8 Things To Teach Your Kids About Money

Unknown Speaker 0:02
This is the digital nomad quest podcast with Sharon Tseung. teaching people how to build passive income, become financially free and design their best lives.

Unknown Speaker 0:14
Hey guys, Sharon from digital nomad quest, and today we’re gonna go over eight things to teach your kids about personal finances. So I think that money is something that parents don’t talk about enough with their kids. It’s something that people think is taboo to talk about their people who think it’s bad to make more money and things like that. And it’s just a difficult topic, especially if the parents don’t feel like they know enough themselves. So some of you guys might be parents already, and some may be wanting kids in the future, and it might be not far off. So it might be good to think about what to teach your kids around personal finance, because in my opinion, it’s good to actually go over the fundamental topics so that kids are more equipped for their future. I think that if personal finance were taught in schools, the average American would be doing so much better in their lives. And if they’re not going to have that discussion at school, then you might as well have it at home. So without further ado, let’s just get right into it. First one is to teach about patience and delayed gratification. So you might have heard of the marshmallow study where kids are shown a marshmallow in front of them, and the grown up in the room tells them that they can have that marshmallow plus another one if they wait it out, rather than eat it right away. So the grown up leaves and comes back. And if the marshmallow is still there, the kid will be rewarded with another one researchers followed these kids as they grew up. And they found out that those kids who are able to wait for that second marshmallow ended up being more successful in their lives. For example, they had higher SATs scores, and they had fewer behavioral problems. So I think this ability to be patient is actually very important to teach your kids not just in money, but also in life. In general, wealthy people know that it takes time to amass wealth, while the average person just likes to make impulsive purchases and buy nice things right away. So I think a great way to teach delayed gratification is to actually say things out loud in front of the kids. So you might say things like, Oh, I really want this shirt, but I don’t really need it. So I’m not going to buy it. Or you can directly tell the kid, hey, if you finish your chores, you’ll get this cookie. So you kind of give them that feeling like if they work hard, they’re going to be able to get a reward in return. And if you practice it in your daily life, usually kids watch their parents and learn a lot just from that. So if they see you’re not impulsively buying things, you are working on something for a larger goal, they can understand that, you know, it takes a lot of time and effort to build up your finances or achieve a certain dream. So kids should be taught to work consistently and be patient for the big picture. So number two is to talk about money. According to this PBS article. By age three, your kids can grasp basic money concepts, and by age seven, many of their money habits are already set. So that’s why it’s a good idea to talk to your kids at an earlier age about money. Kids tend to associate money with materialistic things and consumerism, which is actually the wrong relation to have with money. Instead, money should be viewed as a tool towards freedom. And that’s freedom to be with your loved ones to work on your dreams to travel to give back as well. So money can actually allow for a lot of things and financial security, so you don’t have to worry. So in order to do this, you want to get your child familiar with a value of $1. So kids should learn that money is earned. So you can start by teaching them ways for them to make money themselves. So you might want to have them make money by doing chores around the house, maybe mowing the lawn is $10 or doing the dishes it’s gonna be $2 that you give to them that way they understand that they can make money by doing different things. Now if you want to teach them about passive income, maybe you can have them try opening a lemonade stand or having a garage sale and they will understand that if you sell different items, you will get money that way instead of actively working for something so in the future, they will understand that if they sold things digitally online, they will make money pretty passively. Another thing you could try it’s more controversial though is to attach like dollar amounts to grades for example, if you get a you get X amount of money, if you get a CDF you actually lose money. That’s another way kids can understand the value of money as well. But this can be controversial because if you want your kid to learn for the sake of learning, then maybe you don’t want to attach a monetary value to grades for example. Well let’s go on to number three. It’s to discuss wants versus needs. One of the first things you can do to teach the value of saving is to really understand that difference so you can explain the basics like food, shelter, basic clothing, education, health care, all of these things our needs while wants our extra like things like movie tickets, dessert, candy, things like that. These are all luxuries and pleasures. So if you wanted to teach that to your kid, you can even quiz them. For example, you could ask your kid to point things in the bedroom that are wants versus need that allows you to explain to your kid that there are different priorities when it comes to spending money. So

Unknown Speaker 5:00
There’s kind of a ranking in terms of, okay, you have to pay off your mortgage or you have to pay that rent. And then you have to pay for food and things like that before you THINK about buying any wants and desires and luxuries. For example, number four, you want to set yourself as an example. So for example, if you complain that you’re spending too much money on certain things, and then you go out and take your kids to a shopping spree, and then it just gives your kid mixed messages. So if you want your kid to have good spending and saving habits, you need to have those yourself, you need to keep improving your personal finance knowledge and actually practice what you preach. So don’t buy a bunch of expensive bags and shoes if you want your kid to learn the importance of the value of money. And if you want to teach delayed gratification, you should eat healthy exercise instead of just eat bad foods all the time for pleasure. Educating your kids about this stuff can take time. But if you continuously put in that effort to communicate, that message is going to get through to the kid and it’s going to instill in your child good habits. Number five is to have your kids track their own spending and learn about budgeting part of being a better saver is to know where your money is going. Tracking expenses can be easier with things like personal capital, which I’ll link below, it tracks your net worth and your income and expenses. But you can also do it the old fashioned way. And when you’re teaching your kid, you should just start with, you know the fundamentals. So if you give your child and allowance or paying them for chores, have them write down how much they’re earning. And if you’re paying them per day, they can see basically how much is adding up and it can be very eye opening for the kid at the same time. If they spend money, they should track that as well. So they can understand their spending habits at an early age. At the same time, you should teach your kids about budgeting, maybe you have them think about only spending x dollars per week or per month. And if they’re tracking all their expenses, they can make sure that they’re meeting those goals. For older kids, they can start using Excel spreadsheet, then they can really understand their finances. When you’re talking to your kids about budgeting. You can even talk about your own budget and ask for input from them around your financial decisions and how you can meet your own budget. Number six is to teach them to set savings goals for kids being told to save can actually feel pretty pointless unless you actually explain why savings important. So in order to motivate a child to save money, you might work with them to set a savings goal have a clear mason jar, and then kind of have them start inputting money into the jar so they can see it pile up. And that might motivate the kid, there’ll be excited to see that they’re having a larger amount in their bank account. And I can actually teach the importance of having a bank account. And you can go over investing as well when you get to it, which I’ll talk about in a later tip. And you can also show them the value of saving. So if they are saving for like a $50 video game, you can tell them if they get $10 a week, ask them how many weeks it’ll take to get that video game. And then also, as you are teaching them the difference between wants and needs, you can tell them about how instead of buying that video game, maybe you can keep saving that $50 and grow that into 100,000. And then if you multiply that with your investments, it can increase even more. And that can actually get the kid motivated to save even more. So work with the kid to have saving goals, show them what saving looks like. And then they will get motivated more and more as well. Number seven stress the importance of giving. So when your kid starts making a bit of money, it’s important to show them why it’s important to give if you value giving to others, you might want to instill that into your kid and early age, they can pick a church or a charity or some organization they want to donate to you can have them donate to the homeless, and they can really see the impact by helping someone else that way you can teach that giving will really help someone with their needs. And they can see the impact of their actions know that their actions can go a long way. I think it’s important to showcase this because kindness can go a long way helping others who really need it can really change people’s lives. And you want to instill good values in your kid. And that will help them understand also the importance of money in that sense that if you have more, you’ll be able to help more people. I think that will give them a sense of abundance as well versus a scarcity mindset, like oh, I have to save every single dollar and not give anything away. It will teach them also that they have enough to give around. And then lastly, you want to teach your kids about investing your kid is smarter than you think they’re probably a fast learner. So it’s a good idea to briefly go over how there are assets that can actually make you money every single month and their liabilities that costs you money every single month, you can talk to them about how Inflation affects money and how it affects your purchasing power. So you’re actually sort of losing money every single year if you’re not investing it. So show your kid how you can make money work for you. And you can show them the different asset types like stocks, crypto bonds, real estate, and you can try to set them up with a recurring deposit and have them learn about dollar cost averaging at an early age. So talk to your kids briefly about the different asset types teach them also about the risks of investing. It’s not about just putting all your money into Dogecoin and hoping for the best

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Teach them that investing is a long game and there are also risks so you should only invest what you’re okay with losing and let them do their own research and come back to you with questions and you can just guide them along the way. So I hope you guys enjoyed this episode, please make sure to rate review and subscribe. It really helps our podcast grow. And thanks again. I’ll see you guys in the next one.

Transcribed by https://otter.ai