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Tag: teaching kids about money
Sunday is Pay Day – Earning an Allowance
As a father of three boys (5, 7, and 10) and an investment professional, I’m always finding new ways to teach my kids about taking the long view with their money, goals, and happiness. One habit that has worked hugely well for our family is the old-fashioned allowance.
My wife and I try to instill in our children that we are a team, and together we make the household operate. The boys have typical responsibilities like putting their stinky clothes in a hamper, picking up their 1000 nerf gun bullets, or putting their dirty dishes in the sink (maybe even in the dishwasher). In exchange for their labor, the boys get paid.
Every Sunday, after donuts, is payday. In the McDaniel household, $2 a week is the going rate for an A+ job taking care of your family responsibilities. Fall a little short; you get a little less.
The benefits? We get to communicate our family values of hard work, kindness, and teamwork through direct experience. Also, great conversations: What they want to do with their hard-earned money – Do they spend it, save it, or give it away? How much goes in each bucket?
New York Times columnist Ron Leiber’s book, The Opposite of Spoiled, is a resource that I’ve found invaluable. Want more? Call, email, or set up a time to talk more about how we can help set your kids up for long-term financial success.
My nine year old son, Jack, recently left $28 and a note on my desk saying “Bank it!” Want to know how I got my kids excited about saving for the future? Listen to this 90-second audio clip about the power of compounding.
Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This information does not reflect historical or expected results for any specific Hill client or prospective client, and is not intended as a recommendation appropriate for any individual. Investments involve risk and the possibility of loss of principal, and are not guaranteed. The values used in this report were obtained from sources believed to be reliable and do not reflect management fees. Listeners are encouraged to seek advice from a qualified tax, legal, or investment adviser before investing.
Get the Whole Family Involved
One question we hear often is, how do I teach my kids about money?
We’ve shared our conversation with Marilyn Wechter about subtle ways to set our kids up for success with money and talked about how not to be a snowplow parent, but what about the nuts-and-bolts? How can we teach our kids the basics of saving, the power of compound interest, and how capital markets work? In other words, how do we make finance fun?
Recently, John and I had a crash course in teaching a trio of teenagers. We thought we’d share some valuable takeaways you can incorporate into your own “money talk” with your kids.
The meeting’s highlight was “Roll with the Market”, a dice game that aimed to replicate the stock market. We also introduced them to our version of Finance 101: budgeting, savings, goals, credit cards, and Rick Hill’s favorite Rule of 72.
In “Roll with the Market”, the kids decided if their money was “in” or “out” through 10 rounds of dice rolls. The game gave the kids a taste of what it’s like to be invested in the stock market, simulating a rising or falling market’s emotional effects and changes to their investments. To our surprise and satisfaction, the three kids stayed in the market all 10 rounds, never once deciding to sit out (equivalent to going to all cash). Even at this young age, they were able to intuitively understand and take the long view!
Here are a couple of tips for keeping children engaged as they learn:
- Use cold hard cash – Once we threw some cash on the table and got them involved in helping manage it, they were hooked.
- Gameify the essential topics – Making the lesson a game reframed their idea of money from obscure to practical and made it fun! They were also able to practice and absorb the lessons without just listening to us drone on.
- Make it relevant – We believe the real power of wealth lies in creating freedom and options to lead the life you choose. By asking a couple of pointed questions, we were able to help them understand that money can power their dreams, even now. The key was showing them money matters today – not just in the future. Each member of the family was totally engaged, asking great questions, participating in thoughtful conversation.
If the idea expressed here sounds good to you, let us take “the money talk” off your hands. Contact us about scheduling a family meeting. You never know what small spark will set off your child’s long-term success with money.