My kindergartner is obsessed with getting a Nintendo Switch. He recently started watching videos on his Kindle Fire of some guy playing his Nintendo Switch. All we hear about are games such as Mario Odyssey. This is the first time he’s really been passionate about making a purchase so we are using this as an opportunity to teach him about money. Teaching money to a five-year-old isn’t easy, though this post goes over the strategy we are using to hopefully have money lessons sink in at a young age.
Our children will likely grow up much better off than me or my wife when we were younger. With all the positives that come with their situation, there are some negatives as well such as a lack of appreciation and entitlement. I want to give my kids a great life, but I don’t want to spoil them either. That’s why we’re trying to get an early start to teach financial literacy in our house. The following are a few examples of how we’re teaching our kids about money.
How We’re Teaching our Kids about Spending, Investing, and Giving
Our five-year-old receives an allowance of $5 per week to complete his chores. His chores include making his bed, feeding the cats, and cleaning his room. Every day that he doesn’t complete a chore he is supposed to lose one dollar.
We aren’t as hard-nosed with this approach as it sounds. There are plenty of days when we help him with his chores or look the other way if his room isn’t perfect. There are other days when we ask him to feed the cats and if he refuses we end up taking a dollar away. The point isn’t to strictly enforce the process at this point. It’s more to help him make the connection between doing work and making money.
At the end of each week, he puts $3 in the spending jar, $1 in the investing jar, and $1 in the giving jar. The jars are made of clear plastic so he can see the money adding up. At this pace, it may take him a while to save up for a $300 Nintendo Switch, but with a birthday coming up he’s planning to ask all of his family and friends for money to put towards his goal. Having a tangible goal is so important for young children, especially a goal they are excited about.
How We’re Teaching Stock Investing
Before our oldest had a savings goal of an expensive Nintendo Switch, his birthday and Christmas money would add up to a relatively meaningful sum of money. Every year we have purchased a share of stock or two.
We ended up purchasing two individual stocks via the Robinhood app with his savings. This wasn’t his decision, but he also didn’t push back against the decision. Honestly, I’m not sure he knew exactly what we were talking about. The Robinhood app was surprisingly easy to set up, and even easier to purchase the individual stocks. There are no fees to use the Robinhood app either.
I don’t think he is anywhere near ready to fully grasp the concept of stocks. However, I do sometimes make comments such as, “you are a part owner of Under Armor”. In time, hopefully these comments will start to make more sense allowing him to make the connection between everyday products and the stock market.
Even though he hasn’t shown much interest in the stocks yet, every once in a while he will ask to “see the numbers” on my phone. He currently has about $500 in his stock “portfolio”. It’s amusing to think of my five-year-old having a stock portfolio. 🙂
Going forward we will use his money from the investing jar to purchase additional individual stocks. We may even roll the dice with small cap or penny stocks since we’ll likely be throwing less than $50 at new stocks. While I am personally more of an index fund investor, it would be more challenging to get him excited about investing in something like VTSAX (Vanguard’s total stock market index fund). As he shows interest in products or services, I will ask him if he’d like to be a part owner in X company. Again, I don’t expect him to fully make the connection at his age but in time hopefully it makes sense.
How We’re Teaching Generosity
Back when our oldest was three-years-old we were at our Aunt’s house and had completed an Easter egg hunt earlier in the day. Our son ended up with six or seven quarters that he planned to bring home for his jars. Instead, he decided to donate his shiny new quarters to a better cause.
Our Aunt goes on mission trips to Uganda every few years and showed him a small piggy bank. She explained that the money would be used to buy food for children in Uganda who are hungry. I was so proud as we watched him put his quarters in the piggy bank without being asked. He wanted to give his money so the children had food to eat.
More recently, I had paid my oldest to help haul some trash out to the dumpster. I explained to him that he could sometimes make extra money by helping out with side jobs. He’s been excited by this and occasionally asks to help out around the house. The other day his younger sister, who is 2, helped him pick up toys. Without saying anything to him, he took a dollar out of his spending jar and gave it to his sister for helping him out. It was a really cool moment.
I’m not sure if his actions have been the result of some of the things we’ve been teaching him. However, it is a positive sign that even at a young age he’s starting to grasp some of these concepts. We will continue to do our best so our kids grow up to be generous and give back to those less fortunate.
How are You Teaching Kids about Money?
I’m hoping that by being intentional we can ensure our children are financially literate when they grow up. We still have a long way to go in this parenting thing, and every stage so far has had challenges. I know it gets more complex once they begin approaching the teenage years. Regardless, all we can do as parents is our best and hope that we can raise money smart kids who aren’t spoiled little brats!