Kids and Money
For those of you wondering the best way to teach kids about money, I highly recommend the book “The opposite of spoiled” by Ron Lieber. It’s a thoughtful approach to guide parents about the importance of talking to kids about money, and demystifying it. By doing so, we can teach kids how to handle money, which is such an important life skill!
My takeaways from the book were as follows:
-for kids to learn about money, they have to have some to work with, and we have to talk to them and teach them what we know, and be willing to learn along with them
-start an allowance you feel is reasonable at an age when you feel they are responsible enough to manage it (I think around ages 8-10 is probably about right for most kids)
-teach them to think about money as an opportunity to spend, save, and give
-teach them how you handle money (be open and specific) - these conversations should be held with kids who are old enough and mature enough to respect the private nature of a family’s financial picture
For my eldest, we started an allowance at age 8. He got $5 a week, and I kept track of it. Since I don’t usually have cash, I kept a tally in an allowance app. This way, when he wanted a new toy or game, I would check his balance and he would decide whether he wanted to spend his money on that item.
In addition, on his 8th birthday I also started to secretly set money aside in a savings account for him. I did this online with a few clicks with my bank by setting a $5 weekly withdrawal to the account from my checking account. Since he didn’t know about it, he never touched it.
It was a nice surprise to show him how quickly saving can add up when I showed him the balance in this “secret” account on his 9th birthday. It was also an opportunity to show him how quickly this $5 a week had grown, including a little earned interest. It was a nice math lesson, and exciting for him. We talked about whether to spend it on something big, or wait. He decided to leave this money alone to keep growing and now has over $700 in his savings account at age 10. Now that he’s older, and able to understand more complex mathematics and consequences, we’re having meaningful discussions about giving, saving, and investing, as well as the difference between assets and liabilities. I think we’ll set up a brokerage account for him soon to let him pick some stocks and learn about investing firsthand.
To teach about the power and value in giving, we talk with our kids each year about where we’re donating money, items, and time. They participate in donating their old toys and clothes regularly. I have my kids help me write the checks to the organizations to which we make annual donations. And when we get a flyer asking for money, I seek their input about whether they think we should donate. If so, we discuss how much they think we should donate, and we then check the box on the form, write the check together, and mail it. I figure this ticks many boxes. 1) It’s a practical early life lesson in check writing, 2) it teaches them something about labeling and mailing letters, and 3) it’s an opportunity for us to support the things we love, reflect on things we are grateful for, feel gratitude that there are people in this world working hard to make it better, and celebrating that we can support that. It also gives my kids the experience of giving, which is the best feeling there is.
Mr. Lieber recommends talking to your kids again in more detail about how your family handles money, once they’re old enough to appreciate that being a grown up costs a lot, and that earned income is tough to come by. Doing so will help them see where your family’s money goes each month. He acknowledges (correctly) that most kids want to know how much money their parents make, but most don’t have a clue. We shield this information like it’s top secret, and he challenges us to question why and whether this is the best attitude to have with our kids about money.
He describes his own dad coming home one night with a bag full of cash, and dramatically giving a lesson to his kids by dumping it all on the dining room table and showing his teenage children how much went to the mortgage each month, how much to the car payment, how much to utilities, tuition, food, etc, and how much was left over. This striking visual lesson helped his kids understand where their family’s money went. He describes this as a very memorable evening, and I can only imagine that it was!
My son is a natural saver, like his dad. My daughter (age 6) on the other hand, is a natural spender. She thinks money is for toys and candy and will spend every cent the tooth fairy sends her way on the nearest claw machine or chocolate treat. I hope to help her also learn the value of saving, giving, and investing as she gets older. For now, her habits make it clear to me that she’s not ready for an allowance. She may be ready at age 8, or she might need more time. I will judge that.
I encourage all of you to spend some time reflecting on how your parents talked to you about money. What ideas about money did you learn from the adults in your life when you were a child? Do you still think those ideas are true? What are your own thoughts about money? Do you feel it’s something that flows, and that it can enter your life easily if you know how to attract it? Do you feel like it’s something that you’ve never been able to hold onto? Do you think it’s a finite commodity, and that people who have more leave less for everyone else? As you come to your reflective answers on these questions, stop and ask yourself “Is this true?” and try to be open to exploring the alternative possibility.
I love talking and thinking about money. Challenging my limiting beliefs about money is never comfortable, and can be quite tough, but it’s a discomfort worth enduring because it has helped me grow my family’s wealth. I highly recommend the book “The psychology of money” by Morgan Housel if you are a parent who feels like your beliefs about money might not be serving you as well as they could. It is just chock full of facts and anecdotes to make you challenge your limiting financial beliefs.
Each of our personal philosophies about money are likely filled with unconscious limiting beliefs, planted by our families of origin and early life experiences. We need to raise our awareness of these beliefs in order to raise kids who have the best possible attitude towards money, so they can earn it, attract it, give it, and invest it wisely.
