How to teach our kids about money?

Written By: Laurie Allen, Founder of LA Wealth Management June 30th, 2020

I'm here to talk to you about how to teach your kids about money. This is a question I get asked all the time from friends, neighbors and clients is how do we pass these skills down that we're learning, maybe later in life, to our kids so that they don't have to make the same mistakes that I made. There is a saying if you don't teach your kids about money somebody else will. We all want to raise responsible kids but how do we make sure that we're teaching them everything that they need to know about money before we shoo them out the door into adulthood. I often hear people say, “Why don't we teach personal finance in highschool anymore? What a shame!”  If you ask me, if we're waiting until high school, it's too late. So much of the way that we view money has to do with the home that we're raised in and the example that we see around us, as well as our own personalities. If you looked into my savings you might think, “she's a pretty good saver”, but if you knew me the way that my husband knows me, then you would know that I'm a actually a natural spender.  Over the years, I've had to create systems for myself to help me, help myself.

Today I want to share with you a few tricks that I've learned along the way that can help you teach your kids from the time that they're very little all the way through high school and college, to make sure that they have all the skills they need to go off into the world of finance on their own. 

Young kids Age 3-8

I have a 3-year-old and an 8-year-old and one of the funnest things that we've done over the years is use the JAR SYSTEM to learn about savings. Here's how it works: you take three jars (any old variety of mason jar will do) and label them SPEND, SAVE and GIVE.  Try to keep lots of quarters on hand so that whenever you catch them being kind, doing chores or being a good listener you can reward them right away. We'd ask the kids, “what do you think you'll want to buy once your SPEND jars full?” or “Have you thought about who we can donate the money in your GIFT jar to?” For us, the SAVE jar has always been put into their college funds, but we let them spend their SPEND jar on whatever they wanted. This ranges from ice cream, special clothes or toys.  What really surprised me along the way was when my daughter wanted to buy something small and save the rest so she could buy something bigger down the road. The GIVE jar could be donated to your local church, a shelter or something like the American Cancer Society. We've always made a habit of buying groceries and physically donating them to our local food bank. The primary goal at this age is TO MAKE SAVING FUN AND REAL.

Older kids/ Preteens Age 9-14

My 8-year-old outgrew the jar method a few years ago so we've switched to an app, plus it's not very convenient to carry quarters around with you everywhere you go.   Now, not only does she have to keep track of her debit card but she also gets to see how much she's collected in her SPEND, SAVE and GIVE categories, real-time.  

Another thing that we started to do at this age was help her figure out ways that she could earn money on her own.  Whether it be a summertime lemonade stand or doing extra chores around the house, my primary goal is to help make a CONNECTION BETWEEN HARD WORK AND REWARD.  A few other things that are encouraged during this age are showing them how their college account works, how does the money grow and how much of the money in the college account is their savings. Have open dialogue with your kids around money Make sure that they understand that NO QUESTION IS A DUMB QUESTION. 

Teens/ young adults Age 15-20

What are we supposed to be teaching our pesky teenagers? Now full disclosure, I don't yet have any teenagers myself, but I do have 7 teenage nieces and nephews and there's a few things I've learned along the way from them.  Teenagers are mini adults and NOW is the right time to begin talking to them about the dangers of borrowing money and how credit cards work.  I remember being a freshman in college seeing a long line of people waiting for their free t-shirts.  What I didn't realize that day is I was trading 21% and many many hours of stress for a free t-shirt and to be saddled with a bunch of debt when I graduated from college.   My parents didn't take the time to talk to me about debt and warn me about how credit cards work.  

In addition to teaching your kids about the dangers of spending on credit it's also important to TEACH THEM ABOUT THINGS THEY SHOULD BE DOING.  You can begin to teach them how the stock market works. There are free apps that will help you simulate how the stock market works, which is a great no risk way to get their feet wet. You can also continue to show them how their college accounts are being invested and how they work. You can even take the step to take some of their savings and help them invest it now.  For some of you, this step might seem the most daunting, but let me just say this, You don't have to pretend to have all of the answers!  If you're just figuring this out for yourself now, it's okay for you and your kids to tackle this and learn the basics of investments together.

Now if I can add just one more thing, I think it's so important that at all ages we talk to our kids about the importance of GIVING. When we set aside some of our hard-earned money to give to those who have less, we're reminded to be grateful for what we have. Remember that without contentment money can never make us happy.

As always if you have any questions about the specifics in this video feel free to reach out to us on our website at www.LAwealthManagement.com