Ep 31 - How to Teach Kids About Money
Updated: May 2
There’s always something new to trip up the younger generations
Whether it’s auto loans, credit cards, or crypto this or crypto that. There is always going to be something right around the corner to trip up the younger generations. Something that their parents don’t understand and therefore can’t teach their kids about. This is ok and you shouldn’t be overly worried about these sorts of things. The reason is that if you teach the fundamentals well, then when those new things come along. Your kids or the people you are teaching will know how to handle themselves based on the financial foundation you’ve put in place.
Allow your kids to handle part of the budget
Rachel brought up this point to allow your kids to handle a budget of some sort. Whether it’s the gas station snacks, the sodas, or some other simple budget. It can be key to teaching kids how to watch prices and how to know when something is a necessity and when it isn’t.
This idea was eye-opening to me. As my wife and I don’t currently have any kids this is something that I look forward to trying. For me, I can see huge potential in the example that Rachel gave of your kids learning how to manage when they buy treats. I think this teaches discipline and teaches how to defer gratification. To me, this seems a lot more effective than the candy lesson. The one where you promise more candy if they wait to eat their candy. But ultimately that is up to you to decide. I hope this topic helps spur a money conversation for you and your family!
Small problems now help avoid big problems in the future
I also think this was a great point brought up by Rachel. Allow your kids to feel the pain of small financial mistakes so that they can learn to avoid the large, very painful mistakes in the future. This goes back to the last point where kids are managing a small part of the budget. If the kid spends all of their money on the first of the month then they are going to feel the immense pain of not being able to buy treats for the rest of the month. This can help teach the idea of making sure to manage your money. Instead of them spending all their money on the first of the month and then not having any money for bills or rent.
Money is more than just math class
There is more to money than just math. Money isn’t even the majority math. The math behind money is the easy part. The behavior and personal relationships with money is the larger factor. Financial literacy classes need to be more than just advanced math story problems. Classes at school and parents at home need to teach kids the emotion, behavior, and relationships that we all have with money. A kid might know how to calculate change but do they know how to choose between paying off debt quickly or investing for their retirement when it comes to the emotions involved. There’s a lot more to money than math and teaching money in school needs to make sure to account for that.
Scale-up financial lessons
Teach kids money as you teach them to drive a car. Another great point made in today’s episode. You don’t, or at least you shouldn’t throw a 15-year-old onto the interstate as their first driving lesson. So why then do we throw an 18-year-old into student loan applications as their first time hearing the term APR or interest rate? Seems daunting to me. We need to make sure our kids are learning personal finance as they are going. So they can make smart informed decisions as they get older and the complexity of money increases. If they aren’t sure about what decision to make, then they can at least know who to turn to since you will have been teaching them for years.
Find more information from Rachel
Make sure you check out Rachel Murphy online at https://rachelmurphycoaching.com/moneytalk