day lessons, the best way to teach your kids the value of a dollar is to give them actual dollars. Use cash with your kids. When my daughter was 13, she wanted to go shopping with friends for back-to-school clothes. The other parents gave their girls a credit or debit card and imposed a spending limit. Me? I embarrassed my daughter by handing her $50…in cash. The reason: I knew that when she got to the checkout line with more than $50 worth of merchandise, she’d have to make hard choices and put something back.

Cash tells kids that money is finite, unlike plastic. A famous study out of MIT showed that people will spend twice as much money on the same item when they pay with credit cards instead of cash. While plastic can seem like play money, cash feels all too real.

Additionally, sometimes it’s what you don’t do for your kid that counts. I will never forget the brave audience member at an event who raised her hand and asked me the following question: “Should I get my son a Platinum Amex card? All his friends use theirs to get into first-class airport lounges when they travel.” As a personal finance author, questions don’t get any easier than this. “No,” I said. “Next question?” Always remember, you’re the parent. You set the rules. And the rules will determine how your kid values money in the future.

How do I convince my kid that college is worth it?

Whether your kid can count on a sizable inheritance or your family is living pay period to pay period, a college degree is a must. Along with the intangible life skills you get from those formative years on campus, college comes with a bankable payout: A Georgetown University study found that, on average, college graduates make a million dollars more over a lifetime than people who stop at high school.

Recently, a Bronx nonprofit asked me to speak to a group of high schoolers whose families were struggling financially. The participants were (rightly) worried about taking on too much college debt. Here’s what I told them: even when you subtract tuition, lost earnings while enrolled, and other factors, an average college grad will still take in $300,000 more than a peer with only a high school diploma.

And while soaring tuitions are a serious worry, free college programs of one kind or another have sprung up in more than 20 states. My own home state, New York, boasts one of the most comprehensive efforts. The Excelsior Scholarship program guarantees that students at public institutions attend tuition-free if their family earns under $110,000 a year.

In Silicon Valley, the reason to skirt college was a little different. When I asked a group of parents there if it’s true that kids are foregoing a college degree because they’re sure they’ll be the next Mark Zuckerberg, the answer was a resounding, unapologetic yes.

The truth is that even in this STEM-centric era, so-called “soft skills” acquired from a liberal arts education are more valuable than ever. In a 2013 study, Google wanted to sort out what skills made for a good hire. Of the eight most important traits its best employees demonstrated, the top seven involved soft skills like communication, critical thinking, and empathy. Finishing last? STEM (science, technology, engineering and math). This trend is economy-wide. A 2017 study from the National Bureau of Economic Research concluded that “between 1980 and 2012, jobs requiring high levels of social interaction grew by nearly 12 percentage points.” Meanwhile, math-intensive jobs were on the decline.

In an age when many analytical careers are being co-opted by artificial intelligence, or AI, a liberal arts education can give your kid an edge. As an English professor friend of mine often says, reading Thomas Pynchon can be as valuable as learning to code in Python.