Educating Kids about Money

  • by Bryan Wetzel - Mon, 12/19/2016 - 18:48

I recently had my teenagers do an exercise with me.  Each of them was given a notepad and a pen and asked to write down all the monthly bills that my wife and I pay.  Then we went over the expenses that only come around once or twice a year.  The bills that we pay once or twice a year were divided up into a monthly cost and added to the first list.  At the end of the list, I had them add up all the expenses with their calculator to reveal a total.  I told each of them to look at the total and realize that’s what it takes to have a house, cars, insurance, food, phones, TV, gas, utilities, etc.  Then I pointed out that we didn’t include any money for entertainment, nor did we include money to be saved for retirement.  The next lesson economic lesson via dad is to demonstrate compound interest using what they make at their part-time jobs.  Not the way it's taught in a high school math class, with a word problem and imaginary numbers.  A real life lesson that includes their earnings and what their savings could look like in 5, 10, 20, 30 years.  My daughter and I have already discussed how credit works and how it can be damaged and what it means to your life when your credit is damaged. 
How many parents are teaching their kids about money?  About savings?  Or how to manage it?  Managing money is probably the hardest since most families are carrying more and more debt these days.  Hard to teach about managing money if you aren’t managing your own.  My parents taught very little about money, especially the management of money and debt.  Mostly they taught me by fussing at me that I was spending too much.  From a very young age, I was good at making money but not keeping it.  Several times in my life, despite having plenty of income, I was cash poor.  It took till my 30’s to start to understand how to manage, save, and grow the money that I earned.  Now that I’m a parent I simply do not want my kids to learn about making, saving, managing, investing in money through the process of repeated failure.  I should point out that I believe that parents should let their children fail more often.  Failure teaches lessons, even when we don’t realize it.  I’ve already failed and learned some life lessons when it comes to money.  I want to pass those lessons on to my kids to prevent them from making the same mistakes.  After all, isn’t it the goal of all parents to get their children out into the world with all the knowledge they need to be successful?  Having said that, my informal survey of parents has proved disappointing. Most parents seem to teach economics 101 the way that my parents taught me.  The reason that I decided to teach by using our household economics is that I knew that the dollar amounts would make an impact on their memory.  The average teenager thinks that a few hundred dollars is a lot of money.  When my kids recognized that the number on the calculator represented how much they had to earn a month to be comfortable, their faces momentary described the following sentiment,“ whoa!”.

Some skeptics might say that these lessons don’t really sink in.  I strongly disagree.  It is true that if I sprung a test on them months later, they’d have trouble remembering the exact numbers.  However, I’m less interested in them remembering the details as I am the big picture. Think of it this way.  Everyone who has kids knows they want a lot of stuff.  Much of what they want is expensive, and you can shape your lesson around their desires. 

You don’t have the be an economics teacher to teach the real world reality of money.  So give your kids a wake-up call now instead of later when they have to move back in with you, and they are 30k in debt.