'Uh-Oh, My Child Has a Rich Friend' - Money Magazine

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Social currency isn't worth putting yourself through financial strain.

Fall is a time for firsts—first days at a new school, first time meeting new neighbors after a summer move, the start of a new job. As a result, it can also be a time when your child makes new friends.

That’s all well and good. But every so often, one of the new friends appears to come from a family wealthier than yours, and your child’s reports from school or the new job start to fill with reports of this person’s masses of possessions or the places they have traveled. And in response, your child, whatever his or her age, may start feeling envious, inadequate, or both.

Before you know it, your child may look for ways to seem just as well off as the new pal. In large part, they are seeking a sense of belonging, says Allison Pugh, an associate professor of sociology at the University of Virginia. “Children collect or confer dignity among themselves, according to their (shifting) consensus about what sort of objects or experiences are supposed to count for it,” she wrote in Longing and Belonging: Parents, Children, and Consumer Culture.

But that creates a dilemma for parents. Is it more helpful to supply your child with a few extra goodies so he or she doesn’t lose social currency, even if it puts your budget off kilter? Is it time for a lecture about family finances? Or is there another way?

Certainly, shelling out for a pair of upscale jeans or a new phone will make your child feel better for a while. But unless you expect the social situation to change soon, it’s a risky approach, said Laura Levine, chief executive of the Jump$tart Coalition for Personal Financial Literacy.

“Going outside your budget may solve it for a very short time,” she said. “But what will happen is if you are living in that environment, there are just going to be more needs and more needs and pretty soon you the parent will be in over your head.”

Read: Dad Gives 6-Year-Old Fantastic Corporate Response to Allowance Advance

Instead, Levine suggested starting with a reality check. Remind yourself and your child that appearances can be deceiving. One case in point: when Visa in 2013 surveyed parents about tooth fairy gifts, families with incomes between $40,000 and $50,000 were the most generous.

You can also use the situation as an opportunity to talk about money choices, Levine said. Your family may be diligently squirreling away money for retirement or college—a prudent move with costs rising faster than inflation and college tuition and fees now averaging $9,410 in-state and a whopping $32,405 out-of-state. Other families, though, may be bigger spenders on things that provide immediate gratification. You can explain to your child that you are choosing to save so they can get a college education with minimal financial stress and you believe that is more important than fancy new headphones.

Most important, be honest. Maybe your new neighborhood is wealthier than your old one, or your child’s new school may truly have wealthier students. It’s perfectly OK to acknowledge that, and explain why that is the case. You may have moved into an affluent neighborhood because the schools are stronger, for example.

Alternatively, your family may be experiencing a temporary financial crunch, and that is what your child is trying to counteract. You can explain the situation in terms that your child will understand: “Mom lost her job so we are being extra careful about our spending,” or “We have to replace our car so we are cutting back on other things.” If you are in this situation, make clear to your child that while this is not a time for extra, you will always make sure that they have everything they need.

When you have this talk with you child, consider suggesting ways your child can earn money they can decide how to spend. Depending on their age, they could babysit, shovel neighbors’ sidewalks in the winter, mow lawns, or care for another family’s pet while they are away, just for starters.

Read: A Simple Rule for Raising Unspoiled Kids

Envy is no joke. Dr. Frank Ninivaggi, an assistant clinical professor at Yale-New Haven Hospital, called it “exquisitely irrational, intolerably agonizing, eerily silent, resistant to straight-forward change, and self-undermining” in his book Biomental Child Development: Perspectives on Psychology and Parenting.

But you can use the example of seemingly wealthy friends to teach your child some crucial money lessons for life—and remind yourself in the process. After all, kids are hardly the only people who want to keep up with the Joneses.

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