The Importance Of Saving For Our Kids – Episode 293

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[00:01] Welcome to the Prosperity Podcast. Welcome to the Prosperity Podcast. We’re going to be talking about how to help our children save, but we’re going to go deeper than just the typical savings talk. And we’re actually going to get to the nuts and bolts of what’s the milestone of saving and then next, the horizon, the beautiful thing that they can accomplish. So Kim, are you ready to jump into this with me? Yes, and we have to thank a listener for this question. I’m so grateful for it. And I know we’ve chatted about this before on the podcast, but if it comes up in a question, it means people are thinking about it. And I think particularly at this time of year, we’re starting fresh and we’ve got a whole year ahead of us and people

[00:49] start to think about what might be important. And something that I’ve just have been so grateful for from my childhood and then of course, helped my own children with it is some good, loud, if necessary, prevalent conversation in the family about money. Because so many families just don’t talk about it at all. It’s this weird taboo subject. And I don’t blame parents. Sometimes it’s embarrassing to talk about it or sometimes they may not feel like they know enough about it or they have a sort of negative financial history that they don’t want brought forth or whatever it is. And yet, it’s silly and it’s a real disservice to our children and grandchildren if we don’t talk about money in a way that’s

[01:41] helpful to them. Yes, I totally agree. And you know, one of the things as we were preparing for this episode, we have a mutual friend and his name is Caleb Williams. And he is amazing. I mean, he’s in his early 20s. But he was telling me that by the time he went to college, he had saved over $20,000. And he had jobs of working on a chicken farm. So cleaning chickens and, you know, you name it, the typical hardworking things. And he’d done that by the age he got to college, $20,000. And so I’d love to ask you, what can we do to help our youth get there? And then once they get money like that, what should they be doing? Yeah, it’s a great question. So to me, the teaching and the conversation around the idea of saving needs to start literally at three or

[02:41] four or five years old, just as soon as a child is conscious of money being exchanged for goods, which if you take your children grocery store shopping is often at the grocery store, often even in the checkout line where all the candy is right down there at their level. And they want it and they start to understand, even if not at a deep level, what what goes on, you know, mom or dad hands over one thing and back comes this candy bar. And so the whole marshmallow test, you know, that’s out in the in the public about children that were given a marshmallow and told if they held on to it, they would get a second one. Do you remember that marshmallow test? I do. Yes. Do I need to elaborate on it, you think, or is that clear?

[03:30] Let’s give us a 10 second cap on what a review on what that is. So there are the way that I remember it, please help me if I’m not remembering this right, is that there’s a group of children and they’re all given a marshmallow, I believe, and they’re told if they hold on to it, they’ll get a second one. And like, two thirds of the children eat it right away. And only a third of the children, I probably have my statistics wrong on it, hold on to it to get a second one. And it’s designed to talk about the capability of delayed gratification and the benefit of delayed gratification. That’s it. Totally. Okay, cool. So if not, that was a good enough version, right? Kim’s version of the marshmallow test. So what is interesting to me about that is that

[04:17] how early we can help our children with the concept of delayed gratification, which is really all savings is, and also the concept of money, you know, just even simple things like five nickels equal a quarter and oh my gosh, you know, the child that wants the nickel rather than the dime because the nickel appears bigger, but the dime is double the value, you know, all those fun little things with coins can really easily be ramped up to the concept of, well, do you want to spend whatever it is? I haven’t bought a candy bar in a million years, I guess probably a dollar for a candy bar now, or do you want to save till you get to three or $4 and are able to buy a toy or you can up level that, you know,

[04:59] is it $3 or $4 for this cheap little toy or is it $15 or $50 or whatever it is for the game that you want to buy for your game player, you know, whatever brand your kids are into. All of these things are opportunities for learning for the child to get clear on the whole idea of delayed gratification on saving and spending and the value of money, etc. And then as our children progress, so critical to have them understand the value of clothing. And early, early on, my parents, I earned money starting a fourth grade because I had my dairy cow that I milked. And so very quickly, I had to buy my own clothes and buy my own anything that I wanted. My parents would support it, you know, they would take me to

[05:46] town while you need clothes for school while you have money, go, you know, go buy your clothes. I thought it was totally normal. I’ve realized now that it wasn’t and yet, what a valuable thing to be taught because I wasn’t going to spend 100 bucks on whatever brand of jeans when $20 would do because for me, jeans weren’t important, but I was going to spend 100 bucks on whatever it was getting my hair done because that was more important. So your own value system starts to play in. And again, discussions like I get back in the car. Oh, show me what you bought. Well, how did you decide on that? Just awesome questions that my parents asked that then I realized were valuable things for me to ask my children. And again, the importance of saving. So every time we got a gift,

[06:34] every time we got anything, whether it was money that we earned working or that we had from selling the milk or that was a Christmas present or a birthday present, we understood that 10% went for savings and 10% went for charity. And we got to choose our own charity work. And we got to choose what we did with the savings. And it just became a normal part of not only discussions, but actions in our family. And so that’s what I would encourage people to do is not only have the discussions, but have the actions be all right out there on the table. Yeah, I agree. So help us understand the young Kim, you had the habit of savings. And we assume that you were able to accumulate a decent amount. Is that right? Well,

[07:21] like Caleb, I had saved enough money to pay for four years of a private college that I wanted to go to. And I didn’t know that as I was growing up, it wasn’t necessarily like, oh, I’m saving for college. But when it came down to it, I got a very nice scholarship, but it didn’t pay for everything. But my savings did. And I bought my plane tickets to the college and pretty much everything all throughout my later, or I guess early adult life. And so yeah, that capacity, you know, in terms of the dollar figures that you and I are talking about right now, that’s not going to be available maybe for all children. And yet, it can be done. Is it easier in a rural community? Maybe, because things like chicken and cows are

[08:09] very prevalent. And there’s lots of tractors to be driven and ditches to be dug and etc, etc. But I think every child and you know, we hear stories all the time about this 14 year old kid that did this awesome business on the internet and he earned a bunch of money. And that’s just fabulous. And every child’s got some entrepreneurial thought process and can absolutely find ways to earn money. And even if they can’t go get jobs, which I think is really unfortunate in our communities right now that children are not really allowed to work many times until they’re, I think 16 or 18 years old. And I mean, I was aside from the milking of cows, I was working jobs when I was 12. So if you can find even jobs at home, okay,

[08:51] there should be, I think a certain level of chores that are for part of the family. But what about the extra chores? You know, they can earn money that way and just connecting the level of activity with income, which again, then a portion of which should be saved. Those should all be normal conversations. Yeah, I fully agree. And even for young adults, once you’ve gotten your degree or you’ve got a job or you’re starting our business, the first person to pay is yourself. You got to do that every single time. And how much even as a young struggling professional, what percent should they be saving every month, Kim? Well, I mentioned 10 earlier, but the goal should really be 20. I think 10 at the beginning is fine for a child. But when you get out of college and go to start your

[09:41] first job, you have more income than you’ve ever had in your life. And that is the perfect spot to start saving 20% of your income. And I mean saving as in a liquid place, not investing, way too many people want to invest first. And I know it’s fun to learn about investments. And so please feel free, go learn about them. And yet saving, the act of saving as a verb, and then the actual noun of savings, it literally just sitting in the bank initially is the first thing that anybody should work on, no matter what their age is. But whenever they decide to get serious about wealth, the capability and the flexibility and the freedom and the confidence that comes with having liquid savings is amazing. And I’ve shared this story

[10:33] before, but when my daughter got her second job in college, these kids cobbled together, this 10 hour a week job with that 20 hour a week job, etc. Her first question on the phone, Mom, do I need to save 10% of this check too? And yes, absolutely. And then my son out into the working world. And of course, everybody works talking about the 401k plan and the 403b plan and how much they can be. And they use the word saving. But a 401k and a 403b is investing. It’s putting money away that you cannot touch until you’re 59 and a half. That’s not saving. And I know technically they’re called 401k savings plans, but I think it’s really a disservice to call them that because these kids, they get started in the 401k,

[11:20] 403b environment. And then what happens if they need to fix their car or they have an opportunity to go on a trip or what have you. And so I really encouraged Robbie in his first job to, yeah, go ahead and put one or 2% in there if you want, that got him up to the match level. And that enabled him to get the corporate match, which was fine. There’s some value in that. But please know more because what’s so much more important is that he’s building up liquid savings, which can then solve problems. It can solve emergencies. It can help him take advantage of opportunities. It can fix cars, etc. And I suppose you could even break it down to like the put and use savings account where you’re going to use

[12:05] it within the year. Maybe you’ve got friends weddings to go to or a trip you want to take. And then the more put and leave savings account, which is more for that opportunity fund. Yeah, that’s a great point. I think another piece on this, the psychology piece is that if you develop the habit at a young early age, then as your income increases, so will your expenses increase. It’s just how life works. But you’ll have also increased the habit of your savings. So instead of saving $200 a month, you’ll start to save $20,000 a month or whatever that may be. That’s potential for people. Now, that’s not in the case for everyone. But what I’m saying is we need to just develop those habits now. And I think this

[12:52] episode’s especially useful for parents, grandparents, or even people that are just fighting and getting set in this professional working world. Yes, it’s so, so important and so overlooked. And like I said, I agree, it’s the boring part of finances, but it’s what makes things work. And I’ve said for a long time, savings saves families. And it’s just amazing to see the difference with a family that has not only the discipline, as you spoke of, because that’s crystal clear, the defining factor, but then the freedom with that discipline. Isn’t that funny that those two things go together? Like you got to have the discipline first, but then because you have the discipline, you have the freedom. Yeah, most people don’t see it that way.

[13:42] Very true. And I understand that. And like I said, if you want to spend some time learning about investing, that’s awesome to go ahead and do that. And yet, I mean, there’s people with very, very large net worth numbers that still do not have good savings habits. And they have gotten their large net worth because of some activity, which is fabulous. But what about their liquidity? I meet a lot of clients that have fabulous net worths, but very, very liquidity, very little savings, and consequently, very little opportunity fund. And that makes them make their financial decisions differently. So I always like to point that out and to help people work on the building of that liquidity. That’s a very missing place on people’s balance sheets.

[14:32] Absolutely. You know, I think, you know, as I’m wrapping up the episode and I’m thinking of what’s the best book to read, what’s the best suggestion I have, what keeps coming to my mind is, hey, send Kim an email. And that way, you may have your unique situation for yourself, for one of your family members or someone you care about. So ask Kim. And I’m sure you can get an answer that’s going to be thoughtful and helpful. All you have to do is send an email to hello at partnersforprosperity.com. Does that sound good, Kim? It does. And I really want to reiterate that I’m more than happy to be a sounding board for you and your family members and your friends. A lot of times people are looking for a second opinion

[15:18] or looking for maybe a first opinion on what they should do. And so if you’ll include a brief set of facts so I get the big picture, I’m more than happy to be that sounding board. And if you look at the newsletter that we send to everybody that’s on our email list every single week, it says right at the bottom of that, that invitation for me to be a sounding board if you have questions about your personal finances. Wonderful. Well, thank you, Kim. And thank you listeners for spending some time with us today. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe

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