MW Kids need hands-on money lessons. Why not let them 'FAFO'?

By Venessa Wong

Parenting styles - ranging from 'F- Around and Find Out' to 'gentle parenting' - can have long-term consequences for how children eventually manage money, financial therapists tell MarketWatch. Here's how they stack up.

When Cara Macksoud's five children were very young - ranging in age from 5 to 10 - she simultaneously deposited about $250 into brokerage accounts for each of them and started allowing her grade-school-aged children to buy stocks.

"The best thing you can do is open up an Acorns, Stash or any little account where you feel comfortable; put in $20, $50, $100, whatever your number is, a small amount that you are 100% okay with losing; and let the kid just start to play," Macksoud told MarketWatch, referring to the popular investing apps.

Her oldest child bought $25 of JetBlue's stock $(JBLU)$ and, to this day, hasn't invested the rest. Her second child bought Apple $(AAPL)$ and Microsoft $(MSFT)$ shares. Her third child bought Scientific Games (now Light & Wonder (LNW)) and Visa (V) shares. Her fourth bought Zoom (ZM) and Disney $(DIS)$ shares. And her youngest bought shares of Invitation Homes (INVH), Ford $(F)$ and Sony $(SONY)$.

Macksoud, a former trader who's now a financial counselor and financial-behavior specialist, doesn't explicitly describe her parenting style as "F- Around and Find Out," or "FAFO" - an approach that allows children to experience the natural consequences of their actions, particularly if they are not listening to their parents - but described FAFO as a "great tactic."

FAFO parenting, a concept that has gained visibility on social media and was recently highlighted in the Wall Street Journal, has grown more popular in reaction to highly engaged "gentle parenting." Parents often consider these various approaches in the context of a child's emotional development and how that can impact, say, behavior or academic performance. Yet they should also recognize that parenting styles also have long-term consequences for how children eventually relate to money, financial therapists told MarketWatch.

Macksoud hopes exposing her children to small-stakes but real-world investing at a young age will not only teach them financial literacy, but also help them develop emotional tools for long-term financial resilience.

A parent's role is to set their children "off into the world as financially sensible adults. But [many] don't do that; they indulge kids," leading them to have "no idea" how to handle money once they're independent, Macksoud said. At least when kids are little, the money mistakes they make are "manageable," she said - noting, for instance, that earlier this year, her daughter missed a car payment.

Four main parenting styles

In some circles today, parenting approaches have become an extremely intentional and highly scrutinized practice. There are four broad styles of parenting, according to mental-health experts: uninvolved (undemanding with little support or guidance); permissive (loving with few boundaries and few expectations); authoritative (high expectations and sensitivity to children's opinions); and authoritarian (high expectations and strict punishment).

FAFO parenting, which some describe as a subgenre of authoritative parenting, incorporates elements of other styles - including authoritarian and uninvolved - to varying degrees, Jasmine Ramirez, a financial therapist and founder of the Honest Hour therapy practice, told MarketWatch.

'My first $100, I went and bought a $100 pair of shoes. I did not eat lunch that entire month.'Travis Sholin, Keystone Financial Services

Researchers have also described countless other subtypes - including gentle parenting (focusing on empathy and emotional exposition and developing boundaries, while avoiding punishment and reward), "snowplow parenting" (clearing hurdles for children so they don't have to struggle) and "free-range parenting" (giving kids a high level of independence).

In a 2023 YouGov survey, most parents identified as authoritative or gentle parents.

How parenting styles can impact a child's relationship with money

For most children, the biggest influence will come from observing their parents' own relationship with money, regardless of which conceptual approach their parents take.

"We have to talk about ... what it is that we observe of our parents when it comes to money behaviors that we may adopt, and how we engage with money as a result of these internalized patterns," Rahkim Sabree, a financial therapist and author of the upcoming book "Overcoming Financial Trauma," told MarketWatch.

Financial therapists also agreed on the importance of having conversations with children about saving, investing and spending - not just once, but consistently.

While 93% of parents surveyed by NerdWallet (NRDS) this year said they were teaching their kids about money, only 37% said they discussed family finances with their children and just 31% required them to save a share of the money they received.

"We send kids to soccer practice, T-ball and gymnastics" as forms of enrichment, Macksoud noted. "Why are we so willing to go out of our way and put that in our schedule and bend over backwards in rain, sleet and hail to get our kid to practice, but we don't practice financial management with our children?"

Authoritarian parents

Ramirez, the financial therapist, said how a person was parented has a clear impact on their later relationship with their finances.

For instance, she said, many of her Latino clients who experienced "chancla parenting" - "chancla" means "sandal" in Spanish, a reference to corporal punishment as a form of discipline - feel they need an authority figure to discipline them about their money habits, Ramirez told MarketWatch.

"When there's nobody with the proverbial 'chancla' telling them, 'If you put it on your credit card and don't have the money for it, I'm going to do this to you,' they have a difficult time staying structured with their finances," she said. It can result in "a lack of self-confidence when it comes to financial planning."

Ramirez sees her role as being "more flexible and warm, to give you the self-confidence to do this on your own." These clients "are really looking for me to kind of be an accountability coach," as authoritarian parents often "lay out the steps for you, without giving you the confidence or critical thinking to figure out how to act in a situation," she said.

Permissive and uninvolved parents

Meanwhile, children of permissive or uninvolved parents may come to Ramirez's practice for help, but can have "an initial [reaction] of, 'Don't tell me what to do - I don't need your input on this,'" because they were raised with few boundaries, she said.

Ramirez noted that while some children of permissive parents struggle with financial rules and impulse control - saying they would rather try to make more money than curb their spending - they often are more interested in being supported than those whose parents were uninvolved.

Authoritative parents

Children of authoritative parents, who combine high expectations with sensitivity to a child's needs, may experience "many benefits," Ramirez said.

"There's opportunity for slip-ups - that's a part of it. You might make a mistake along the way, but with this type of parenting, it's also allowing you to figure out how to correct it," she said. "You build the self-confidence to be able to bounce back from it."

'How do my kids learn that everything isn't handed to them?'A question higher-net-worth clients often ask, according to financial therapist Jasmine Ramirez

FAFO-authoritative parents

Sabree, the financial therapist and author, said FAFO parenting seems like an "overcorrection" in response to gentle parenting. He worries that when it comes to finances, not providing enough guidance to children "who depend on the parent to educate them" can be detrimental in their early income-earning years, and also damage a child's relationship with the parent.

A child may later feel "the person that I was supposed to trust most in the world, that was supposed to protect me most in the world, allowed me to make these mistakes when they had the ability to interject or correct me," Sabree said. "I think there's an aspect of negligence."

The key is knowing when to get involved and use mistakes as teaching opportunities, as authoritative parents might, so children develop critical-thinking skills and don't feel uncared for by their parents, Ramirez said.

She noted the question of how to support children when they make financial mistakes is a question her higher-net-worth clients often ask. "'How do my kids learn that everything isn't handed to them?' Those things can be taught in a more curated way" than simply letting them "f- around," Ramirez said. "There are different ways to teach without putting your kid through [serious] financial hardship."

While this approach requires parents to have financial literacy themselves, Macksoud said it is more important to focus on simply talking to kids about money, including when they've made mistakes, than to try to hammer in technical knowledge about interest rates and economic data, which can be overwhelming. She said she tells her children: "I'm not going to undo this mess for you, but I'm here to brainstorm and listen."

To keep them from losing confidence, Macksoud reminds them that there will be growing pains - and that at the end of the day, unless they make a truly enormous financial error, "you're not going to be homeless."

How FAFO parenting can work for kids' money

"There's an old adage that you either learn good money habits from your family or you learn the hard way, and we definitely have seen that countless times," said Travis Sholin, a financial planner with Keystone Financial Services, a firm that also provides financial-therapy services.

MW Kids need hands-on money lessons. Why not let them 'FAFO'?

By Venessa Wong

Parenting styles - ranging from 'F- Around and Find Out' to 'gentle parenting' - can have long-term consequences for how children eventually manage money, financial therapists tell MarketWatch. Here's how they stack up.

When Cara Macksoud's five children were very young - ranging in age from 5 to 10 - she simultaneously deposited about $250 into brokerage accounts for each of them and started allowing her grade-school-aged children to buy stocks.

"The best thing you can do is open up an Acorns, Stash or any little account where you feel comfortable; put in $20, $50, $100, whatever your number is, a small amount that you are 100% okay with losing; and let the kid just start to play," Macksoud told MarketWatch, referring to the popular investing apps.

Her oldest child bought $25 of JetBlue's stock (JBLU) and, to this day, hasn't invested the rest. Her second child bought Apple (AAPL) and Microsoft (MSFT) shares. Her third child bought Scientific Games (now Light & Wonder (LNW)) and Visa (V) shares. Her fourth bought Zoom (ZM) and Disney (DIS) shares. And her youngest bought shares of Invitation Homes (INVH), Ford (F) and Sony (SONY).

Macksoud, a former trader who's now a financial counselor and financial-behavior specialist, doesn't explicitly describe her parenting style as "F- Around and Find Out," or "FAFO" - an approach that allows children to experience the natural consequences of their actions, particularly if they are not listening to their parents - but described FAFO as a "great tactic."

FAFO parenting, a concept that has gained visibility on social media and was recently highlighted in the Wall Street Journal, has grown more popular in reaction to highly engaged "gentle parenting." Parents often consider these various approaches in the context of a child's emotional development and how that can impact, say, behavior or academic performance. Yet they should also recognize that parenting styles also have long-term consequences for how children eventually relate to money, financial therapists told MarketWatch.

Macksoud hopes exposing her children to small-stakes but real-world investing at a young age will not only teach them financial literacy, but also help them develop emotional tools for long-term financial resilience.

A parent's role is to set their children "off into the world as financially sensible adults. But [many] don't do that; they indulge kids," leading them to have "no idea" how to handle money once they're independent, Macksoud said. At least when kids are little, the money mistakes they make are "manageable," she said - noting, for instance, that earlier this year, her daughter missed a car payment.

Four main parenting styles

In some circles today, parenting approaches have become an extremely intentional and highly scrutinized practice. There are four broad styles of parenting, according to mental-health experts: uninvolved (undemanding with little support or guidance); permissive (loving with few boundaries and few expectations); authoritative (high expectations and sensitivity to children's opinions); and authoritarian (high expectations and strict punishment).

FAFO parenting, which some describe as a subgenre of authoritative parenting, incorporates elements of other styles - including authoritarian and uninvolved - to varying degrees, Jasmine Ramirez, a financial therapist and founder of the Honest Hour therapy practice, told MarketWatch.

'My first $100, I went and bought a $100 pair of shoes. I did not eat lunch that entire month.'Travis Sholin, Keystone Financial Services

Researchers have also described countless other subtypes - including gentle parenting (focusing on empathy and emotional exposition and developing boundaries, while avoiding punishment and reward), "snowplow parenting" (clearing hurdles for children so they don't have to struggle) and "free-range parenting" (giving kids a high level of independence).

In a 2023 YouGov survey, most parents identified as authoritative or gentle parents.

How parenting styles can impact a child's relationship with money

For most children, the biggest influence will come from observing their parents' own relationship with money, regardless of which conceptual approach their parents take.

"We have to talk about ... what it is that we observe of our parents when it comes to money behaviors that we may adopt, and how we engage with money as a result of these internalized patterns," Rahkim Sabree, a financial therapist and author of the upcoming book "Overcoming Financial Trauma," told MarketWatch.

Financial therapists also agreed on the importance of having conversations with children about saving, investing and spending - not just once, but consistently.

While 93% of parents surveyed by NerdWallet (NRDS) this year said they were teaching their kids about money, only 37% said they discussed family finances with their children and just 31% required them to save a share of the money they received.

"We send kids to soccer practice, T-ball and gymnastics" as forms of enrichment, Macksoud noted. "Why are we so willing to go out of our way and put that in our schedule and bend over backwards in rain, sleet and hail to get our kid to practice, but we don't practice financial management with our children?"

Authoritarian parents

Ramirez, the financial therapist, said how a person was parented has a clear impact on their later relationship with their finances.

For instance, she said, many of her Latino clients who experienced "chancla parenting" - "chancla" means "sandal" in Spanish, a reference to corporal punishment as a form of discipline - feel they need an authority figure to discipline them about their money habits, Ramirez told MarketWatch.

"When there's nobody with the proverbial 'chancla' telling them, 'If you put it on your credit card and don't have the money for it, I'm going to do this to you,' they have a difficult time staying structured with their finances," she said. It can result in "a lack of self-confidence when it comes to financial planning."

Ramirez sees her role as being "more flexible and warm, to give you the self-confidence to do this on your own." These clients "are really looking for me to kind of be an accountability coach," as authoritarian parents often "lay out the steps for you, without giving you the confidence or critical thinking to figure out how to act in a situation," she said.

Permissive and uninvolved parents

Meanwhile, children of permissive or uninvolved parents may come to Ramirez's practice for help, but can have "an initial [reaction] of, 'Don't tell me what to do - I don't need your input on this,'" because they were raised with few boundaries, she said.

Ramirez noted that while some children of permissive parents struggle with financial rules and impulse control - saying they would rather try to make more money than curb their spending - they often are more interested in being supported than those whose parents were uninvolved.

Authoritative parents

Children of authoritative parents, who combine high expectations with sensitivity to a child's needs, may experience "many benefits," Ramirez said.

"There's opportunity for slip-ups - that's a part of it. You might make a mistake along the way, but with this type of parenting, it's also allowing you to figure out how to correct it," she said. "You build the self-confidence to be able to bounce back from it."

'How do my kids learn that everything isn't handed to them?'A question higher-net-worth clients often ask, according to financial therapist Jasmine Ramirez

FAFO-authoritative parents

Sabree, the financial therapist and author, said FAFO parenting seems like an "overcorrection" in response to gentle parenting. He worries that when it comes to finances, not providing enough guidance to children "who depend on the parent to educate them" can be detrimental in their early income-earning years, and also damage a child's relationship with the parent.

A child may later feel "the person that I was supposed to trust most in the world, that was supposed to protect me most in the world, allowed me to make these mistakes when they had the ability to interject or correct me," Sabree said. "I think there's an aspect of negligence."

The key is knowing when to get involved and use mistakes as teaching opportunities, as authoritative parents might, so children develop critical-thinking skills and don't feel uncared for by their parents, Ramirez said.

She noted the question of how to support children when they make financial mistakes is a question her higher-net-worth clients often ask. "'How do my kids learn that everything isn't handed to them?' Those things can be taught in a more curated way" than simply letting them "f- around," Ramirez said. "There are different ways to teach without putting your kid through [serious] financial hardship."

While this approach requires parents to have financial literacy themselves, Macksoud said it is more important to focus on simply talking to kids about money, including when they've made mistakes, than to try to hammer in technical knowledge about interest rates and economic data, which can be overwhelming. She said she tells her children: "I'm not going to undo this mess for you, but I'm here to brainstorm and listen."

To keep them from losing confidence, Macksoud reminds them that there will be growing pains - and that at the end of the day, unless they make a truly enormous financial error, "you're not going to be homeless."

How FAFO parenting can work for kids' money

"There's an old adage that you either learn good money habits from your family or you learn the hard way, and we definitely have seen that countless times," said Travis Sholin, a financial planner with Keystone Financial Services, a firm that also provides financial-therapy services.

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MW Kids need hands-on money lessons. Why not let -2-

Starting when he was age 12, Sholin's mother gave him $100 each month to budget, which included saving for the future and spending on necessities like lunch. "My first $100, I went and bought a $100 pair of shoes. I did not eat lunch that entire month," he recalled. "I had to scrounge off my friends for a month, and I did not like doing that. ... I learned how to budget my money real fast."

In high school, Sholin started his own landscaping business. "Since I knew how to budget from middle school, I was able to pretty much save all my income throughout high school, max out my Roth IRA [and] do all those fun things as a kid that my peers didn't even know about," he said, noting that his mother worked in wealth management.

Sholin said a FAFO-esque approach to budgeting and investing can be extremely effective, "as long as education surrounds it."

"We don't teach this stuff in school, which is just silly," he said. "It's really the most important thing you do in life - managing money - regardless of what career path or anything you take."

He is already exposing the older of his own four children, who are between the ages of 1 and 6, to investing concepts. His daughter tells him what stocks she is interested in (Disney, for instance); they discuss whether it is a good price; and she gets to review her statements and see if she has made money. "We make it clear it is for her future and she can't access it, but she likes to watch it," he said.

As a financial planner, Sholin has all of his clients take this approach with their own children. Starting when the kids are around sixth grade, the parents give them a budget of $200 to $300 a month - with one-third allocated for savings, and the rest for all of the children's personal-spending needs and wants.

"We've found great success," he said, "and their kids just grew up to be fantastic with money."

If you're just starting out on your money or career journey and have questions about how to navigate your finances, we want to hear from you. Write to Dollar Signs, MarketWatch's new advice column, at dollarsigns@marketwatch.com.

-Venessa Wong

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