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.
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.
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.
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.
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]