So. Privileged brat. This is a #FirstWorldProblem angst a lot of us newly-minted folks feel, especially since we aren’t used to thinking about it at all.
The key for me, is to try and extract the great out of what my childhood was and taught me, and to pass on strong values that I know will serve my son well.
Not all children are the same – some are natural savers, some are spenders, some are hoarders.. it’s so hard to say because it varies so much with each child – you have to be flexible and be able to adapt.
STARTED WITH COINS AND VALUE OF MONEY
I taught him what the coins and bills were. And I taught him with some math workbooks: If I have $10, how many boxes of candy for $1 can I buy?
Just getting him comfortable with the idea that money is what pays for items and it isn’t just going to a store and tapping a card (which I totally do).
LESSON 1: Money is used to pay for items, not air or tappy cards.
WE WALK INTO STORES AND WALK OUT
We also started when he was young, going into stores just looking at things, and leaving.
I didn’t do it on purpose to walk into a store and not buy anything, but we just generally don’t always buy things in stores. Sometimes, it is to compare prices, and check for quality or what is available.
LESSON 2: He knows that when we go some where it isn’t always to spend money.
HE KNOWS I GO STRAIGHT FOR SALES
I go into the pharmacy and I said it so often that he picked up on it saying: “Mommy, let’s go see what’s on sale in the beauty lipstick rack!“…
Only once he said that, I realized that he was listening to everything I was saying.
LESSON 3: Kids hear how you talk about money and you should be their role model
WE TALK ABOUT SAVING
The other day, I introduced him to the idea of a high-interest savings account and that if he saved his money, he would see MORE money in the bank account if he left it.
I started in on compounding interest and then explained how the bigger the pot of money is, the more money he’ll get, and we did a little “high interest savings account” experiment over 20 days where I’d pretend to put in 10% and he could see it grow on paper.
LESSON 4: Never too early to start with basic concepts of saving and the WHY
I SHOW HIM MY BUDGET
He wanted some app, and I told him I didn’t have the money yet because I wasn’t working.
I sat him on my lap and showed him my budget categories and what went into each of them, and what I allocated for the year.
Then I showed him my monthly budget and said: We are at the start of the month, if by the end of the month there is money leftover for this after savings, donations and bills, then we can buy the app.
LESSON 5: Get them into the mindset of allocating their dollars & paying themselves first
MY FUTURE PLAN
I will advance to these steps once he is older, no real “oh once he turns 8 we will talk about X”, but more like seeing how he is taking in these ideas, and then reinforcing them, and introducing things slowly.
For instance, he is now learning about jobs making money, money means savings and savings means you can buy what you want. When I watch videos with him about cartoon characters spending or saving, I make it a point to talk about the money decision made and why it is important.
For instance, this pig on Baby Looney Tunes named Petunia, saved up all of her quarters and at the end bought a huge sundae to share with everyone.
I seized on this moment and said to him: Look how clever Petunia was! She saved all of her money so she could buy something special!
He absorbed it, because he told me just this morning: Mommy, I want to save up ALL of my golden coins in Hi Words so that I can just click Collect a bunch of times and watch my money pile up!
(I had to explain that I thought the game didn’t work like that but I did acknowledge it would be a cool idea / feeling to tap the Collect button and watch 50 coins shoot up in your balance each time.)
I am also monitoring for signs in his personality of what kind of money personality he has. Like I said, some are Savers, some are Spenders, some are both, etc.
I am in between as a Saver and a Spender (obviously), so I can understand spending on Wants, and it looks like he is demonstrating that he is a Saver/Hoarder, so I will keep that in mind as we go through this.
I want him to enjoy his money as well, so I am not going to be strict, but show him a budget, explain WHY, and then let him make decisions on his own.
Before he gets a job (between now and age 15)
In no particular order:
- Have him open up his own personal bank account – he is right now under my account, but I want him to start his own bank account and his own investing account separate from my accounts so he feels responsible & adult-like
- Have him read money books that teach him a rich mindset first, AND THEN advance on to read books on investing so he is ready once he makes money, to start investing ASAP (see list at the end)
- Teach compounding interest and show him how if he puts in the maximum in his RRSP in one year, how much it will be in 10, 20, 30, 40 years (and explain that being financially independent is very attractive to everyone but most of all, a confidence-booster to have under your belt early on because you will rely on NO ONE for ANYTHING)
- After he reads about investing and we discuss EACH BOOK, I will let him take over his own RESP account for investing – I’ll keep depositing money into the account but he will go online and trade ETFs every quarter just the way I have been doing it, so it becomes natural how to read a stock and trade one, plus track it in an Excel spreadsheet etc
- Teach him how to read basic stock fact sheets, and buy stocks – if he wants to take some of that money of his from the government to experiment with stocks, I’m all for it as part of the learning process
- Will not give him an allowance. He will not be getting money just for being in the household, and I won’t pay him for any chores he is responsible for – but he will still get to learn how to handle money
- Will have him take over and create the budget for things like Back to School shopping instead. We set a budget, he goes with us and picks out what he needs from the list, and decides between items. He will have cash, a calculator, learn how to calculate taxes and write it down on a notepad in the store / at home so he can see how it works, including paying for the items by himself.
- Travel often with him – I want him to see how other people in the world live, because travel opens up so much in your mind. You start seeing the world through others’ eyes, and until you see that people really do have outhouses or no creature comforts, you appreciate everything you have so much more. He can even help make the travel budget and price out what to see, what things will cost, currency exchange, and map/plan the days based on a budget.
When he gets a job
- Teach him how a pay stub breaks down by making him explain it to me after he researches it (e.g. taxes, EI, etc)
- Start him immediately in an RRSP for savings
- Start him into charitable donations – 5% to 10% to help him see that he has the money to give back and he should OR he has to volunteer and spend TIME helping others not as privileged as he is
- Have him open his own credit card in his name to start building a score, and teaching him how to clear the balance each month without fail; and how to take advantage of credit card offers/calculate the best offers
- Encourage him to think of side incomes, extra ways to make money if he happens to have any ideas because you can’t rely on one income as I have learned
- Teach him how to set up a working budget and plan for bills now that he has true income and where it goes
- Explain to him how it isn’t 100% his money to spend and have him set aside 50% for savings, and 20% goes to the household bills*
- Have him take over his own bills – if he has a cellphone, or any subscriptions, including clothing beyond basic things, he starts paying for it so he realizes it isn’t a free ride and he can’t afford everything AND pay himself first (which is key)
- Talk to him about his future goals – buying a secondhand car, maybe a home, going to school and how he wants to reach those goals and what it takes to save aside for them
- Teach him how to price compare and shop for deals
- Teach him how to bank and credit card hack – bank promotions, high interest accounts, credit card promotions if he can save money to do so – I will even loan him money to help him get these promotions for a cut of the pie, and have him work out whether it is a better deal for him to save and do it, or to get money from me to do it but for a price
- Have him do his own taxes (they are so simple at this age), and have him read through the guide and ask questions if need be – I would likely ask him to do taxes by hand on paper the first year so he learns, and then he can use a tax software afterwards as doing it on paper teaches you like nothing else.
*I don’t plan on using or keeping the money for actual bills, this is just to show him that 100% of your money isn’t 100% to spend which is a lesson I have seen parents miss an opportunity to teach, and then kids start out on their own and are shocked their needs take up 60% of their pay and they don’t have 100% of their salary to spend on fun.
When he gets into university
- Reinforce the values of using the money wisely – he will have RESP access to pay for things, and I will leave him to do it on his own because I am confident I will be satisfied that he knows enough by this point (he can ask if he has questions)
- If he has to take on student debt, I will teach him that loan payments will eat him alive, and show him how much interest payments will be if he graduates with a big loan at the end
- Gift to him at the end, his 20% “household payments” from his job during school, as a graduation gift (with interest of course), and tell him it is his money to do as he wishes – if he has debt, to clear it, or to enjoy it as he wishes.
- Start teaching him how to negotiate for a salary and practice with me, reading a benefits package or weigh out the pros/cons of each job, but not to spoon feed him or go with him to interviews because… WTF?
- Teach him how to think about sacrificing in the short-term like giving up privacy for the first while, and maybe get a roommate, or rent-hack/house hack so he gets his rent paid for ‘free’ while he ‘manages’ his roommates/tenants
- Ask him to start a budget for after university – What job will you get? At what salary? What’s that after taxes? Where can you afford to live? What is your budget? How will you live and clear debt? What will you have for fun money?
He should be fine by now.
I hope I will have plenty of opportunities to impart EARLY ON and build smart money habits in him so that by the time he has graduated, he is SOLID on the money front.
I would also like to see what debt he has, and after a year or two, just clear it out of my savings to give him a fresh start, IF I think he has solid money habits and doesn’t need the learn any hard lessons about paying debt, budgeting and saving.
I am not going to promise or mention any of this idea of clearing his debt to him so he doesn’t rely on it, and he STRUGGLES if he has to or figures it out. In the struggling, I learned so much and it will be the same for him, I hope.
As for the partners he will encounter — well. We will have to see. I hope he ends up with someone who is his equal, and if I see it isn’t the case, I will tell him the truth because I’m his mother, but ultimately he makes his own decisions in life.
You can’t learn anything if you’re not challenged in life.
I won’t be giving him a lot of things or supplementing his life – he has to learn how to pay for and live his own life without my money, and whatever I give him is just a sweet bonus.
I also don’t want to be structured or too rigid – I want him to learn and to adapt to him learning, the way I managed to teach him so far how to read, write, do math, and so on. I want to adapt to his style and give him the best education possible on all fronts.
Books to Read:
- Starter Books for Kids talking about money
- 5 Money Book recommendations
- Managing money like a boss – Basics & How to change your money mindset completely
- Investing like a boss: How to invest for only 4 hours a year – Canadian version
- My 5 Money Book Recommendations for Canadians
- The only Personal Finance Books you should read
And that’s how I plan on educating Little Bun so he doesn’t turn out as a privileged brat.