Money Lessons for Children: What I want to do with Little Bun
I have been thinking a lot about how to introduce the concept of money, finances and reality to Little Bun without shoving too much adulting down his throat.
Where I am scared about all of this and making sure I DO NOT SCREW UP, is that I did not grow up with any money management pearls of wisdom or skills, and I had to figure it all out on my own.
I ended up landing on my feet learning about money in general and clearing $60,000 of debt in 18 months after graduating and starting my career, but I don’t want him to start off without the basics.
So, here are a few of my brain dumped thoughts:
I DO NOT WANT TO LIE TO HIM ABOUT OUR SITUATION
I read a (great) reader Clo’s comment here on this post: Did you know how much your parents made where being lied to as a kid, stressing about adult things like worrying if your parents had enough money and if you were going to make it as a family, sounds painful.
I do NOT want to lie about being poor, and having Little Bun worry about whether or not we were going to lose it all.
We obviously have money and lots of savings for where we are in our lives.
I mean, our house was paid in cash, and together we have more than enough where we are able to not think about any expenditure for the home under $1000. We just spend the money, and tell the other person the half they owe. I do not know many families that are able to do that..
So, with that said, while I do not want to lie to Little Bun about our finances, I also do not want to give him the impression that we are ballers.
I do NOT want him to go to school thinking: My mommy drives a 6-figure luxury car (for sure, his friends are going to comment on this, NO DOUBT, I know how kids work, I grew up with the same experience), we seem to have lots of money to do whatever we want, we must be RICH!
No. We are not “rich”. We are comfortable.
Rich to me means I do not have to work ever again if I did not want to, and can still maintain my lifestyle as-is. That is not the case, ergo, we are not “rich”.
Yet, I don’t want him to worry about us.
So, I am thinking I am going to tell him our average salary as freelancers, INCLUDING the years where we made $0 because we couldn’t work due to the lack of jobs, and to walk him through gross income, taxes taken out by the government, and how much we have left over each month, and where it goes in terms of bills.
I WANT HIM TO GET A TASTE OF REALITY BEFORE IT HITS
There was this great money exercise I read about where once a kid gets their first job, you start introducing the concept of fixed and variable expenses, and give them a taste of reality.
Their income is not 100% theirs. So, I want to highlight this by:
- going through his paystub together with him
- pointing out his gross versus net income
- showing him where the money goes, and explaining why
- showing him the net amount based on the hours he worked
…. and then I’d like him to go through an exercise where he creates a budget.
He chooses where he would think is a nice place to rent, estimates the cost of food (based on some basic budgeting categories and percentages) and then show him how where he is working with the hours and how much he is making, would cover X and Y but not the rest.
Something where we can tie in what he earns today as a minimum wage, part-time worker, versus what real life would cost, and what kind of real life he wants ….
I feel like we go to school, we graduate and then… bam, we have to figure out where to find a reasonably priced and safe place to rent, how much groceries cost when we have never shopped for them before, the fact that utilities, telephone.. all that stuff ADDS UP…
It becomes a reality shock. I don’t want him to be unprepared for that, so I want to be sure he knows that he can buy what he wants, as long as he can afford it.
I WANT HIM TO ENJOY HIS MONEY
I want him to also not be so focused on money that he will take any job he hates that sucks his soul out through his toes, working 100+ hour weeks in a meaningless job, just to be “rich”.
I’d rather he find a balance — a job he likes (not necessarily loves), can do well, and still has time for LIFE.
I want him to enjoy his money.
I want him to spend it on nice things, dinners, and not feel guilty about it.
I want him to see money as what it is — a tool, which is why I am compiling a list of great personal finance books to get him started on once he is ready.
These are books that kids and young adults can read without getting overwhelmed:
…and the rest of my list is here: The Best Personal Finance Books To Read
I want him to work hard and then enjoy the fruits of that labour, and not to stress about money all the time when he CLEARLY HAS ENOUGH. OR has saved enough.
Thoughts? Other kid-friendly or teen-friendly ideas when he gets older?
Once my daughter was 12(?), I thought it would be a good idea for her to be able to start prioritizing spending. Part of it was for her to learn how to manage her own money, partly so she would stop asking me to buy her stuff all the time. We made a list of what I paid for on a regular basis (clothes, allowance, school supplies, toys etc), and estimated how much per year I spent on those items. At the beginning of every month, she got 1 / 12th of that amount (this was 16 years ago, I think the amount was $150 per month). She was not allowed to ask me to buy anything for her any more. (I still paid for school trips, and other incidentals). The first few months, she bought $100 shoes, or just ran out of money in the first week. (She could earn more by doing chores). Sometimes she’d not go to the movies with her friends because she’d run out of money and didn’t feel like earning more.
After a few months, she could make the money last the entire month, with some left over.
We stopped doing this when she got her first part time job.
She is almost 30 now, has a credit card but doesn’t carry a balance. She has gone into a little bit of debt at times when life happened, but cleared it up quickly.
If I’d known more about personal finance, I would have put a savings program in place as well, but I did the best with the knowledge I had at the time.
Teach him to look at the prices of things whenever you shop for anything. Ask him to calculate if the bulk item is cheaper per unit, that kind of thing. I know people who never look at the prices of things or comparison shop because they weren’t taught to do that.
Once he starts earning money (even if it’s from allowance or tasks like dogwalking, etc.), teach him to not just comparison shop, but to look at items in terms of hours worked or tasks completed (“how many weeks of allowance is that? Do you want to save?” or “if you bought this yourself, how many walks would you have to take the dog next door for?”)
I agree with SarahN that money conversations have to start WAY before the kids actually make money, especially when it comes to saving and delayed gratification. My son is only 4 but we got this book: Little Critter: Just Saving my Money
We had other Little Critter books but for some reason he’s really glommed on to this one (and “I was so mad!” which was really cute). Basically the character in the book wants something and does chores and saves up for it (including opening a savings account) so I think its a great way to start a money conversation without really getting into details.
I also agree on an allowance or some other way for a kid to have their own money before an official job, how are kids going to learn to save and balance money if they are never given any? But, to each their own. I’m sure with little bun seeing how great you guys are at saving and budgeting, it will help regardless.
Gail Vaz-Oxlade also has a book about kids and money (“Money Smart Kids”) and one of the first books I read (in high school, though) was The Wealthy Barber. Lots of resources and tools out there 🙂
I really liked the book “The Opposite of Spoiled” for talking to kids about money. I too think about this a lot. I bought the book before my daughter was born and mostly read it while breastfeeding during the first few months, i.e. long before I could do anything with that knowledge. But I liked how he presented lots of different perspectives and didn’t seem to zealous about any specific approach (if I’m remembering right, I was very sleep deprived when I read it).
I think the rent and grocery exercise is fine, but perhaps at 10 or 12. Long before then, I think you need to have conversations. I think I recall you don’t want to give him pocket money, but it’s an incremental way to learn about money, and introduce taxes/savings as you see fit. Also what he wants, delayed gratification to ‘earn’ it over weeks of pocket money (whether for chores, or just given each week, as a set amount).
I grew up with a mum who spent (a bit) and a banker dad who left school at 16 to pay his way. I have great money skills, without anything artificial. When I asked, they answered, honestly. They explained about debt and how others at school likely used debt to afford some of their life.
Also, your definition of rich is fine, but it’s worth having a convo on what he thinks is rich, and what his school friends might think. It’s definitely enlightening!
I used to quiz my mom on all our expenses and draw up budgets for her to prove we could afford a pony, lol. Just make sure you let little bun know that the amount you and your partner make is private, so playground conversations don’t get back to his classmates’ parents and get misunderstood.
I recently listened to a book called the Barefoot Investor for Families and found it a fantastic read and has easy and simple rules or things to do with your kid so they could learn about money until 18yrs old. I’ve been recommending it all my friends who have kids young kids.
Random note thought, could you do a financial/money post about things to consider what you bought or did not buy when you had baby bun? I would really like to read your thoughts on that.