“Working to help parents raise money-smart kids.”
Hello, friends!
Since it’s National Financial Literacy Month, this week I’m sharing notable passages from three excellent books about raising money-smart kids.
Each one has in some way shaped how I’ve brought up my own children. And considering the oodles of insights and tips in all three, I’ve done my best to condense their content into a few meaningful tidbits that I hope you find helpful on your own journeys.
â 1 â
The First National Bank of Dad by David Owen
“Well, if you leave your twenty-five dollars in the bank for just one year, the bank will pay you fifty cents.”
This passage helped convince me to offer our kids enhanced interest. My wife and I currently pay a whopping 3% compounded monthly! We do so to emphasize the power of saving, as current institutional interest rates are laughable. However, there are a few exceptions, like the admirable youth account our partner F&A Federal Credit Union provides. It gives children a 6.1% annual rate for the first $1000 deposited! đŞđź
“You do have to pay an onerous interest rate, but in return for your sacrifice, you receive the satisfaction of knowing that your kids are effortlessly equipping themselves to become fiscally responsible adults. And if you think about how much more expensive your own life would be if your children were fiscally irresponsible, the rate won’t seem onerous at all.”
I owe a huge debt to Owen for leading the way in my chosen field (as a Chief Mammal helping parents raise money-smart kids). And as you may be aware, I’ve written often about the power of experience. Owen addresses the topic in his book as well:
“Don’t we learn about money the way we learn about anything else â by making a series of gradually less horrible mistakes and living with the consequences.”
Clearly, The First National Bank of Dad is funny. Owen is a gifted, insightful writer. If you get a chance to pick up this witty read, then please do. And for a more condensed version, you might like my podcast interview with Owen.
â 2 â
The Wisest Investment by Robin Taub
“Kids are curious. They spend a lot of time just trying to figure out how the world works. If theyâre old enough to ask questions about money, then theyâre old enough to deserve a good answer.”
Two-time podcast guest Robin Taub gives us all an excellent reason why we need to be prepared to open up money conversations with our children when they’re young.
As Taub mentions, you shouldn’t avoid a conversation you could have. It probably isn’t appropriate to respond directly if your three-year-old asks how much money you make (unless you want your salary announced to an entire preschool class). But when she wants a toy and tells you to just tap your phone or swipe your card to get it, it might be time to pull out some cash. Or, better yet, let her complete the transaction so she can see that buying an item requires more than magic. â¨
âWhen my son turned 11, he asked for a raise in his allowance. I told him that if he wanted to get more money, he had to take a course about money that his school was offering as an after-school program. To my amazement, he agreed!â
As evidenced above, Taub is a clear money thinker. And although I like her idea, the odds that such a class exists in your school system depend very much on where you live.
Therefore, you might consider a strategy I recently recently implemented as part of my teen girls’ digital allowance system. Before I dole out their money, I ask them to review and reflect on material from the program we built for kids their ages.
Here’s an example:
“Please take a look at Good Money Habits Video #1 on our Adolescent$ page, and tell us a way you might be able to use your money to be kinder to your future self.”
And here’s one daughter’s response:
“I can be kind to my future self by saving more money! Every time I get a check/allowance/etc., I can put the majority into save. I can also try to invest in more stocks! Alsoooo every time I buy something that isnât a whole number, I can take the change that would make it a whole number at put it into save. Ex: I buy dinner for $13.12, I put $0.88 into my save. đ”
If you try something similar, then I’d love to know how your children react.
â 3 â
The Opposite of Spoiled by Ron Lieber
“One of the most profound challenges of having kids is that raising them isnât simply about shaping their financial values and decision-making skills. Teaching them means questioning our own priorities as well, which is a healthy thing to do in any event.”
I just facilitated an Art of Allowance Academy workshop last week, and I shared with the participants something I admit to all my cohorts: I’ve learned as much as (if not more than) my kids in the process of trying to teach them money smarts.
Learning from your students is one of the wonderful benefits of teaching. So I agree with Lieber that it’s healthy to question our priorities and money perspectives as we navigate this journey with our children.
Furthermore, when we encounter information that should change our minds, we must allow it to do so. For example, I used to be more adamant that chores and allowance must be separated. However, speaking to many parents and money experts like Cameron Huddleston has convinced me to soften my approach.
To wrap up, I’ll share one final point from Lieber about engaging kids in your family’s charitable giving plans:
“The best way to help kids learn about giving is to give them a literal seat at the table when the grown-ups make decisions about donations. This may involve some adjustments in our routine. It also means making an actual household giving budget and thinking about it as one large pie that we divide consciously and conscientiously.”
There are many choices we make that are invisible to our children (when it comes to sharing, saving and spending). This passage underscores the importance of pulling back the curtain to let our kids in on how we make the decisions that we do.
Until next week, enjoy the journey!
John, Chief Mammal
P.S. Please consult with a financial or investment professional before engaging in any decisions that might affect your own financial well-being.
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