The Financial Life Skills Blog for Families by Nancy Phillips

Children's Financial Education - Why Spoiling Hurts Your Kids

Posted by Nancy Phillips on Mon, Mar 28, 2011

Nancy Phillips, author Zela Wela KidsHow you live your life is fundamental to what you will teach your children about money and it will create their “blueprint” or programming for life.

Nothing demonstrates a point more clearly than a personal story and this one gives a clear picture of a “wealthy” man’s feelings of emptiness and confusion. This thirty-something gentleman explained, “I know I can’t ask people to feel sorry for me because I grew up in a wealthy family, but I have no idea how to hold onto money. I spend what I make and the stuff I buy doesn’t mean anything, it’s just what I’m used to doing. I have no idea how to change where I’m at.” The expression in his eyes was not only one of unhappiness but that of a person who is feeling “lost.”

Unhappiness is often due to a lack of self-discipline, especially when it comes to money. Learning to be personally responsible for our actions and thus our lives is critical for everyone, and it’s much easier when the lessons start in childhood.

Kids and Money

The Effects of Overindulgence

Don’t feel guilty about saying “no,” in many ways, you may be doing your child a big favor. You’ll be surprised how resourceful they can be when they know it’s up to them to come up with the moolah. Plus, it has been shown that delayed gratification is a very important part of a person’s emotional development and long-term happiness.

When a person desires something and knows they have to figure out how to come by it on their own, it kicks off a series of questions and ultimately leads to setting a goal and taking action to achieve that goal. If the person is simply given the item, none of these problem solving or actions steps take place. Neither does the self-esteem which comes with achieving a personal goal. Dr. Bredehoft at Concordia University has done a great deal of research on this. His conclusion is simply: if you want your children to be self centered greedy adults, overindulge them. If you want them to grow up to be caring, thoughtful and happy adults, don’t overindulge them.


Spoiling and overindulgence can prevent your children from learning numerous vital lessons including:

  1. Understanding family values – your child’s behaviour and ultimately their purpose will be consistent with their values. This will shape their life goals. Are you clearly communicating your values through your daily actions?

  2.  The increase in self-esteem and confidence that comes with setting and achieving goals. Learning how to figure out solutions, be resourceful and truly “think through” a challenging situation is critical for creating this capability in the brain.

  3. Learning the self-discipline and self control necessary for saving and making wise spending decisions early on. Once a bad habit is “learned” by the brain, it is difficult to change.

  4. Taking responsibility for their own actions and understanding the long-term consequences of their choices.

These lessons are the beginning steps of “life management.”

 How to help your child create good money habits

Like I discussed with the young man above, learning to manage your money wisely can bring relief, hope and excitement because you are able to physically see how your dreams and plans can become a reality. He also agreed it would be helpful for him to spend less time shopping and more time outdoors and with friends and family.

 The Give *Invest*Save*Spend (GISS) Method of Money Management

This system is powerful in its effectiveness and a wonderful place to start, especially with children. Why? Because it’s simple and fun. It incorporates counting, goal setting, visualizing, and most importantly for learning, experience and repetition. When your child receives "income," sit down with them and help them divide their coins and dollars into these four categories:

Give (10%)

Philanthropy is known to increase inner happiness and self-esteem. Giving is one of the greatest joys in life and a powerful lesson for children. Helping others not only teaches your children empathy and how to be kind to others, it also helps them learn to appreciate their own lifestyle and develop a sense of gratitude.This is a chance for you to talk about how they can make a difference in the world, and I can almost guarantee you will be inspired by their words!

Invest (15%)

Investing is essential for people to ensure they will have a secure income and good lifestyle as they get older. Many people make the mistake of just having “savings” and then spend the funds on expensive material items leaving nothing for them to live on in retirement. Investing is an abstract concept for really young children but can be learned about gradually. Initially this segment can be explained as the money they grow and use when they are older.


Save (25%)

It is critical that children and adults learn to set and achieve goals and that goes for the financial part of their lives as well. As a child works toward their goal, whether it’s saving for a bike or a toy of some kind, they learn the steps to achieving their goals. When they do achieve the goal, they are proud and feel confident and excited to set a new goal. Parents need to give their children the opportunity to set and achieve small goals so they are inspired and feel confident to pursue their life goals.


Spend (50%)

This is the money for expenses if you’re an adult and basic spending money for treats and so on for children. Once a child uses their own money for purchases they begin to consider the cost and value of things. They will learn more about needs and wants, buyer’s remorse and the feeling of "running out." These lessons are far better learned at a young age with small amounts of money than in college when it may lead to thousands of dollars of credit card debt.

 The Benefit for You

The “GISS System” of managing money is a wonderful way to get your children started on the path of learning to handle their money wisely. It will give you the opportunity to discuss values, why they are saving for something special, what charity they would like to help and many more meaningful discussions. By having their own money to spend, it will not only cut down on their requests to you for more money, they will begin to learn age-appropriate responsibility and self-discipline, both of which are critical for long-term financial well being in adulthood. The parents benefit from their children's lessons as well! See this mom's story on how the GISS system helped her daughter.

All the best as you travel this path of financial education with your children.

Zela Wela Kids Build a BankThe first story book in the Zela Wela Kids Build a Bank series teaches children more about the “GISS System” and how to build their own “GISS” bank at home which they can then use. If you like, go ahead and send me a picture of your child’s bank so we can all see their great work!


Tags: overindulgence, the risks of spoiling, overspending

Help your teen daughters to become financially literate

Posted by Nancy Phillips on Fri, Oct 01, 2010

Today I was speaking with a lady who wanted to get her fourteen year old daughter on the right track in regards to handling money and financial issues. We talked about some of the key topics to begin discussing right away as well as some of the habits which should be developed in the next couple of years. In June I wrote a short article on the topic so I’ve included the link at the bottom. I hope you find the information useful.

Key financial concepts for your teen daughters:

1. You don’t need to be a math or investing genius to build wealth.

2. Divide your earnings into Give, Invest, Save and Spend categories as you receive your money. Simply said, doing this will help you bring wealth into all areas of your life.

3. Keep track of what you spend; this will significantly enhance your rate of success as you become more aware of where your money goes (this is the beginning of understanding your cash flow, a critical factor for long term financial success.)

4. Keep your own financial identity whether you are single or in a relationship. Establish a credit rating and keep a good score throughout your life, this is essential.

5. Research shows that true millionaires care more about financial freedom and the positive benefits it affords (such as spending more time with their families) than they do about living a glittery, high spending lifestyle. The vast majority of high net worth individuals are not hyper-consumers, as demonstrated by Dr. Stanley in his book The Millionaire Next Door (a great read for teens.)

Read entire article

Tags: children and money, how to handle money, children’s books about money, financial books for children, wants and needs, children and saving money, financial education, children's financial literacy, children's books about money, children's finance, overindulgence, Invest, gratitude, Give, value of money, The Millionaire Next Door, credit card debt

Financial Literacy can help drive Innovation in our Society

Posted by Nancy Phillips on Mon, Sep 13, 2010

Many of the great advances in our society have come from a basis of passion and the desire to answer a question. Edison, Ford, Einstein, Newton, Gates and Jobs. All were inspired and driven, and willing to create a new path.

How do we help our children get to a point where they have the tools they need and inspiration from within to create their own path? History seems to indicate that a major factor would be encouraging resourcefulness and the understanding of how to solve real life problems. This allows for children to grow up capable of dealing with challenges (which entrepreneurs face frequently), and they learn from their experiences to elevate their level of thinking. Nancy Koehn, a professor of business history at Harvard Business School says “In the biographies of entrepreneurs, you see they were all testing the water when they were young.”

A number of weeks back I read an article in Inc. Magazine that discussed the fact “we need entrepreneurs, not just MBA’s.” I would agree that our society needs to encourage young people to be innovative and creative and provide them the skills to allow for this no matter what field they are interested in.  In the long term this will create new jobs; new ways of solving current environmental and economic challenges and an environment which allows our youth to pursue work that they are truly passionate about as opposed to taking salaried positions just to pay the bills.

One of the best ways to stimulate critical thinking skills involves approaching situations and thinking up numerous different “answers” or solutions. Aiming for at least twenty is a good way to get past our “habitual” thinking patterns and really begin to get creative. A development team I sat on in the orthopedic field had a minimum criteria of fifty ideas during an engineering brainstorming session before we started discussing each concept individually.

Let’s take this thought and relate it to financial education for children. The same approach directly applies, which is why it is so important for children not to be given everything they ask for. Overindulgence has been proven to be damaging to a child because it takes away opportunities for children to really think about how they can achieve a desired goal. 

As the Inc. article discusses, the average debt for graduating seniors is over $20,000. If students don’t have hands on experience making wise money decisions, they will potentially be dealing with disaster when they graduate. Will they have the ability and courage to consider launching a start up company if they want to? Or, will they feel they have no choice but to join the “rat race” as financial author Robert Kiyosaki calls it, and get a high paying salary?

Food for thought but the bottom line for parents is, I believe, for us to give our children plenty of opportunities to think about and talk about solving real life challenges both financial and non- financial.


Tags: children and money, financial education, innovation, passion, overindulgence, financial literacy, Robert Kiyosaki, Bill Gates, Steve Jobs, entrepreneurship