Dollars And Sense

"Puh-leeze buy me this, mom!" Every parent has heard the plaintive wail of a child begging for one more toy, outfit or serving of fast food. In his book Prodigal Sons & Material Girls: How Not to Be Your Child's ATM (Wiley), financial adviser Nathan Dungan, based in Minneapolis, Minn., offers helpful advice on ways beleaguered parents can respond. Confront the issue head on, he says. "Consumer-product companies are playing for keeps in shaping the financial habits of these young people." TIME recently spoke with Dungan.

When did kids get so demanding, financially speaking?

It's been evolving over time. My grandparents grew up in a generation of gratitude--the Depression. They had so little. Today the shift is to entitlement. I think you can pinpoint this to the early '90s, the last recession. What happened is that companies were looking at what sold during this time period. What they realized was that things like soft drinks, fast food, sneakers, chewing gum, Barbie dolls flourished. It was the coming of age of Generation Y, born between 1979 and 1994. And the [companies] said, Hmm, here's a new opportunity.

You describe the so-called "time-guilt-money relationship." How did that arise?

It was also at that time that parents were becoming exceptionally busy. Their schedules were just filled to the brim each and every day. Along with that came guilt: "I don't have enough time to spend with my kid because I'm working so much because we're trying to get ahead, and gosh, do I feel guilty about that." What was the logical way they were told--or their kids told them--they could assuage the guilt? Through money and stuff.

What if you have kids who constantly nag you to buy them things?

Adopt a system for teaching your kids. I'm partial to what I call the share-save-spend philosophy. Ninety-nine percent of the messages kids hear about money are on how to spend it. So I put share up front intentionally to help families and young people look into the world and say, What are the needs of the world out here? Maybe it's the neighborhood or a religious organization. When you share, I think it also opens up a young person to be more interested and curious about saving. When you're more grateful for what you have, all of a sudden saving becomes a more important value. By putting spending last in the formula, what I'm hoping is that it reinforces the need to be diligent about maintaining those healthy financial habits.

At what age should parents start talking to their kids about money?

As soon as kids say, "I want." That's an indicator that there's some message that has pierced through to them. When they start school, you want to be in a rhythm, because that's when the peer pressure will start.

Do you believe in allowances?

I love allowances! Unfortunately, only about 50% of families today in the U.S. actively use an allowance. I think that allowances are one of the great secrets in teaching and training young people to have healthy financial habits and boundaries. It's one of the best tools for minimizing the nag factor.

What if parents can afford luxuries? Is there anything wrong with giving them to their children?