How Do I Begin Teaching My Children About Money

“Children are sponges – they are going to absorb whatever is around them, so we need to be intentional about what surrounds them.”
Dave Ramsey, Smart Money Smart Kids

How can I instill strong values regarding life and money into my son?

Granted, my son, Baylor, is only 10 months old. However, it doesn’t mean I can’t be prepared for when he begins to grasp the actions and values I visibly demonstrate. Smart Money Smart Kids, by Dave Ramsey & Rachel Cruze (Dave’s daughter), mentions many things that our children learn are caught as opposed to taught. Children are always watching and learning from the actions we demonstrate.

Brian and I talk often on this topic. I was fortunate and blessed growing up with parents who instilled great values in me around money: the meaning of hard work, earning what you work for, and taking care of money. Much can be learned at an early age for our children, which lays a foundation for when they become teenagers. Here are a few takeaways I found insightful from Smart Money Smart Kids:

Spend, Save and Give. For what does a child really need money? A toy now, a toy tomorrow and giving to faith or charity. Ages 14 to 18 this changes with cars and college entering the picture, but the majority of what children spend their money on falls into these three categories. Determine what percentages or amounts work for your family. If your child receives $5 a week, maybe $3 is to spend, $1 is to save and $1 is to give. Brian has used Money Savvy Kids with his kids. They have an awesome visible resource, a see-through piggy bank with these three categories as well as an investing category.

Commission and not Allowance. Personally, I don’t remember receiving an allowance. In my teens, I worked for and earned money cutting grass in the neighborhood. The ideology of having chores or helping around the house was never missed. It was a general understanding that me doing work around the house was required. Commission allows for children of any age to receive weekly gratification for their work as well as learning the value and effort of working to earn money.

It’s important to note, do not break the piggy bank. Imagine your 5-year-old’s face lighting up after receiving $5 of their own money for completing tasks like picking up toys, making their bed, emptying trash cans, and setting the dinner table. That money is THEIRS to do what they wish with it. As children age tasks can be more difficult including feeding pets, vacuuming, doing the laundry, cleaning dishes, watering plants, yardwork, or house cleaning. Spending their own money at a store will make the toy even more valuable to them. Giving their own money at church will show them the sincerity and meaning of a giving heart instead of handing them a couple of your dollars.

The Car. Brian speaks from experience here with 4 teenagers driving! Anything can happen to their first vehicle. We also both believe having “skin in the game” affects the value of an object or task at hand. If your child has skin in the game, there is a good chance they take better care of their first car.

My personal skin in the game was in physical labor. My Dad had a 1982 Jeep CJ8 “Scrambler.” He and I removed every part down to the frame, cleaned it up, and put it back together with some new parts and a new paint job. This was my dream first car, as well as the vehicle my Dad and I took to every ballfield growing up. Parts would break from time to time, but Dad and I always fixed the Scrambler together. Skin in the game for most people means your child pays for a percentage of the first car. If your child saves (from the three categories previously mentioned) $3,000 for their first car, you then match that amount and help them buy a $6,000 car. Maybe they contribute a third, and their first car is $9,000. Used vehicles are your friend here, because at 16 mistakes always happen! (I was lucky enough to have a Jeep that jumped curbs…)

As I flipped back through the pages of Smart Money Smart Kids these few topics are just scratching the surface. The takeaways are numerous. If you have children, I would definitely suggest giving it a read.

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Regards,

Warren D. Stribling, IV, CFP^®
Principal
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Brian E. Whalen, CFP^®, CIMA^®, AIF^®
Principal
brian.whalen@striblingwhalen.com

Jacob Beauchamp, AAMS^®
Financial Advisor
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