How To Teach Your Kids About Money – Episode 238

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[00:03] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler. Welcome to the Prosperity Podcast. I have my co-host, Kim Butler. Are you there, Kim? Yes, I am, Spencer. Glad to talk with you today. It is my pleasure as well. So today we are continuing on from a prior conversation. See, we already discussed how couples can become better communicators when it comes to finance. But many times we have kids and they range in ages and we want to get them up to speed and ultimately as myself of having three little kids, I want them to become good savers and investors and teach them great habits.

[01:03] So I want to turn the tables over to Kim and ask what can we do to get our kids on board when it comes to finance? It means you got to involve them as early as possible. And so this really starts at literally two, three years old when you’re at the grocery store and they’re wanting that piece of candy or whatever it is that they want. And it continues on all the way, frankly, for the rest of your life. It just utterly amazes me how many families do not have monetary discussions with their children. So let me just break this up into various age brackets. I guess that’s going to be the most helpful way to do it as a child goes up through their growing up years. And we’ll take three, four, five years at a time and just share some appropriate

[01:56] things that we’ve done in our past and hopefully that will be helpful to people. Does that sound like that’ll work? Sounds great. So, like I said, you know, your two year old, give them a dollar, but don’t give them a paper dollar. Give them either literally a hundred pennies or if that’s too obnoxious, give them 10 dimes or 20 nickels or something like that and help them start to understand how to count, how to, you know, and I say two to three, maybe this seems to be more like two to five, because, of course, various kids are going to be ready for this at different ages, but not only the counting, but then being aware, OK, this little toy, it costs 20 cents, this piece of candy, it costs 50 cents or

[02:37] whatever it is that they’re looking at and just help them start to understand what each thing represents in terms of like this candy representing 20 cents, but then also in terms of how the 20 cents is in relation to the dollar. And I don’t really think you want to do it as allowance per se at this stage. It’s more a learning exercise that they can have fun with and you absolutely need to make it fun. And maybe they can even start to, in a very loose way, write some things down like, again, this dollar and with this one dollar, I got this toy and this piece of candy and then the next week, maybe this one dollar, I got a bigger toy so that they can start to see relativity. I think that’s a super helpful thing for them.

[03:26] Then the next phase, I would say, is to start and you can do this really young to start teaching them about work and earning money. And so I believe that there should be some chores that they do around the house as a part of the family. And then if they want money, they should have an opportunity to do extra chores to earn that money. I’m a big believer in the word earn. In fact, just recently, I was so excited. My 16-year-old niece texted me and said, I would like to earn some Christmas money. Do you have any jobs that I can do? I was all over that. That was a fabulous thing. And you can start that at five or six years old. Again, just extra little jobs that they could do to earn money. And it’s kind of tough sometimes to figure out pay, but you want to go at

[04:22] a very age-appropriate level and also time. You’re not going to have them, a five-year-old can only rake leaves maybe for 10 minutes. OK, great. So that’s this many quarters or whatever it is for you. But anything that they can do to earn money, super, super helpful. Again, also writing it down will be helpful to them so that they can start to see relativity. Oh, I did this job and it was worth this much and I spent this time and I got these dollars or what have you. And then I do feel that sometimes allowance in addition to that is appropriate. Each family has to work through that. I think the old adage of one dollar for the amount of age is helpful to people. But other families do something entirely different.

[05:09] And we tried a bunch of different approaches with our kids. And I don’t know that there’s any one perfect way. And sometimes what works for one child doesn’t work for another child. So you have to switch gears as they go. Then when I would see probably around the 10, 12, maybe 15, it may be that long for some children, you can absolutely start to involve them in more discussions and bigger dollar figures, including here’s 100 bucks, here’s the grocery list, go figure it out. Or hey, let’s work through all the things that we have to do in our house. And we have x dollars. You could give them the monthly budget. You don’t have to give them your income. But let’s say it’s $2,000 or $10,000 or whatever it is

[05:58] that your house works on per month. And let that, especially in the later teenage years, let that person work through, OK, the mortgage payment is this much or the rent or whatever, the car payments, the gas, that’s another thing you can have them do. Go ahead and have them fill up the gas and see the dollar figure. And again, develop some relativity so that they can start to be aware of the value of a dollar. Then you can also start to talk with the older teenagers about saving money, about investing money. I guess I should have backed up a moment ago. When you do start to pay children for those extra jobs, I think it’s important that they save some of that money. And it can be super simple, but just have a jar.

[06:45] And that’s why I like breaking the dollars up. If you’re going to give them $20, give them $21 bills. And that way, they can put 10% to 20% in the savings for later jar. And you might choose to have a charity jar. I think it’s super important to involve children in charities. And a lot of people do that early on. Oh, let’s pick a toy that you can take to the fire station or what have you. But they should be saving some of their money, actual cash for charities as well. Another thing is to have a short-term savings and a long-term savings. Maybe the long-term savings is for a bike or a car or something like that. And the short-term savings is for the concert ticket that comes up once a year that they want to buy, et cetera.

[07:29] I would also get kids involved as quickly as you can in shopping for clothes. Here’s an amount of money that’s appropriate for clothes. And you go buy your clothes. Oh, and by the way, you wash your clothes too. I think it’s super important to get kids involved in caring for their clothing as quickly as possible. And that isn’t a job they should get paid for, just something that they can then be in the loop, if you will, of, oh, my jeans are horrible because they sat on the floor all night. And you have to go with it because some kids aren’t going to care about that. So parents beware, I guess. But having them involved in the full circle of what money does, what it can do for clothing, and how that clothing has to be cared for in order

[08:15] for it to look good and be ready, et cetera. And you just want to keep the circle going, really, so that they see that in a complete way. And then you need to start talking investing with them. Just share what you’re doing from an investment standpoint. They can have some fun looking at rental houses to buy. They could have some fun looking at stocks on the internet. They could have some fun talking about alternative investments if you’re involved in various things. Let’s say, back to our earlier discussion, you and your spouse are having a conversation about a particular investment that you’re interested in and maybe come up with a list of questions and see if the teenager can go help you research

[08:58] the questions, help you be involved in the conversation. I would even include children in meetings with tax advisors and financial advisors and attorneys, if appropriate. That’s all totally doable from, say, age 10, 11, 12 on up to be involved in that kind of thing. They can just sit there and listen. They don’t have to do anything. They can maybe write down some questions that they would like asked and answered later. Or they can just sit and listen and absorb information that is helpful to them. And then, as they head off into college, same deal. You’ve got to stay involved on the financial realm. And I think it’s so much better if you do need to be giving your children money to do things like eat and pay car payments

[09:42] and that kind of thing. Give them the money and let them make the payments. I pay for my daughter’s car right now. She’s in school. She does work, but she doesn’t really have the ability and needs the vehicle to get to work and school because she doesn’t live on campus because her campus doesn’t have the ability to do that. So I pay her and she pays her car note and her insurance and her gas. So she sees what all those dollar figures are. I’m shocked these days when somebody will tell me their 30-year-old daughter and they’re still paying their car payment. That just is not, in my opinion, the best thing for that adult child. And frankly, it’s typically not usually good for the senior adult either.

[10:27] So you want to be giving them the money and let them sorting through it. Let them be involved in the choosing of healthcare. Let them be involved in the choosing of, like I said, grocery items, food items, clothing, even car insurance discussions, deductibles. All of those are things that somebody at the 18 to 24-year-old level can be included in so that when they do get out on their own, they are ready. They have a sense of handling debit cards, credit cards, checking accounts, which will kind of go the way of technology. And even the Venmo apps and things like that on their phone that help them move money around and get paid from friends and pay friends, et cetera. Tipping at restaurants, that’s something you can involve kids in early on

[11:23] in calculating a tip and what’s an appropriate tip and did this waitress help us extra or not, that kind of thing. Any monetary discussion that is happening can pretty much include the children. You just have to find age-appropriate ways to do that. Wow, these are great strategies for teaching responsibility. So I want to ask a kind of a strange question, but you grew up on a farm. My mom grew up on a farm as well. And one of the attributes that she gained and that you have is hard work. And you’ve talked a lot about responsibility and I think many of these things will teach hard work. Do you have any final tips on how to teach kids to love work and to be hard workers? Yeah, that is a great question.

[12:14] And I will readily admit that the presence of a farm makes that so much easier than other places. And yet I do still think it can be done. So as an example, the cleaning of a house and the caring for of a yard are things that kids can be doing and it is tough. It usually means a little bit more parental involvement because let’s say for example, that you already have a house cleaner and so the kid is used to having the house cleaner clean the house. And if you’re going to have the kid clean the house, that means basically you’re gonna have to be helping with it. That’s not fun, I get that. And yet I think at some level that’s a really important step to take and maybe it’s every other week or maybe it’s just in the summertime or whatever.

[12:59] But any household activity that can occur, the kids can be involved with house cleaning, laundry, all kinds of food, shopping preparation, cleanup, et cetera, obviously are all obvious things that can be done by children at various levels. Having the yard service come and having your lawn look perfect is easy and nice and yet is that really best for the kids? Is that really best for the family? And so again, maybe it’s just in the summer or maybe certain times of year or every other or what have you, but get the kids involved. And then I think furthermore, you can expose them to farm-like environments. Go find a community garden, that’s always an option that they can do some learning from. Find a friend or a relative that has a farm

[13:50] and get them involved in that regard. And then you can find other ways to have them work. Maybe it’s research on the internet that they could do, maybe it’s writing something up, drawing something up, kids that have good drawing skills, maybe they could do something that would be beneficial for you at work or what have you. Anything that the child can be asked to do and at this stage of the game, we’re still building character. So this is not the time to focus only on what we love. If we were talking to adults, I would say you need to find work that you love, but a child just needs to work. So it’s in that work that they will then find work that they love and so they need exposure to it. Maybe get in your circle of adult friends

[14:42] and say who can take my child to school for, or to work, sorry, not school, for a day, for a week or what have you so that the child can be exposed to different working environments that are maybe gonna be more office related or who knows, maybe somebody in the friend set is a welder or a bus driver or some other thing that the child could go witness. And then two, there are conversations that can be held just as you’re out and about in your daily lives seeing what people are doing for work. But I will readily admit to you, there is nothing that substitutes like physical labor and getting out there and actually getting the job done. That is so true. Well, I think today we’ve heard a lot of valuable lessons

[15:38] of making our kids, I should say, helping our kids to become more responsible, helping them to develop a strong character and to understand money and finance. So thank you, Kim. How can our listeners ask additional questions to you? I would love to entertain questions on this subject matter. It’s hello at partners number four, prosperity.com. Special email for podcast listeners, hello at partners number four, prosperity.com. Thanks so much, Kim. Absolutely. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partners4prosperity.com. If you liked this episode, make sure you subscribe and leave a review.