As our guest today, we are breaking the “just ask your mom” mold and talking with a DAD, who also happens to be a financial advisor, and who ALSO happens to be Renee’s husband, David, who many of you only know by the vaguely embarrassing comments Renee has dropped here on the podcast. Welcome, David!
When you offer a kid a penny, dime & a nickel, they’ll invariably choose the nickel thinking it’s the best one b/c it’s the biggest. No concept of value.
As with most things, kids take their cues from their parents in the area of money. If you don’t talk about money at home (maybe it’s a taboo subject or “impolite”) what does that convey?
If your parents fight about money or you know they’re hiding stuff from each other (don’t tell your dad we bought you that dress…), you’re learning something here, too!
Also, if as a kid all you hear about money comes with a scarcity mentality—your parents talk about how they never have enough to pay the bills, can’t afford this or that, it conveys a very limiting view of money. [we can’t afford vs. “how” can we afford?]
There’s anxiety & risk wrapped up in money, too…. sometimes that’s an unspoken inherited class anxiety (trust, will there be enough, etc., how much money you need to feel comfortable)…. And how much risk you’re privileged to take and in what ways. (stock market vs. lottery ticket)
Kids (& a lot of adults) tend to associate money with THINGS/STUFF. Consumerism. Is this all that money is good for? Is this what we want/need to teach? Money is good for what it can do for you–obvious basic needs, providing some freedom from debt, freedom of choices, ability to live the way you choose. Ultimately, our money is not OURS. Like any other resource, it’s a gift from God that we’re to steward well. If we think of it as Someone else’s, we are more apt to use it wisely, responsibly, and generously.
Key concept for kids: What’s the value of a dollar?
Money is earned. (resist always buying them things on impulse)
How can kids earn money and what’s a good age to start? Add’l tasks around the house are a good way to earn money, and these you can start as soon as kids have the concept of money.
“Work while you work” poem…
Fixed amount for fixed duties with add’l opportunities to earn extra. Extra effort=reward. Some kids/adults aren’t motivated by money—they’d rather have the free time. Still, WORK in and of itself is a necessary concept/skill/behavior that kids need to learn, with or without the coin reward at the end.
ALLOWANCE concept: good or bad? (to learn about money, have to have some to work with; start at age 7-8 and get $7/wk if you’re 7, e.g.,) The Sproles family didn’t do allowances; the Blaylock family did.
Can incentivize behaviors: $10 for A on report card, or PAY $10 for D. If you get a D, means cutting the grass 3x to make that up. A positive/negative reinforcement concept. Neither of us paid for grades. We each thought school was our kids’ job and doing their best was a requirement, whether that resulted in an A or a C. Scholarships they earned later on from academic success were definitely a financial reward, but one provided by others, not their family.
What’s a good age to open a bank account for your child? (there’s apps now, of course: Rooster Money, PiggyBot, Allowance+). Whenever they have money enough to do so. Until age 18, parents can be co-custodians of the account.
Credit card offers start magically rolling in just before they leave for college. Is having a cc a good idea to establish credit? Depends on the child and how responsible they are with little. If you’ve not practiced or explained the concepts of money and finite resources, debt and the problem with interest accruing, don’t expect your child to know how to be responsible with a credit card.
**(points, cash back, etc….) Some credit card rewards can be beneficial for students who can learn how to use them to their advantage.
–Some gaming systems/role playing can actually teach concepts of value. Buying/selling/investing/profit/gathering, etc….
Key concept: Money is a finite resource.
Key concept: SAVING
Teach saving concept early. Delayed gratification. Save all year for an XBOX or have several trips to movies, toys, etc.,
Coupons, sales, better deals…. Save a little here, can use it somewhere else. Renee was the queen of yard sales, bargain hunts, and Goodwill shopping. It has paid off!
What are some good rules of thumb for saving? (using bday money, e.g.,). Requiring at least 10% of each money allotment (allowance, gift money, earned money, etc.) is a good habit. They can always choose to save MORE, but that is a minimum. The Sproles used a Crown Financial “kid ATM,” which allowed you to deposit real money in the base and program the percentages that went to saving, giving, and spending. There are many similar tools on the market now available for parents.
Enough savings can give you passive income for zero work. Money can work for you!
Compound interest and how it works. Most powerful tool. Money doubles every 7 yrs or so (depending on interest rate). Starting early vs. starting late. Start SOMETIME.
Key concept: GIVING
What are some good ways to teach generosity?
Tithe, first fruits
Gifts—bday, cmas gifts for others
Is forcing your kids to give encouraging generosity later on or might that spawn resentment? Again, the fundamental concept is that money is not ours to begin with, so the selfish “mine” mentality should be talked through often from an early age. We can be generous in many areas and our kids should witness us doing this with our time, our home, our resources, etc. We only have because we have been given. Gratitude is a habit that can and should be cultivated.
Key concept: INVEST
Do you have to be a certain age to do this? (Michael J Fox’s character, Alex, from Family Ties). Anyone can do this from any age, and a fun family exercise is to make it a contest. Pick some stocks and watch how they perform over a few months’ time. See if you can predict. Talk about long term versus short term gains and having to wait over a long period for improvement.
Can choose to invest half your allowance so it grows at 10%
Stocks, mutual funds, crypto, other….
HERE’S A QUESTION: Once kids have money, once the money is “theirs,” whether they’ve earned it with a HS job or chores around the house, how do you then monitor or regulate it? You might hear, “This is MY money and I can do what I want with it.” (gratitude, money is a gift)
MODEL
Show them you’re paying bills
Explain when you use credit card—looks easy to swipe, swipe, swipe….
Show them what you earn—lay it out there so you can visualize amounts that go to taxes, mortgage, insurance, bills, saving, etc…
In high school, most students are required to take a personal finance class, which does cover some basics but is not hands-on or overly involved, and by that time, would you say most people’s financial attitudes have already formed?
Approaching HS…. Include your student in discussions about the cost of college, ROI
A WORD ABOUT DEBT
Is this a dirty word?
Nat’l debt, student debt, etc…. I feel like we’ve been conditioned to be afraid of it. As a business owner, it’s unlikely average person is able to start a business without incurring some debt. Often, it’s unlikely average person can go to professional school without debt. Do you not open a business or go to med school?
Is there smart debt and dumb debt? (short answer, yes. ) Especially when they’re older and thinking about college, seriously look at the costs and include them in the discussion/choices. If they want to be a teacher making $40k/yr, it’s probably not worth it to rack up hundreds of thousands in debt at an elite school. You’ll spend half your career spinning your wheels trying to pay that off. Think about cheaper options, scholarships, etc., that will give you the training without being saddled.
Pitfalls:
The dog track & lottery tickets
Is this only a middle to upper class model? Can any income level do these things? The way we use money reflects a world view, and an ability to be far-sighted rather than just making it to next week.
Weddings & Obermans example…..set amount saved for each child. One chose school; another had scholarship & bought house; another had part scholarship, student loans and invested.
One family’s example:
Starting at age 2 & 4, each week, however old they were, that’s how many points’ worth of chores they’d do that week, and that’s how many dollars they’d get/week.
@10, do 10 pts worth of chores and get $10. Out of that $10, “family taxes” would get taken out ($2.50), they’d save $2.50 and the remainder was theirs to spend.
Once family taxes built up enough, they’d have a family meeting and vote how to spend it.