Raising Financially Independent Kids Is Serious Business

Raising kids isn’t easy under the best of conditions.  Most of the parents I know work a 50+ hour work week.  To deal with after school care, they enroll their kids in after-school programs, at considerable cost to themselves.  It’s a kind of “two steps forward and one step back” situation that makes raising kids and saving money difficult.

The average family I see, only gets to spend nights and weekends together.  That’s not a lot of time to spend with your kids, and there’s no manual on “How to parent perfectly” in the limited time a parent has.

Going into parenthood, Mrs. Tako and I knew that time was going to be a big issue.  We both worked a lot of hours.  Together we resolved to reach financial independence before we had kids, so that we might have the financial flexibility to spend more time with our boys after they were born.

It was a good plan, but in truth we didn’t reach this blissful financial status until our oldest was about 2 years old.  (Better late than never I say!)

It’s not all perfect smiles and sunshine of course — Along with financial independence comes a whole host of unique issues that only financially independent families have to deal with.

For example: We have enough money to spoil our kids pretty rotten.  I’ve known my share of spoiled rich kids over the years, and I know I don’t want my kids ending-up like that.  Their relationship with money gets completely screwed-up.  Spoiled kids become super entitled… believing they deserve the finer things in life without actually doing the work necessary to achieve them.

It’s a problem I’m determined to avoid as a parent.

How am I doing that?  I’m glad you asked…


Basic Financial Lessons

My kids are still pretty young (they turned 4 and 6 this month), but the last few months have been big for Tako Jr. #1.  He started kindergarten in the fall, and his mental development has made HUGE leaps over the last 7 months.

When he first started kindergarten, Tako Jr. only had a basic understanding of his numbers (1 through 15), and he knew his ABC’s.  That was last fall.

Now, 7 months later he can handle numbers into the thousands, do basic addition, subtraction, and even some multiplication.  He’s already reading at the first grade level too! — We’ve always read books together, but now he’s constantly reading signs and product labels asking me what all the different things mean.

I have to admit it’s pretty fun to watch his brain grow.

Along with these big mental developments, he’s absorbed a number of important financial concepts:

1. He understands that money is necessary to buy a huge number of things in life.  We use to go to stores and he would always ask me to buy him toys or candy, but instead of saying “No”, I started telling him, “Sure, you can buy it with your piggy-bank money”.  Now he doesn’t ask me to buy him junk anymore.  He knows how hard that money is to get.  Now, every time we walk through a grocery store or parking lot he’s actively scanning the ground for dropped change instead.

2. He’s also learned that his time can be exchanged for money.  Just like real life, we don’t give him money for free, he has to earn it.  Currently he earns small amounts of money for the chores he does — like setting the table, cleaning up his toys, sweeping the floor, doing his homework, and so forth.

3. Interestingly, he’s also learned that the amount of money he earns can be negotiated.  Funny enough, this lesson was learned without any influence from me.  One day he realized that whenever his grandparents were around he could negotiate a higher salary from them than what I pay!  He does the same chores, but he knows his grandparents will pay more if he negotiates a little.  He’s a crafty kid, and I think it’s great.  Negotiating for a higher salary is a good life skill!

4. I let him lose some of his money a few months ago, and he’s been extremely careful with money ever since.  I could have nagged at him to be more careful, but I decided to just let him make the mistake and lose it. (It probably fell on the floor of the car somewhere.)  I think it was a good lesson learned.  He now quickly puts his money in his piggy-bank right away, or in a safe place until he gets home.

That’s a pretty good set of financial lessons learned for a six-year old, right?  I think he’s doing great, but I might be a little biased.

Learning to read was a pretty big jump for Tako Jr.  It really unlocked his curiosity about the world.

Most importantly, Tako Jr. #1 is starting to understand the value of a dollar — Whenever I buy something at the store he asks me how much it costs, and then he gauges it against how much money he has.

Tako Jr. #1:  “How much does that milk cost dad?”

Me:  “About $5 dollars.  $4.69 to be exact.”

Tako Jr. #1: “I have enough money to buy that!  I could buy it!”

Me: “You want to buy it?  OK, sure!  You can buy the milk!”

Tako Jr. #1:  “No, no, silly daddy.  I don’t want to buy it, YOU buy the food.”

See what I mean about entitlement?  Sheesh!  The nerve of kids these days… expecting parents to buy all of the food! 😉


“It’s A Waste Of Money”

This post reminded me of a funny story I’ve been wanting to share — A few weeks ago I took Tako Jr. #1 out for some frozen yogurt after school.  It was a warm day and he’d been doing really well at school.  The teachers have noticed how hard he’s working, and they occasionally send notes home telling us how good he’s doing.

As a reward, I wanted to take him out for frozen yogurt.  Just a father and son thing.  We’ve never taken the kids out for ice cream or anything like that, so I though this would be special treat for him.

So, we went to one of those frozen yogurt-bar places that are pretty popular right now.  We started by tasting a few samples until he decided on his favorite flavor.  I let him add plenty of sprinkles and all the toppings he wanted.  Was I spoiling him?  Maybe, but he was working hard at school, so I thought it was a well earned treat.

I paid for the yogurt, and we sat down to eat.  He then says to me in a deadpan voice, “You know Dad, this is a waste of money.”  I burst out laughing because that’s exactly the kind of thing I would say.

frozen yogurt
Where I live, frozen yogurt shops that serve stuff like this have almost entirely replaced ice cream shops. That’s progress I guess.

It’s amazing to me how much kids learn by watching and listening to us adults.  Even when we think they’re not paying attention, they’re still learning by the examples we set.

Over our frozen yogurt I tried to explain how spending money on seemingly unimportant things can sometimes be a good kind of spending.  In this case, I was getting to spend time with my son and rewarding him for a job well done at school.

I’m not certain if he completely understood the lesson I was trying to teach, but for me the time together and the conversation made the $4.50 for the yogurt totally worth it.

ice cream
The next day I took him to Dairy Queen for “free cone day”. He thought it was cool we could get ice cream for free.


Right-sizing Our Relationship With Cars

When I was a kid back in the 80’s we rode our bikes everywhere, or we walked.  I walked to school or rode my bike every day.  Those were safer times then, but I learned not to be reliant on my parents or cars to get around.  I had my bike and my feet, and that was good enough for the first 20 years of my life.

This is a lesson I’m trying to pass on to my own son.  Now days though, most parents drive their kids everywhere like some kind of unpaid taxi service.  Seriously.  We only live half a mile from the school, yet my next door neighbor drives their daughter to school every single day.  Rain or shine.

In contrast, I walk my son to school every morning and back home every afternoon.  It takes about 20 minutes each direction, and really isn’t a long walk.

walking to school
We walk to school together every single day. It’s good for both of us!

However, my son noticed the next door neighbor kid was always getting a ride and he began to complain, “Dad, why can’t we drive like everyone else.  You could just drive the car!”

Unbeknownst to Tako Jr., I had an answer for this complaint ready and waiting — “Cars are really expensive to operate.  Every time we start the car it costs us money.  Money that we don’t need to spend if we walk.  Money I could spend on you.  Walking also keeps us much healthier and living longer.”

Inadvertently I was also teaching him the lesson that it doesn’t matter what the neighbors do.  Being different from the neighbors is OK.


Still A Long Ways To Go

Obviously Tako Jr. #1 is just starting on his financial journey, but I think he’s taken some great first steps.  He’s not a millionaire yet, but he has maybe $30 in his piggy bank.  It’s a good start, but I really hope I’m not spoiling him too much.

It’s just the beginning for both of us — These are his first steps into the financial world, and my first time trying to teach personal finance to a kid.

We’re both beginners at this, and I really hope I don’t screw it up.  Parenting is hard.  I’m a big believer in teaching by example, and recent experience has shown me this is *extremely important* when teaching kids about money.  Setting a good examples is HUGE.

Not all of the explanations and lectures we give kids about money are going to get through the first time.  But the kids are absolutely watching how adults interact with money.  They’re watching us closely.

Taking time with them really matters too.  Even simple things, like getting a power bill can matter, if you take the time to explain and answer all of their questions.

This happened the other day when Tako Jr. and I were walking home from school — we got a power bill in the mail, and it sparked a whole huge conversation about what bills are, and energy efficiency.  Suddenly he finally understood why we don’t leave lights on when we leave a room.

Despite being a pretty efficient household, I’ve been trying to get him to turn the lights off for years, and now he finally gets it!  It was a big moment for me as a parent.  Like, something finally got through.

All because I let him see the power bill and I took the time to answer his questions.  I should have shown him a power bill a lot sooner!

Then, it dawned on me — Sometimes financial ideas just have to “simmer” in their heads for awhile.  When it happens, it happens.  You just have to take the time to present the ideas, set good examples, and then… wait for it.  You really can’t force financial learning on to someone if they’re not ready.  Especially kids.  Money is entirely a mental construct after-all.

The financial lessons are going to get absorbed when their brains are finally ready.  Who knows when that’s going to be!  Just like investing, teaching kids takes consistent effort and a whole lot of patience.  Then, one day when you least expect it, the returns finally happen.

At least for my kids, “investing in them” couldn’t be a more apt analogy.

What about you?  How did you teach your kid the important lessons of personal finance?


[Image Credit: Flickr]

38 thoughts on “Raising Financially Independent Kids Is Serious Business

  • April 20, 2019 at 6:16 AM

    No kids here – but like the idea of teaching kids a thing or two about money! It’s never to early to start and important they have a positive and realistic relationship with money out of the gate. Kudos to you for taking the time for share these important lessons!

  • April 20, 2019 at 7:52 AM

    Yes, the indirect lessons are often way more powerful than the direct, intentional ones. They are watching you all of the time! We’ve been surprised many times how some of our values have come back to us, even from years ago. When we’ve seen that a concept has taken root, then we often go into a deep discussion and explanation – all the while praising him for showing such brilliance 🙂

    • April 23, 2019 at 12:40 AM

      It’s pretty awesome when they pick-up and reflect some of those positive values without you even trying to teach it. I was pretty amazed! 🙂

  • April 20, 2019 at 8:56 AM

    Wow, you are doing a great job teaching your sons good financial and life habits! I have two adult sons and went through a similar experience and it really paid off in the end.

    Don’t forget to teach him about compound interest as soon as he has enough math to understand!

    • April 23, 2019 at 12:41 AM

      Hey Mr. Freaky Frugal! Long time no see!

      We’ve started talking about what interest is, but I think you’re right – once he’s got enough math it’ll help his full understanding of the concept.

  • April 20, 2019 at 9:02 AM

    I absolutely love this post, Mr. Tako! I also love how you’ve been able to walk your son to school every day… that’s a great opportunity for discussion (both financial and non) completely distraction-free. The lessons you’re already instilling will grow asking with them. Your kids will probably be FI by the time they’re 20!!

    I try to do the same with our daughter. Small lessons mean more to kids than long lectures. When an opportunity presents itself, I bring it up and let her ask questions. It’s a great feeling to watch a child start to “get it” at such a young age.

    Now I just need to dig into this free cone day and get the hookup! 😉

    — Jim

    • April 23, 2019 at 12:53 AM

      I think free cone day was the first day of spring (March 20th) at DQ. Not sure if they’ll do one next year.

      Ben and Jerry’s did one in April this year, as did Baskin Robbins. Gotta keep your eyes peeled for the free deals! 😉

      FYI: Free Slurpee Day 2019 is observed on Thursday, July 11, 2019

  • April 20, 2019 at 9:08 AM

    Haha, love that Tako Jr. figured out how to negotiate on his own! Great life skill.

    I’ve got a similar approach to teaching my kids about money. I definitely don’t want entitled brats running around… heh.

    There are some basic chores the kids are required to help out with, but beyond that they can earn some extra money (ie. do a deep clean). I’ll usually give them and option of how much they can earn, like $1, $2, or $5. And I’ll base the amount both on the type of job, and quality of the actual work done.

    Of course they usually opt for the $5 option (which is what I hope for), but they don’t necessarily always earn it. When they do, I give them crisp $1 bills from the bank (uncirculated currency = a lot less germs).

    We have a discussion and they’ve learned to pay (save) themselves first $1, $1 to God or charity, and up to $3 to spend at the dollar store. If they don’t spend it all, they can bring it back home and invest it with Dad. ROI varies, but I’ve been known to match them dollar for dollar taken home, or sometimes just a quarter per dollar. In any case, they will usually only spend $1 or $2 of the dollars at the dollar store.

    This seems to be working decently for now. But the challenge is when family just thrusts money upon them for birthdays, new years, etc. They literally get handed $50 – $100 at a time, sometimes multiple times. So, we of course take those larger amounts and tell them we’re putting it in the bank for them. But, what happens when they get older and realize they don’t need to work for the larger amounts of money coming in?

    • April 23, 2019 at 1:06 AM

      I’m not sure how we’ll handle larger amounts of money. So far the grandparents only give a few dollars, but this could increase once they get older.

      I imagine as the boys get older they’ll also have bigger material desires too… more than likely a phone or some other connected device. I might make them pay the regular monthly bill — that would soak up plenty of excess cash! 😉

  • April 20, 2019 at 9:31 AM

    Ours kids are 1 year younger than Unger than your (5 and 3) so I totally get where you are coming from. Our oldest is getting more and more into numbers and money. The other day school had a book fare and he bought a Lego drawing book with the money he got from Christmas. We have been teaching both kids some concept about money and trying time for money and I think they are slowly getting it.

    It’s dedinia great idea to teach kids about money and what money management skills.

    • April 23, 2019 at 1:09 AM

      Thanks Bob! I don’t think there is any rush for me to teach the kids about money — they’re just naturally curious in my case.

      I think I’ve come to the conclusion it’s best to not force important lessons on them, but rather let that natural curiosity drive the lessons.

  • April 20, 2019 at 3:03 PM

    I’m a big fan of Tightwad Gazette, old school, so we talk about the nice hand me downs she gets from cousins, and mommy’s friends (she’s two) and not to waste food and be careful with our things, and when they are too small, we share them with others (gave clothes and shoes that were too small to our friend, handed over by her sweet self).

  • April 20, 2019 at 3:58 PM

    Wow. I think your kids are way ahead of the game when it comes to finance. I know growing up I didn’t have any of these concepts put in front of me.

    I hear you about the concern of raising entitled kids. I have to draw a line between spoiling my daughter and making her realize the value of money.

    It is funny because when she goes shopping and realizes that no I am not going to fund it she is way more conservative about what she’s getting. Every now and then though I do cave in and she makes full use of it

    • April 23, 2019 at 1:13 AM

      My kids don’t have much in the way of material needs right now, but I imagine when they get older I’ll have to deal with more requests for expensive items.

      Rather than buying them stuff that’ll probably wear-out or be out of fashion, I think I’m more likely to fund learning experiences for them. Vacations, classes, etc. Giving them plenty of opportunities to learn and try different things seems important.

      Having the fanciest pair of jeans in school probably isn’t. I’ll let them pay for that. 😉

  • April 20, 2019 at 6:00 PM

    I love how you have taught him these lessons (letting him lose his money…lol so evil). My family is a few years behind you but I have had pretty good results by letting my kids just sit in on our family financial discussions. I figure the best way to have them learn is to let them see it in motion.

    So far my oldest just really gets that she gets a bulk discount on more candy when she has more money…its a start. 🙂

    • April 23, 2019 at 1:14 AM

      Nice! I like the idea of letting them sit in on family money discussions. Great idea! 🙂

  • April 20, 2019 at 8:31 PM

    This is exactly how I parent my kids with regards to money. My parents also raised me and my siblings this way. Setting an example for your kids and naturally building money conversations into daily life is the best way to ingrain good, lifelong money habits.

    I’ve also walked my kids to and from school daily since they started kindergarten. Now my oldest walks to and from high school by himself—even on the wettest days here in Raincouver!

    That morning walk is so good for all of us. No matter what mood everyone’s in when they leave the house, it’ll be 100% better by the time the 15 minute walk to school is over!

    • April 23, 2019 at 1:15 AM

      I totally agree, there’s nothing like a nice walk to clear the head! I actually miss my morning walks with him on the weekends!

    • April 23, 2019 at 1:15 AM

      Haha! He’s working on his writing daily…. won’t be too long now! 😉

  • April 21, 2019 at 9:12 PM

    I think it will be interesting to see how Tako Jr 2.0 takes to money lessons. My (younger) sister and I deal with money very differently.
    I think as they are old enough there needs to be a balance between remaining frugal, and preparing them how to handle what could be a lot of money one day. That is what got me into the rabbit hole of FI-RE…an offhand comment about how much I might inherit. A search for ‘How to manage a decent sum of money’…and Mr. Money Mustache came up. I’ve since decided I’d like my parents to live a nice long time, and I’ll try to get my net worth to a large number instead, and get to FI on my own.
    I think there’s a chance my sister won’t be as prudent, lottery winner style spending, is my concern. As noted hopefully we’ve got plenty of time!!

    Glad Tako Jr 1 is gaining understanding. I love the negotiations with grandparents!

    • April 23, 2019 at 1:18 AM

      I try to pretend I’m not going to inherit anything, and that’s likely going to be true.

      When our parents get older, they’re going to need A LOT of expensive medical care. That could very well soak up hundreds of thousands if their end-of-life situation is difficult and costly.

      • April 24, 2019 at 9:39 PM

        Yes, lots to be seen for our parents, and ourselves for later in life needs and costs.

        I still think it’s good to try to prepare young adults- mid adults for the possibility, especially for FIRE parents. Even things like understanding trusts, DAF, inherited IRA rollovers etc is an important start.

  • April 21, 2019 at 10:44 PM

    Thank you for the great post! We are working towards FI with a 3 year old and a newborn, aiming to make it within in the next 3 years. I appreciate any insights you and other FI minded parents have on raising financially responsible children.

    • April 23, 2019 at 1:19 AM

      Thanks AlaskaFI! Keep reading the blog, I’m sure I’ll keep writing about it as we progress! 🙂

  • April 22, 2019 at 6:32 AM

    I agree with the above poster about seeing how #2 kid does. My oldest is awesome with money. My youngest (8yrs), however, I believe she thinks the money is burning a hole in her pocket and must be spent before it falls through the hole! One of the things we frequently do is when it is time for school to start back and you are looking at school clothes shopping, we make a list of clothes/shoes they need for school. Then each kid has an envelope of cash (their budget) to buy everything on the list. We will take them wherever they want to go including thrift stores to get everything on their list. If my oldest daughter wanted those designer jeans, then she had to either get them at a discount at a thrift store or buy cheaper other stuff. Any money left over we let them keep. This worked really well for my girls. Both my girls recently just got new bikes. Did I buy them? Nope, they used their own money they received from grandparents at Christmas. You are right about the simmering. Teaching kids about money isn’t any one lesson. It is years of mini lessons and setting examples. I tell my kids frequently “no, we don’t have the money for that right now”. They know I do have enough money, but I then explain that if we use the money for that, then we will not have the money for this over here. I believe this can be a difficult concept for little kids especially. My wife and I make enough money we can afford almost anything, but not everything.

    • April 23, 2019 at 1:21 AM

      Absolutely. I think it’s important to let kids know the “whole money picture” so they don’t feel like you’re trying to deprive them or something.

      I’m completely with you about letting the kids purchase their “wants” with their own money. Material things especially!

  • April 22, 2019 at 7:17 AM

    Great job with the kids. I like the power bill idea. We get it electronically, but I should show them to my son. He tends to leave the light on these days.
    Our son is super cheap too. He doesn’t like to spend his savings. Sometimes, I’ll match 50% on something he really wants. He got some Nerf guns last month. 🙂

    • April 23, 2019 at 1:22 AM

      Cool idea about the 50% match. If you don’t mind, I might steal that idea for Tako Jr’s more expensive purchases. 😉

  • April 23, 2019 at 8:15 AM

    We actually walked into a bank to open an account for our kiddo. The sheer act of walking into a building and talking to a teller to open an account was pretty awe inspiring for a 6-year old. There was a tad under ~$100 in the piggy bank! This is the deal we’ve made: we, parents, will match 100% of the proceeds the next time the piggy bank is emptied. There seems to be more money going into the piggy bank now 🙂

  • April 23, 2019 at 12:31 PM

    Very cute kid Mr. Tako! I’ll definitely be taking these pointers from you and the rest of the commenters to help teach my son. He’s only a week shy of being 1 year old. Sometimes I get impatient he can’t really do much but I keep trying to teach him things. I know some day I’ll see the payoff 🙂

  • April 29, 2019 at 4:53 AM

    “No, no, silly daddy. I don’t want to buy it, YOU buy the food.”

    Bwahahaha. Smart kid. I also love how he’s learned that he can negotiate his allowance. Most adults don’t even realize they can do this with their salaries.

    I’m glad you didn’t get guilted into driving your kids to school just because everyone else is doing it. If we ever have kids, I will definitely have to learn from other parents how to prevent kids from having FOMO.

    • April 29, 2019 at 9:21 AM

      I’m certain you’ll be a great parent if you ever decide become one FireCracker!

      Sometimes when you’re in the “thick of things” with having a family, it can appear like you’re not making any progress. Then, one day the kids say something amazing that validates all your efforts to grow them into good people.

      It’s the darnedest thing. 😉

  • April 29, 2019 at 10:09 AM

    This is a great article, especially as I have 5 and 7 year old kids…really enjoyed reading through the comments too…I’ll be using the 50% match from retire By 40 as well!

    Our 7 year old is grasping money concepts quite well so far, a couple of things that have worked for us are…

    – talking about the power of advertising on TV, particularly on the kids’ channels. My son now tells me that the toy companies just want to take all his money and he’s not giving in. He also knows that the toys rarely turn out to be as advertised or even as great as they appear once out of the oversized plastic wrapper or box. He’s now quite happy to browse the toy section in Target for an hour knowing he’s not missing out on anything. Except for LEGO…he would happily blow all his money on that!

    – we also spent an afternoon collecting all the spare change in our house and running it through a money sorting machine, the kids banked $46 between them and it was a great math lesson and showed how small change really adds up

  • May 5, 2019 at 7:19 AM

    Hi Mr Tako

    If I could go back in time I would have chosen to work harder, save more and later on have kids. By the time I knew about the FIRE community both kids were already born. By as you said, better late than never.

    As parents, we always try to do our best but just the time will answer. Look’s like Tako 1 is doing fine. And teaching by example works very well with our kids. Besides many technics/examples that you mentioned in your post, one thing that I use to do is go to the supermarket and explain why we choose some products looking at the price per kg.

    Here in Odysseus household, we do not have implemented a way in which we give some money to Telemachus. The idea of trade money for chore came to our mind but is still not clear to us how much of it would be classified as supporting us/obligation (setting the table, homework) and what could be traded for money (dish wash).

    The first time that my son negotiated with me something was in 2018, he was 7. We were moving and selling some furniture. We received one phone call from a guy that did not speak English, so we could not understand the person and hung up the phone. He saw the situation and told us that for some amount of money he could intermediate the negotiation between me and the person (he learned the country language by himself watching cartoons and playing with other children). After some negotiation with my kid he accepted the offer, we called the guy and he spoke to him. And we got for free support when the person came to pick up the furniture.

    All the best.



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