There are a million things to worry about when raising children. Often times teaching our kids about money doesn’t rise to the top of the list. If your kids are anything like mine, they care about video games, dolls, sports, and a million other things. As a personal finance blogger, I’d love to say that I have this financial literacy thing figured out with my young kids. That would also be a huge lie. Sometimes we have to turn to others for advice. Such as in this article where seven experts share their best money advice for kids.
A few years ago I boasted about setting up spend, give, and invest jars for my preschool kid. For months we did great with this process. However, after a while, we fell off the wagon. My kid stopped doing his chores regularly and we stopped paying him for them. He didn’t seem to mind too much because he already had everything he wanted.
This seems to be the push and pull when it comes to raising money-smart kids. As parents, we want to provide our kids with the best life. Sometimes that means giving them the toy we always wanted as a kid but could never afford. It feels really good when your kid is happy.
The hard part is thinking through the downstream impacts of giving them everything they want. If everything is handed to them, how will they ever learn to appreciate hard work? How will they learn to appreciate how ridiculously lucky we are to live in the United States of America, one of the richest countries in the world? How do we teach them there is more to life than material things?
I’m not sure I have found the right answers to any of these questions. Or at least I am still trying to figure them out. That’s why I turned to money experts on Twitter to share their best advice for kids. The responses were excellent and I took a few notes as a parent. Read on for money advice for kids from seven personal finance experts.
7 Experts Share Their Best Money Advice for Kids
Lesson 1: Make Their Money Work For Them
This article from the Interesting Dollar shared a great idea to use birthday money to demonstrate the value of interest. By gifting $300 a year for birthdays (between parents, grandparents, and aunts/uncles) you would be able to demonstrate the growth provided by interest over a relatively short period of time. This is a simple exercise that can help a teenager delay gratification and better understand how interest works. Below is an excerpt from the article.
“I did the math and thought that if they received $300 a year from age 10 to 17 and 8% interest, they would receive $2,592 on their 18th birthday. Each year they would receive the interest check on the balance in the account.”
Lesson 2: Embrace Minimalism
So much of what makes a person successful with their finances as an adult is being intentional. Sure, having a high income helps, but many people make a lot of money and still live paycheck-to-paycheck. What I love about this article from One Frugal Girl is the conversations she’s having with her children. It’s not necessarily about depriving your kids of toys, but getting them to be thoughtful about why they want something.
“I want them to learn how to use their imaginations to prevent boredom rather than depending on a room full of toys.“
Lesson 3: Use Money to Buy Your Time
There are multiple ways to use money to buy your time. All of them involve earning more income than you spend or generating passive income through stocks, real estate, or business. Jim Wang from Wallet Hacks shares his story in this article about how a hobby eventually turned into a full-time business that generated more income than his day job. As the saying goes, we can always find ways to make more money but we can never get more time. Jim is leading by example with his family on how to use money to buy time.
“You turn your time into money. Don’t let “excess” money turn into things without careful deliberation. Turn it into your time, your only non-renewable resource.”
Lesson 4: Think About What You’d Tell Yourself as a Child
One of the more difficult things about being a parent is simply forgetting what it’s like to be a kid. Especially when you’re an older parent like me. It’s been a long time since I was a kid and to connect with our kids on topics such as money we need to be able to think like them. In this article Lauren from Adulting is Easy writes a letter to herself 14 years ago with 10 things about money she’d tell her younger self. Would her 16-year-old self listen to this advice? I guess we’ll never know.
“The people around you with the nice stuff probably aren’t as rich as you’d think. I know you get envious of the Christmas presents your best friends get every year. It’s hard to believe they got a Playstation and an Xbox at the same time. Their parents are going to have trouble retiring. There’s a difference between material things and wealth.“
Lesson 5: Being Smart is Not Enough to Win with Money
There are a lot of smart people in the world that are bad with money. Like anything, to be good at something you need to learn the rules of that space. It’s no different with money. Personal finance concepts are actually quite simple. The behavioral aspect or the “doing”, is the hard part. Being smart may help you achieve a higher income, which is certainly important. However, that isn’t enough. See the quote below from Money in your Twenties.
“Being smart is not enough. Handling money well is a game, and you have to learn the rules. Some of the rules are really strange (our tax system) and some are the opposite of what you would expect (you will be offered credit, then get in trouble for using more than 30% of it)” – @money_twenties
Lesson 6: Talk Openly About Money
Money isn’t only a taboo topic among family members and friends. It can also be a topic not often discussed within your household. The challenge is as a parent if you don’t talk about money regularly, how will your children even learn to understand how to use it? Sometimes the reason is due to shame or a lack of understanding around money by the parent. However, for parents that do have a good understanding of financial literacy, it’s critical to pass that information on to our children. That only comes by talking openly about money. Check out the quote below from Frugal Nomad Family.
“Talk about it openly and remove the stigma. Be open about major financial decisions and the family budget. (Keep it age-appropriate).” – @NomadFrugal
Lesson 7: Be Vulnerable and Share Your Mistakes
What if you could capture all of your money moves, the good and bad, into a book? Then you shared that book with your children. That’s exactly what Brian Siemens attempts to do in his new book, “Money: What I Wish I Knew When I Was Younger“. I’m reading through the book now and many of the themes are similar to what I’d like to convey to my own kids. The tricky part is getting them to listen to my advice.
“But he came out the other side all the better for it and with something to share, something guaranteed to make the path much easier (and less painful) for other teens and young adults who dare to read his story.”
What is Your Best Money Advice for Kids?
I appreciate all of the experts above for sharing their best money advice for kids. At the same time, there are so many other lessons to share with our children. What is the advice that you’d share with your kids to ensure they grow up money smart and financially literate?
Financial Pilgrimage is a blog dedicated to helping young families pay down debt and live financially free by sharing our personal stories, the stories of others, and financial tips to improve your family’s finances. Mark is a husband of one and father of two and calls St. Louis, MO, home. He also loves playing in old man baseball leagues, working out, and being anywhere near the water.