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How are you teaching your kids about managing their money?

2,544 Views | 28 Replies | Last: 1 yr ago by aTm2004
Southlake
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All my kids started working at 15 and I taught them about investing their paychecks as well as birthday / Christmas money. I also introduced them to how the house bills were paid electronically out of my paycheck and the household chores they did indirectly helped pay the bills. "What? We have to pay for water? What? We have to pay for electricity? I opened up accounts at the Credit Union and showed them how to track their money on line, how to maximize employer contributions and how the Roth IRA was better with low tax payments. They bought and paid for their used cars.

Great part is that they got very protective and aware of how their money worked for itself. Later, I showed them Net Present Value and Future Value formulae worked. Understanding time value of money and assets is critical in managing their financial future. I also explained how insurance and home mortgages worked.

Un-great part was they played that against me all the time! Hey Dad, I really don't want to withdraw money and lose the interest, can you help out?!

They are all out of college now. They all worked part time in school. The deal was if they worked and made grades, I'd pay their tuition. They graduated with sizable nest eggs enabling them to get a good start after college.

Now, finances and money are a standard conversation as I teach them how to handle their mortgages and investing options and strategies.
Howdy Dammit
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AG
My dad showed me the time value of money/compound interest calculator. That did it for me. But it's also very hard to get teens to look 20/30/40 years in the future. Luckily my daughter is 3 weeks old so I have time to figure out my strategy
topher06
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Just imagine what she could have if you started her out at 3 months. Better get those calculators out now.
AgOutsideAustin
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AG
We talked with our kids about money growing up. They saw we didn't have the largest house, best cars, high end clothes, huge vacations, even when some of their friends did. Our kids never got the latest phones first or the latest Xbox first but they eventually got them and most of the time as a Christmas or birthday present. We went to Port A each summer with their cousins, We simply said some people choose to spend their money one way and we do another. Made sure to explain debt and that when you see someone with the best and latest everything many times that's financed on credit. Talked to them about retirement savings. We tried to model handling money for them and our golden rule was " save some spend some but the saving always comes first".
10andBOUNCE
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AG
Started giving the option for anything they invest from their chore money, I will match in their UTMA.

Giving is also a major element of what we try to teach.
Dill-Ag13
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AG
Kids earn up to 10 dimes a week. Teaching them to save 2 coins, give one coin and 'spend' the rest. They are 6 and 4. Open to better/other ideas
$30,000 Millionaire
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AG
They're buying YOLO 0DTE call options.
You don’t trade for money, you trade for freedom.
Baby Billy
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AG
I think it's as easy as showing them the time value of money. Tell them most people work full time from about the age of 22 until about the age of 62. If you can set aside $500/mo into a Roth IRA from the day you start working until the last day, without doing ANYTHING else at all, and earn a modest 8-9% average annual return, you'll have over $2,000,000 tax free the day you retire.

And that's only $240,000 of your money
Dr. Horrible
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Hookers and blow
techno-ag
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AG
https://www.amazon.com/Smart-Money-Kids-Raising-Generation/dp/1937077632
$30,000 Millionaire
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AG
To be more serious, we have regular discussions about income, debt, delayed gratification, needs vs wants, cost of living, and most importantly, having a healthy relationship with money.

The last one is something I didn't have growing up and I had to get over as an adult.

On the mechanical side, we review their investments all the time. We talk about dividends, taxes, and so on.

At the right age, they're going to work retail. Everyone needs to have that experience to learn the value of a dollar.
You don’t trade for money, you trade for freedom.
Pizza
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I've tried starting off slow, explaining the basic principles of compounding interest, and how to budget to my son; but he just doesn't seem interested. I also tried showing him the basic functions of an HP 12C calculator, but that didn't do much good either. He's only 8 days old, but I'm concerned that he just isn't grasping the fundamentals yet.
AtlAg05
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AG
We have our kids maintaining their own ledger (by hand!) on money they get from allowance/birthdays/etc. They divide it into save/give/spend categories.

At first, the save is just us holding onto it and as they get old enough we open a savings account at a local credit union. We took the two oldest in to see the process in person over the last few years.

Not even a teenager yet and the oldest is saving for a car.
AggieAces06
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AG
My son is 8, but we set up a savings account for him last year that his dad and I have access to. I put in the $5 to open the account and he put in a chunk of his birthday and Christmas money from years past. He kept some spending money for himself.

This year after birthday and Christmas he made another deposit. (It helps that the bank sent him a post card that if he made a deposit in the month of his birthday, he got a free backpack). He has a little ledger book that he can put his deposits in, and I showed him the interest that his money had earned, so we wrote that down and added it too.

He actually paid me back my $5 investment as my Christmas present this year. (Come up with it himself).

For day to day management if we go shopping and know he might want to buy something he brings his wallet. He puts his item on the checkout and hands the cashier the right amount for payment (with help as needed). If he doesn't have his wallet, we will agree to pay, but he knows he has to pay us back when he gets home. Things don't seem as highly needed once he has to use his own money to pay for it.
BenTheGoodAg
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AG
When I was a kid, my parents didn't talk about money at all. Nothing about budgeting. They didn't understand enough about investing/compound interest enough to share, but they did have an advisor who would invest for them. Never talked about what they made or what things cost. I worked for my dad on the farm, and never got paid until he did his taxes at the end of the year, so I never knew how to relate my income to the work I was doing. In school, we learned about the math of compounding interest, but not really in the context of investing. Very little about meaningful budgeting, maybe how to balance a checkbook. I think this experience is pretty common for my generation.

When I was graduating college, someone got me plugged into the Dave Ramsey show. Not here to debate his philosophy (there are good and bad elements of his show), but it was definitely good to get me plugged into learning more about money.

So the single biggest takeaway I've had is just to be more transparent about money with my kids. I've had this conversation with my parents/in-laws, and they wish they'd done more, but it was just very taboo at the time. They're happy to see us be more open with our kids on this topic

Specifically:
- We talk a lot more about the costs of things - ie utility costs, the cost of a new vehicle, how buying in bulk can be a good thing, etc.
- We encourage them to both save and to spend. It's important to be able to do both. Each kid seems to understand one or the other more naturally.
- We teach them about tithing and giving to others.
- We talk more about the concept of budgeting, and less about balancing a checkbook/credit card (does anyone do this anymore? Lol)
- We focus on the reward of working hard. Some chores they do are expected. Some they get paid for. Sometimes they can decide that an optional chore doesn't pay well enough, or can negotiate their rate, but they also miss out on some of the things they want. We want them to learn the value of working hard, but also want them to understand that it's OK to be rewarded for hard work. We try to pay them immediately.
- We talk a lot about debt and understanding the good/bad, and encourage them to avoid it.
- They're not quite old enough, but they know that investing is important. We'll get more into it as they mature.

Good topic.
Definitely Not A Cop
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AG
"It's never too early to learn that the government is a greedy piglet that suckles on a taxpayer's teet until they have sore, chapped nipples. I'm gonna need a different metaphor to give this nine year old."

Ron Swanson
aTm2004
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AG
We primarily do it through having them earn money and to buy things they want with their own money.

My 9 and 7 year old have chores they do each week, and for that, we give them a $5 each and reccomend they put it in their bank. We do buy them fun things, but outside of a holiday or birthday, anything they want to go with it, we have them use their own money to do it. An example is a Nintendo Switch. We bought that and a couple of games for Christmas one year. If they want a new game, they have to use their money to buy it. Often times, when they see how much it is, they choose to save, which we commend them on. If they still want that game when their birthday comes around, we may get it for them.

We got the 2 oldest an iPad for their birthdays last year due to school homework (mainly math) being done online now. A few weeks after getting hers, my 9 year old left it on the ground in front of the couch, and her brother stepped on it and cracked the screen. We dropped it off at a repair place to have it fixed, and told her she could go into her bank and get the money and give it to us, or she could forego her allowance and pick up extra chores to pay us back, which is what she chose. She tried to blame her brother and said he should pay for it, but we explained to her that it is her responsibility to make sure it's put up somewhere safe, not her brother's.

For their birthday, my mom's thing is to take them shopping with a $100 budget. What they don't spend, they get to keep. When they were younger, they blew threw it all because they didn't understand value, but now, my mom says they're thinking about if they really want or need it. Last year, my daughter only spent about $40 and decided to keep the rest. My 7 year old spent about $90, and the 4 year old blew threw it as you'd expect.

As they get older, we'll explain the importance of saving a percentage of what they earn and whether or not they need the things they want. We'll also teach/explain about living within their means and not buying something just because you can.
Stringfellow Hawke
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AG
As a side topic, how does one keep the government taxation to a minimum?
BenTheGoodAg
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AG
Stringfellow Hawke said:

As a side topic, how does one keep the government taxation to a minimum?


In keeping with the thread? I just have tons of kids. CTC for the win. We do lose money faster and in other ways because of this method.

Might seriously be a good topic for a dedicated thread.
Retired Principal
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Wife and I retired before 60. Saved 10-15 percent pre tax and we told our kids to do the same. Drive cars for a long time and don't accumulate credit card debt that we can't pay off each month. Try to lead by example. Both our sons know what to do and how to do it, but one chooses not to and the other does a great job of managing his money.
cgh1999
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AG
I teach them by stealing their money. Jk. Sorta.

Whenever they get money for birthday, Christmas, etc I would take 70-80% and put it in a savings account. Got that over $1000 and I would open up a brokerage account for them. Instead of giving them an allowance, I put money in the account for them. As young kids 8-13ish, they'd realize what I was doing and get mad about it. Now, the older two are happy to give me the money.

They put about 50% in the brokerage and the rest is in savings. They can spend savings, but we discuss all purchases. They still buy stupid stuff occasionally, but they at least understand the concept of saving for something they want.
ATM9000
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I think 90% of it is just modeling good behavior.

I grew up with parents who were really thrifty, thoughtful and calculated about money. We were as middle class as you can get. Beyond that, they didn't live reckless lives. They worked hard, I never saw them drink in excess when I lived with them and, when they did splurge, it was on meaningful things. I'm sure I had money management discussions with them growing up, but I can't recall any to this day. That means they probably didn't happen that much and that they didn't impart some sort of life changing wisdom to me. I worked for spending money and if I spent that on something dumb, then I was stuck with that dumb thing.

My wife grew up in a house of chaos, unrest and recklessness. Her parents were really the opposite of mine. When we first got married, some of her money blind spots astounded me… those blind spots are mostly gone now.

So much of money management is just about having the right mental state to think about things logically and evenly. Yes… the math is important but it is the easy part of the equation. I don't know a single person who is killing it financially that lives a reckless life in all other aspects and vice versa.
aTm2004
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AG
This discussion is fun to have, but if we're all honest with ourselves, it really comes down to individual personalities. My wife and I are prime examples of this because we are polar opposites when it comes to money, and we grew up on polar opposites of the economic scale. My parents were hard working hourly employees their entire career who were loose with money, while my FIL was in the 2 comma club at one of the major railroads and is so frugal that many would consider him a miser. My parents never talked to me about money management, but I have always been a saver. Even when I was a kid, I saved any money I had and always took great care of my stuff. My wife, not so much. She's a spender and continues to be. Big stuff or little stuff, it doesn't matter. Money is hot and it needs to be spent. Her brother is like me. Save as much as we can and only spend when we need to. If we do make a "luxury" purchase, all of the homework is done and we've had the internal conversation with ourselves that it'll be OK.
Malibu
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The four-year-old gets a five dollar allowance per week doled out with four $1 bills and the extra dollar she puts in the family taxes piggy bank. I want her to see now that her gross earnings and net earnings are not the same thing. When we do grocery runs or go to Target, she can use her money for whatever she wants to within reason and this has cut down the harassment for me to buy things for her to zero. We've been doing this for a few months now and had two early meltdowns because she spent her money unwisely on candy and cheap toys that broke and couldn't buy the baby doll that she actually wanted. After those tough life lessons dealing with the consequences of poor money management, she has since decided to forgo impulse purchases and sometime later this month will be able to afford her doll.
Malibu
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aTm2004 said:

This discussion is fun to have, but if we're all honest with ourselves, it really comes down to individual personalities. My wife and I are prime examples of this because we are polar opposites when it comes to money, and we grew up on polar opposites of the economic scale. My parents were hard working hourly employees their entire career who were loose with money, while my FIL was in the 2 comma club at one of the major railroads and is so frugal that many would consider him a miser. My parents never talked to me about money management, but I have always been a saver. Even when I was a kid, I saved any money I had and always took great care of my stuff. My wife, not so much. She's a spender and continues to be. Big stuff or little stuff, it doesn't matter. Money is hot and it needs to be spent. Her brother is like me. Save as much as we can and only spend when we need to. If we do make a "luxury" purchase, all of the homework is done and we've had the internal conversation with ourselves that it'll be OK.

I am like your wife. Money that is in the bank account is there to be spent. My solution is that I move excess funds into a different savings account that doesn't have a debit card so that I am operating on a scarcity mindset rather than an abundance mindset. I know that this is kind of stupid, but it works for me.
aTm2004
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AG
I move money as well and she has no clue how much we have, otherwise she'd be on me about getting a vacation home in Colorado or something.
GE
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AG
We recently started trying to teach our 5 year old the concept of earning and to help out more around the house. She gets a coin for doing things like setting and clearing the table, making her bed, and getting dressed by herself without complaining. She gets one taken away for whining, not listening, or tormenting her younger sister. 10 coins she gets to watch a movie on TV. 3 coins she can have popcorn, and 3 more coins she can also have candy.

It's only been a few days but it's pretty wild to watch. This morning she made her sisters bed too for an extra coin.
Pasquale Liucci
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I have struggled with my wife for years because she is the same way. Recently opened up separate checking/savings accounts. Weekly I put our monthly budgeted amount / 4 for groceries, gas, restaurants, incidentals, etc into the joint checking account. Pay bills and ourself out of the separate checking account, with savings going to the account that she does not see when she pulls up her bank statement.

I am logical and spending conscious to a T. My dad was born in 1936 to a family of sharecroppers and remembers years where all he would eat in a day was a slice of bread with margarine if he was lucky and was an engineer. You can see how both those things rubbed off on me. It frustrates me frequently that my wife is so different but this system seems to work at least.
aTm2004
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When we got married, we opened up a joint account that we put everything in for household bills, entertainment, etc. From that, I transfer out a set amount per month to a savings account for taxes/HOA/insurance (don't escrow), and another transfer to our FA.

But we kept our individual accounts as well, and each put in the same amount each month for our "fun" money that the other can't say anything about. She's shocked that I'm in the middle of building an AR and have expensive items showing up almost weekly. It's not clicking that I haven't spent much of my money in the past year where she blows through hers in a week.
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