The impact of teaching kids about money is tremendous coming from a parent. Do you remember as a kid when your mom or dad was ten feet tall and a superhero in your eyes? When I was with my dad, I was convinced that he could take care of any situation that came our way. That security made me feel brave and confident. I admittedly am a risk-averse person. But even today, I am comforted by the fact that if he believes in me, I can do anything.
As a Kid
I am reminded of a story that I still remember like it was yesterday. I was riding my bike for the first time without training wheels. It was my first big boy bike, and I was so scared but knew with my dad helping me that I wouldn’t fall. Funny thing happened though– I did fall. I ended up falling into some big bushes around the cul-de-sac. Even still, he quickly dusted me off and dried off my tears. I got back on the bike and proceeded to have the time of my life. In my little eyes, that day I learned a valuable lesson. Even when I fall, I can get up and still succeed.
Isn’t it critical as children for our parents to allow us the ability to struggle through problems so that we learn to overcome challenges? It builds character and makes us more resilient. However, oftentimes parents don’t allow their kids to see their own struggles. Of course the motivation is to protect their children so they aren’t fearful or worried. But, I believe this is counterintuitive.
I can honestly say I had no idea what was going on with my parents’ finances growing up. The extent of money talk was me saving money for items I wanted and getting a job as a teenager to make additional spending money. But we never discussed “adult” finances. I had no idea how much a house cost to run (ie. electricity or water bills) or even how much a mortgage bill could cost. Maybe they thought I was too young to understand or even care.
It wasn’t until I got my first paycheck as lifeguard that I truly understood the value of a dollar. At this point too, I started having more expenses that I was responsible for paying. From gas for my car to movie tickets and meals out, the expenses started to add up. For the most part, I saved as much as I could and deposited any excess into a savings account. Needless to say, my frugality really became evident around this time.
I thought I was smart by saving. However, in hindsight, I wish I had invested this money into the stock market. I’m not sure my parents knew to advise me about the market at that point. On top of that, I’m sure they wanted me to actually spend some of the money I made and enjoy it.
I remember at eight years old having $300 in my bank account and thinking I was rich. Three hundred dollars seemed like so much, even if it wasn’t a million. Each month, I would gain a little bit more interest and would rejoice at the addition of each penny to my account. For fun, I looked up to see what that $300 would be worth today if I had invested it into the S&P 500 and had the dividends reinvested. Shockingly, that $300 would now be worth over $3800 or almost a 1300% increase. If only I had a time machine to tell my eight-year-old self what to do with the money.
Of course, I don’t fault my parents for not teaching me about the stock market at a young age. But, one of the things I wish my parents were more vocal about was sharing their mistakes. I believe this is helpful for the next generation so that the same mistakes aren’t repeated. Children learn habits from their parents, both good and bad and are also prone to the same lifestyle patterns.
As a Parent
Now that I have my own child, I think a lot about when and how I will teach him financial lessons. I’m still trying to determine the “right” time to start teaching him. The hope is that it will happen naturally, so as not to be terribly forced, but of course, it is definitely a priority to me. I want to equip him with as many financial tools as possible from a young age.
The “right” amount of financial information is something else I think about in relation to his age. I know that eventually, I would like to sit down and teach them how to pay bills, so he can wrap his mind around how much it costs to run a household. This may also help explain why there might not always be extra money to spend on every little thing that he wants. My wife would also appreciate him learning not to keep the lights on or the water running as a result, too. She’s very anti-waste. Anyways, I would hope this early introduction would cause him to better grasp financial concepts and would cause him to become successful in handling money.
When did you start, or when do you plan on, teaching financial lessons to your children? How much transparent should you be about your own personal finances with your children? Share your thoughts below.