Even though I like things simple, I sure have a way of making things complicated. Teaching our kids about money was no different.
Kristan and I have known for years that exposing our three girls (11, 9, 5) to conversations about money was important for their development (and our peace of mind). How to do it in a unified way that appealed to all three despite their age differences escaped us… until recently.
We tried different approaches throughout the years: from books, to individual lessons, to inconsistent family meetings. Our attempts were typically met with blank stares and sometimes tears. I can’t say that we tried it all because we didn’t, given the resignation that quickly set in after each failed attempt.
Looking back at it, I am not surprised that we failed miserably - I tried to turn our young children into money experts in one conversation!
In 2020, we simplified things.
We started with “what is our intention?” question. It was actually not to “teach” our kids about money, but rather provide them with the “experience” of money. The former became kind of like describing gravity to a child, and the latter is shaping up like them starting to ride the bicycle.
So what does that look like?
Our kids earn money
There are no allowances in our household. If they want something like a toy, we figure out how they can earn money to buy it in between birthdays and major gift holidays (we’re blessed with grandparents who like to grant our kids’ wishes).
Our oldest has an obsession with baking, so she started a baking business - Sweets By Sloan. Our middle child reads for money (topic for a different piece) and cleans her grandparents home - she has not found a way to monetize her obsession with Roblox and Minecraft. And our youngest, currently lowest spender, folds laundry once in a while.
We do not use the term “make money”. We want our girls to know that money is earned by providing goods and/or services to others.
Our kids set aside at least 50%
Setting money aside for future consumption is a foreign concept to most of us, and especially children. So Kristan and I instituted a rule - half of what comes in, goes into their respective bank accounts. More than a few tears were shed when this rule went into effect and yet, a few months later, it was adopted as a way of life and adjustments were made on their part. Liv recently asked me: “Daddy, if the game that I want to buy is $5, does that mean that I have to earn $10 so that I can use $5?”
Instituting the 50% rule was so much simpler than explaining how taxes work and the importance of delaying gratification.
We do our best not to use the term “save”. With ongoing devaluation of currencies, “saving” is not what it used to mean under the gold standard.
We do talk a little bit about “investing” when the right opportunities come up.
First lesson was taught via Roblox IPO in March of 2021. As mentioned above, our nine year old is obsessed with Roblox and decided to buy one share in the company that has so much meaning to her - a good first step in selecting investments.
Our kids’ money earns money
We pay our kids 1% monthly interest to make it clear that money earns money too and the more money they have, the more money it earns - the fundamentals of compounding.
Our kids see their progress
Each month I update a simple spreadsheet that shows the money they earned (or were gifted on holidays/birthdays), how much their investments appreciated, and how much money their money earned. We print three copies and go over the numbers quickly with the girls. This is far from a deep dive business analysis, or a wealth creation conversation, and yet the monthly has served three purposes:
It shows them their progress visually - they may not have the concept of numbers per se, but the increase in numbers is understood.
It has promoted some healthy competition among them. Where it goes will be interesting to watch.
It has created a regular opportunity for us to have, albeit currently somewhat short, conversations about money. The way I see it, if nothing else happens, we will have about one hundred regular, non-emotionally charged conversations with each of our kids about their money before they are eighteen. We’ll take it!
Early signs of success
Our kids stopped asking us if we could give them money to buy stuff. They are now asking us how they can earn money, including the 5yo.
Their spending on random stuff has decreased - this is a qualitative assessment
Sloan has started creating budgets for her baking business and I broached the conversation with her regarding cost-based vs market-based pricing of her products.
Liv randomly asks me about the market value of her share of Roblox and I now have an opportunity to randomly tell her that it has increased in value by about 50% since she bought it. She recently asked me “When should I sell it, daddy?”. Pretty great question for a nine year old.
They are price shopping before making a purchase.
That’s all for now. Stay tuned for an update!